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Should you have bonds in your portfolio? Yes and No
What gets annoying in the finance/investing world is when people talk past each other. Why does this happen? Because finance is nuanced by its very nature, and perhaps some people aren’t aware of this fact. If you want a one-size-fits-all approach to finance, you are in the wrong business. I contend that the issue of whether someone should have bonds in their investment portfolio is a nuanced issue, which means it’s not a simple “yes OR no”.
Yes, you should have bonds
You should have bonds in your portfolio depending on your age and objectives (among other things). For example, if you are 100 years old and don’t plan to leave any money behind (because you don’t have a family), you will want almost all your money in bonds — as opposed to stocks. Why? Imagine a scenario where the stock market drops by 33% or 50% (and it takes years to recover). Do you want the person in our scenario to be mostly in stocks, all things being equal? No. Bonds help soothe out your portfolio during stock market crashes; bonds are the instruments that reduce volatility in a portfolio.
No, you should not have bonds
You should not have bonds (or very much money in bonds) if you are young (e.g. 20 years old). When you are young you want to take more risks. Why? Because the market will have plenty of time to…
