No. of Recommendations: 0
I'm in the same boat as you are. Bond funds are under-represented in my portfolio due to my initial set-up (I follow a varient of the Coffeehouse Portfolio). However, I think now is not the time to beef it up for the reasons you mentioned.

Overall, I would say rebalancing has a net benefit: Remember, in 2000, the stocks were up and bonds were down. Re-allocation would've taken money out of stocks and put it into the bonds for the ride up these past couple years. However, we seem to be in a position now where we're 'instructed' to put more money in the 'peaking' asset - it doesn't jive. Fortunatlely, I'm fairly young so I can be more aggressive when deciding to sit this re-allocation out (at least leaving the bond fund out of the re-allocation mix) and waiting until bond funds become more favorable, interest rate-wise. Someone closer to retirement has a much more difficult choice.

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