Talking about bonds... I've never worried about them much when I was younger, but now in 50s feel like "shouldn't I have some bonds?" for diversification, risk reduction, et al.
Well, the answer I have come to is yes and no.
For risk reduction and diversification as part of portfolio allocation, I am seriously underwhelmed. They're more correlated than they used to be and the return is lower. And more inflation risk. Why not just buy utilities instead? Doesn't make a lot of sense to me, certainly the old 100-age % allocation thing is total BS imho.
But here is where I do think they have a purpose. Time. They do have less risk over say 2-4 years than equities, but better return than money market. So if you are doing the "buckets" thing in retirement, they work in that middle timeframe bucket. Keep the money you need for this year and next in cash/MM/CD/etc. Keep what you will need in year 3,4,5 in bonds. Keep the rest in your equities portfolio.
Now, if you want to say that all 3 buckets are your overall portfolio, then that's OK, but rather than pick an overall %, you pick the DOLLARS needed, and then the % is what it is. Two examples - $100k annual expenses needed, one portfolio has $2M assets, the other $4M.
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So just saying "you should have x% in bonds" doesn't work for me at all, its a super lazy thing to do. But I do see they have a use. IDK, maybe I have discovered that fire is hot, but this helped me think about bonds differently.
