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Author: DrTarr Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35345  
Subject: Re: Asset Allocation & Bond Mutual Funds Date: 2/3/2011 9:14 PM
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knob-

I know I'm supposed to have fixed income assets in my portfolio

How do you know that?


Your portfolio should be balanced based on your risk tolerance. Factors for that include: what can make Mr. and Mrs. Knob sleep at night, and what you want from your assets!



I'm afraid of losing value as rates increase
More than you are afraid of losing value if equities drop? Well If that is the case - lets go to the other point!

is better to put up with poor performance for the sake of diversification
What kind of performance do you need to have? If 3%, or whatever Janus and PIMCO are racking up right now, is performance enough to meet your goals, sure. If you want more, and point one is taken care of....


So - bottom line, no one on this board can tell you what the magic allocation for you should be without a significant amount of more and personal info, or a crystal ball and I am certainly not the brightest tool on the tree (or sharpest bulb in the shed) and dont have the ball - but if sleeping at night means having some Bonds/FI and you can sleep with the risk, you can certainly diversify into bonds and move down the credit spectrum to capture a little better yield - buy the actual bonds with a plan to hold to maturity so you will get the yield (assume no default) and then not really worry about rates rising. Or if you view some strong dividend payers as FI (and can sleep with that risk) pulling out and putting it into something you feel more comfortable with certainly has value.

Another way to look at it, if you didn't own these funds now, would you put fresh money in them today

Really - about the only way to look at it!!
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