I totally understand that and agree with you. But EE bonds do not help you as much as other bonds with sequence of returns risk because their nominal return (currently) is essentially zero unless you hold them for twenty years. If stocks take a nosedive and you need to get most/all of your income from your bonds, you'll be sacrificing that 3.5% nominal return for a guaranteed real loss if you cash them out early. And if you just refuse to sell them, you would almost certainly have been far better off with putting that money in equities instead. Being almost forced to hold EE bonds for twenty years really handcuffs you.Grt2bOutdoors wrote:For retirement money, I have a serious issue with holding a 100% or even 80% equity portfolio. I'm gliding down as I reach either age or asset targets. I only take risk when willing, able or needing to. The last thing I want to experience is a bad sequence of returns when I'm 5 years away from retiring. It could take longer than that to recover.willthrill81 wrote:So you view a twenty year holding for equities as being more risky than holding a 3.5% nominal bond for the same period? I can point to many more historical periods where you would have lost more buying power with the bonds than with the stocks over twenty years.Grt2bOutdoors wrote:I use equities for risk, the purpose of fixed income is to protect the savings face value I can not afford to lose, ever. TIPS can expose you to deflationary losses, nominal bonds have a place in a portfolio.
If we're talking about a portfolio in or near the withdrawal phase, I think that a much stronger case can be made for other bonds where you aren't sacrificing liquidity for returns.