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Retirement Discussions / Retired Fools
|Subject: Re: Corporate Bonds?||Date: 6/22/2000 1:05 PM|
|Author: TMFPixy||Number: 4270 of 20174|
Greetings, 1937Fool, and welcome. You wrote:
<<I'm a first time poster getting ready to retire and
looking for a good mix of income. My broker indicates that I can get a reliable stream of income from the
highest rated corporate bonds. However, I have never
invested in bonds before, except in 401K Bond Mutual
Funds where the results were negative. What are
suggestions as I possibly add this diversification as
an alternative to CDs? >>
I hope you are intending to invest no more than about 40% of your retirement savings in bonds. That's the maximum most folks should have in fixed income vehicles like bonds and CDs to maintain their purchasing power. Inflation remains your enemy, and bonds and CDs are very poor inflation fighters. Thus, about 60% of your stash should remain in equities (i.e., stocks) so you can keep protect both your income and your principal from inflation.
As to the bond investments themselves, the actual instrument as opposed to a fund is a great way to go assuming you hold the bond to maturity. You can get the income while your principal has little risk of declining. The only way you would lose (other than purchasing power on the principal) is if the issuer defaulted, an unlikely event using double-a rated bonds or higher.
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