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The 3 to 5 yrs of bonds is intended for those who are retired based on investment income. Keeping all the money in
stocks gives the best chance to keep up with inflation. The bonds cover the years when the stock market may be
down, so it keeps you from being forced to sell stocks in a down market.


Hi there. I have just been handed the "educational" task of handling a relative's retirement account.
I am interested in understanding the allocation of bonds in a primarily stock retirement portfolio. Your statement (above) seems to be the fundamental reason for doing this. However, I would like to question why bonds instead of moneymarket? I do not know much about bonds, so please help me out with relevant links if possible. My concern is this: I would consider the bond portion of the fund akin to an emergency fund in the sense that it is drawn upon when other resources are doing poorly. In that case, I reminisce to a time when I was "chided" for considering using bonds for an emergency fund. I was told they were "too risky", an emergency fund HAS TO BE THERE when you need it, and its goal is NOT PERFORMANCE BUT RELIABILITY. Bonds do have fluctuating prices, so who is to say that the hard times for the stock funds won't coincide with rising interest rates and a dive in the price of a bond you are currently holding? Is that worth the risk for your backup holdings, the money that is supposed to be available in bad times?

Since I am inexperienced in bonds, can you help me understand how much better bond performance runs compared to money market accounts? What really is the risk level? Should a retirement portfolio consist of money market as well as a bond portion?

Thanks for any help,

-nacohn
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