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I've always carried some fixed income investments. In the early 80's you could earn double digit rates even on money market funds and mortgage securities. Over time my equities grew to 85% but I still held mortgage securites and a high yield bond fund. Today I've reduced equities to 75% but I didn't do it soon enough to avoid a substantial hit in 2001 and 2002. My plan now is to gradually reduce equities to 70% or less. I'll do this by taking some profits each year and re-investing in fixed income securities.

One thing I have learned from the last 3 years is to set specific portfolio allocation objectives and re-balance on a regular schedule. I may vary the allocations by 5% depending on which way I think markets are trending but I'll never let the portfolio get that lop sided again.

As for what bonds to buy, right now I'm staying with short term corporates because I expect interest rates to rise through 2005. Also some CD's. And I have 5% in REITS, which I buy for income and treat as fixed income rather than equity for allocation purposes.
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