No. of Recommendations: 13
SO -

I have this thing where I don't really like bonds. They seem like that lazy brother-in-law who's been sitting on the sofa doing nothing for years. I like STOCKS. They're a bit bipolar, granted, but over ANY TEN YEAR PERIOD they'll outperform bonds, like, always.

So I went to my financial adviser today for our annual pow-wow and I asked her DO I HAVE TO BUY BONDS ONCE I RETIRE? AND SO MUCH? cause - and this is key - I am VERY risk-tolerant and like the returns I get from stocks. I mean, if my account drops even 20% as it did in 2008, I sleep like a well-fed old dog (not a baby).

So - here's the deal. The thing where bonds have to be a certain percentage of your portfolio that's 100-your age? It's crap. You shouldn't do bonds as a percentage.

Bonds only outperform stocks during a recession. It's purely downside protection. Since the great depression, our recessions typically last less than 3 years each. So instead of saying "bonds should be 30% of your portfolio" you SHOULD say "bonds should cover my expenses during a recessionary period".

So if your 401K is smaller, and it's a huge part of your retirement income, then sure, have enough in bonds to cover 3 years of expenses and maybe that's 30% or even 40% of your 401K. If you have other income streams that are recession-proof and your 401K isn't your only income stream, or if your 401K is huge, maybe that bonds portion is 5% but, again, enough to get you through a 3-year market dive.

The thing that says "everyone should do bonds as a percentage that is X" though, is crap.

Thought I'd share. If you disagree, YMMV.

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