Is bond diversification as important as stock diversificatio

[ihckennedy]

The answer depends on why you own bonds in the first place.

If the answer is: to serve as a hedge against economic contraction and equity bear markets, then you should stick with Treasuries, because they serve this purpose better than any other bonds.

If the answer is: to reduce total portfolio risk, then a total bond market fund (in tax-deferred accounts) &/or high quality munis should serve the purpose.

If the answer is: to generate postive real returns, then you're in the wrong place! Most people don't realize that historically the bond market has generated negative real returns more often (in 5-, 10-, 20-year periods) than the stock market. And starting from today's yields, negative real returns are a pretty sure bet over the next five and ten years.

[Doc]

The answer depends on why you own bonds in the first place.

If the answer is: ...

And if the answer is "some of each" than break your FI portfolio into "some of each".

[Bustoff]

Doesn't this tell all we need to know ?

[Beagler]

You made the mistake of painting all munis with the same brush

Best wishes
Larry

And you made the mistake of attributing Mr. Swensen's statement to me; I simply reported a passage from his book.

[larryswedroe]

Beagler
My apologies but my assumption was you agreed which was why you cited it. Might have said, while I don't agree here is what Swensen had to say.
at any rate I think the case is clear, that junk munis should be avoided for same reason Swensen states you should avoid junk bonds
Best wishes
Larry