At what age did you begin adding bonds?

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pmr2017
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At what age did you begin adding bonds?

Post by pmr2017 »

At what age did you start to invest in bonds within your 401k/IRA accounts? How did you determine the percentage to put to bonds? What's you asset allocation plan for the future to shift more to bonds?
theorist
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Re: At what age did you begin adding bonds?

Post by theorist »

I started at some point I don’t know, probably in my mid 30s, when my retirement plan automatically vested me in a Vanguard target date fund (the 2035 fund, it so happens). I am now 49 and that fund is currently at a roughly 75/25 asset allocation, a bit more aggressive than “age-20” in bonds. Typical easily stated rules in bonds are “age-10” or “age-20” if you want to be aggressive. I prefer the more nuanced “at least the minimum of (30, age-20)” in bonds (since after 50 you may want to maintain a relatively aggressive portfolio if your circumstances allow it and you have desire for it).

I started paying attention around 2015 and since then have added significant holdings outside the target date fund, and added bonds to some inherited accounts, designed in such a way as to bring my total allocation to 70/30. I plan to stick here — or maybe move to 65/35 if the bull market continues for a year or two, and then stick — for the foreseeable future.

I picked this fraction based on my comfort level. At 30% in bonds, I figure I already have at least 10 years of expenses (probably more) in fixed income, and I am not subject to a loss of more than about 35% of my portfolio value (from a bad drawdown on equities) in a “worse than typical” bear market. (We could have much worse than typical, in which case all bets are off.) We are at the highest level of our contributions for the next decade or more, and so I feel we have the ability if not the need to be moderately aggressive. Hence the 70/30 instead of e.g. 60/40.
Last edited by theorist on Sun Feb 16, 2020 4:14 pm, edited 2 times in total.
lakpr
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Re: At what age did you begin adding bonds?

Post by lakpr »

I suppose I had bonds always in my portfolio, indirectly. When I started in my career, I chose the LifeStrategy Aggressive Growth fund, and also the T Rowe Price Capital Appreciation Fund in my first 401k. Then in my next job, I invested in the target date 2035 fund for quite a long time. That allocation persisted through the 2008 crisis. In 2011 I became member of this board, had a ton of reading -- and finally converted most of my 401k holdings into essentially a 3-fund portfolio across the 401k and Roth IRA, and currently have a 70:30 allocation.

If you are seeking advice on when to shift into bonds ... I suggest either invest in a Target Date fund, or invest in stocks exclusively until you reach $100k in 401k assets, then start adding bonds according to your desired asset allocation.
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Re: At what age did you begin adding bonds?

Post by H-Town »

pmr2017 wrote: Sun Feb 16, 2020 4:01 pm At what age did you start to invest in bonds within your 401k/IRA accounts? How did you determine the percentage to put to bonds? What's you asset allocation plan for the future to shift more to bonds?
Early 30s when the portfolio has grown to a point that the protection from the bonds has become more important that the upside of the growth from 100% stock. In other words, I didn’t need 100% stock to achieve my FI goal.

I hope when I’m 40s things will change and the protection of bonds have become somewhat meaningless. I plan to move some of the bonds to real estates.
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Re: At what age did you begin adding bonds?

Post by yangtui »

early 30s. i try to roughly stick to age in bonds now.
AlexanderTheMediocre
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Re: At what age did you begin adding bonds?

Post by AlexanderTheMediocre »

I spent my 20s without any bonds then realized that I wanted to shoot for FIRE in my mid 40s. At 30, I adjusted my new money allocations to be 80/20 and have since dropped down to 70/30 after several years of that. I'll probably stay there until ~40 as this is slowly tilting my allocation to be more conservative without needing to feel like I should go and make big changes in my existing allocations. I have been fleshing this out with I-Bond purchases when the feeling strikes me and I have a surplus where I don't have an existing earmark for the money.
Triple digit golfer
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Re: At what age did you begin adding bonds?

Post by Triple digit golfer »

22 years old. I've held an 80/20 allocation since.
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Re: At what age did you begin adding bonds?

Post by Big Dog »

62. Was 100% equities, but started to move $ into bonds pending a retirement. Four years later, now 60/40, and spending down the bonds to increase equity %.
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Re: At what age did you begin adding bonds?

Post by WarAdmiral »

Started at age 40. Will settle for 10% bonds until 50.
carminered2019
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Re: At what age did you begin adding bonds?

Post by carminered2019 »

I added 40% bonds recently at the age 50 and retired at 50. Working career from age 27-50 I was in 100% equities. I don't believe in "age in bond" during the accumulation phase and teaching my 24 yo daughter the same. I am glad my daughter experienced the correction in 2018 with less than 50K account and still continued investing.
Last edited by carminered2019 on Sun Feb 16, 2020 5:39 pm, edited 4 times in total.
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Re: At what age did you begin adding bonds?

Post by Notme »

Also 62. I went to 25% bonds at the end of 2016. I had to have the stomach to ride out some steep drops without selling for a couple of decades. Now that I am almost 66 I am close to 30% bonds but trying to get comfortable with the idea of getting to 40% or more. I only really started reading this board a couple of days ago so don't use my example as a guide.
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Re: At what age did you begin adding bonds?

Post by Hockey10 »

Started in early 50s with about 3% bonds. At 55, I went to 10% bonds. I don't plan on ever increasing this to a higher %.
Double Dog
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Re: At what age did you begin adding bonds?

Post by Double Dog »

Started buying bonds at 42, because everyone kept saying it was important to have bonds. :) It was only 2% bonds at first, because it was very hard to intentionally choose an asset whose return will almost surely be less than stocks. "Volatility" and "risk" are nice words that can be difficult to wrap your head around to appreciate the benefit.
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Re: At what age did you begin adding bonds?

Post by nisiprius »

If I count the TIAA-CREF Traditional account as bonds, I have always had bonds.
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dogagility
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Re: At what age did you begin adding bonds?

Post by dogagility »

Started investing in index funds at about age 28. Added bonds at age 50, figuring I might want to spend some of that money in five years or so. Now age 53 and have a 20% bond allocation. It has worked for me.
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Triple digit golfer
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Re: At what age did you begin adding bonds?

Post by Triple digit golfer »

Wow, so far I'm the most conservative investor here!
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Re: At what age did you begin adding bonds?

Post by sawdust60 »

If you include the value of pensions and social security, I always had bonds. I only began holding bonds in investment and retirement accounts a few years prior to early retirement.

I was told that this was too aggressive, but perhaps as important is how you cover living expenses. Control your costs. Stay married. Don't retire too early -- become debt free and get the kids launched.
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Re: At what age did you begin adding bonds?

Post by Northster »

When I started work in 1973 I chose 50% equity fund and 50% TIAA Traditional in 403b. Over time as savings grew I added more equities in taxable account. In retrospect I was too conservative, but what did I know? Though I have heard the 70s were not great for equities. All worked out in the end.
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Re: At what age did you begin adding bonds?

Post by Nupey03 »

Upon birth... kidding... I’m holding my 90% equities / 10% fixed income Asset Allocation until my early-to-mid 40s when I will begin to incrementally ramp my fixed income exposure...
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Re: At what age did you begin adding bonds?

Post by carminered2019 »

Triple digit golfer wrote: Sun Feb 16, 2020 5:28 pm Wow, so far I'm the most conservative investor here!
at 22 you need to have a stomach for big drop with little money so you can have stronger stomach going forward with great reward.
Last edited by carminered2019 on Sun Feb 16, 2020 5:49 pm, edited 1 time in total.
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Johnsson
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Re: At what age did you begin adding bonds?

Post by Johnsson »

56 or 57.

I would suggest waiting til at least 30. Then only so you have ammunition to rebalance on the downturns.
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Re: At what age did you begin adding bonds?

Post by Wiggums »

I first purchased high yield bonds around age 30. Approaching age 40, I purchased 20k in munis. My brother talked me into it.

We had very stable employment and lived on one paycheck. I only got serious about bonds when I retired.
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Re: At what age did you begin adding bonds?

Post by Third Son »

Around age 30 with 10% bonds. Now retired at 60, I am at 50/50.
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Re: At what age did you begin adding bonds?

Post by jeff1949 »

I did not add bonds until I was 51 and then it was only I-Bonds.
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Re: At what age did you begin adding bonds?

Post by Svensk Anga »

I really started adding bonds at 50. I set a glide path to get me to my desired bond allocation by an intended age 55 retirement. The bond allocation was calculated to satisfy liability matching rather than as a percentage of the portfolio. Markets cooperated so it worked out well.
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Re: At what age did you begin adding bonds?

Post by averagedude »

At age 47 years ago, which was 3 years ago. A "mistake" that cost me 6 figures. Actually it was the right thing to do because the finish line is in sight, and investing in bonds is about lowering risk, not increasing returns.
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Re: At what age did you begin adding bonds?

Post by Stinky »

sawdust60 wrote: Sun Feb 16, 2020 5:31 pm If you include the value of pensions and social security, I always had bonds. I only began holding bonds in investment and retirement accounts a few years prior to early retirement.
This sounds like me.

Except I didn’t retire early.
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Re: At what age did you begin adding bonds?

Post by willthrill81 »

pmr2017 wrote: Sun Feb 16, 2020 4:01 pm At what age did you start to invest in bonds within your 401k/IRA accounts? How did you determine the percentage to put to bonds? What's you asset allocation plan for the future to shift more to bonds?
Assuming you have the risk tolerance to handle it, I believe that on the basis of historic data, a good case can be made to be 100% stock until about 10 years from your planned retirement or point at which you will be financially independent.
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Re: At what age did you begin adding bonds?

Post by Ron Ronnerson »

At 41.
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Re: At what age did you begin adding bonds?

Post by Elysium »

If you count Bank savings accounts & CD's then early 20's, bonds and stocks much later in late 20's. Bonds were my first mutual fund investment, before I had bought even one single stock investment. I have had them always since then. The highest equity allocation I ever had was 86%. To me, it makes no sense to be 100% equities or to even begin with equities unless you have a super safe job and have no short term needs for the money saved up. I had many such needs in my 20's like paying deposit on an apartment, buying a car, building up for a home down payment, or just using it as a back up between jobs.
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Re: At what age did you begin adding bonds?

Post by KlangFool »

OP,

When you asked the wrong question, you will never get the right answer!

In the coming recession, if the stock market drops 50% and you are unemployed, how long can you survive is the right question. Will you survive long enough to wait for the recovery. It won't matter what our answer is. We will not be paying your bills.

Some people are either lucky or have very good job security. They survived multiple recessions across many years without unemployment. So, they could be 100% stock and it won't matter. For those people that are 100% stock and did not survive, they would not be posting in this forum. This is survivorship bias. You only hear posting from those survived.

You should be at least 30% bond at any age. Please check the following URL. There is no reason to be 100% stock.

https://personal.vanguard.com/us/insigh ... llocations

The average annual return for 70/30 is 9.1%. The average annual return for 100/0 is 10.1%. The difference is only 1% per year.

But, the loss difference in terms of the worst year between 70/30 and 100/0 is 13%.

Can you count on that there will not be a recession over the next 13 years and you will not be unemployed at the same time?

Bad things tend to happen at the same time in the coming recession. Please make sure that you are not one of those capitulated.

KlangFool
Last edited by KlangFool on Sun Feb 16, 2020 7:08 pm, edited 1 time in total.
averagedude
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Re: At what age did you begin adding bonds?

Post by averagedude »

willthrill81 wrote: Sun Feb 16, 2020 6:59 pm
pmr2017 wrote: Sun Feb 16, 2020 4:01 pm At what age did you start to invest in bonds within your 401k/IRA accounts? How did you determine the percentage to put to bonds? What's you asset allocation plan for the future to shift more to bonds?
Assuming you have the risk tolerance to handle it, I believe that on the basis of historic data, a good case can be made to be 100% stock until about 10 years from your planned retirement or point at which you will be financially independent.
I couldn't agree more. Having any money in bonds for a 20 + year time horizon for an investor who can handle a 50% drawdown, is the wrong thing to do. Having just 10% in bonds for a 20 year old is the only criticism I have for target dated funds.
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Re: At what age did you begin adding bonds?

Post by Pierre Delecto »

Almost 44 and not yet.
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Re: At what age did you begin adding bonds?

Post by mottooscillator »

About 40 as part of my Wealthfront robo portfolio.
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Re: At what age did you begin adding bonds?

Post by Brianmcg321 »

47. I turned 47 this year.
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Re: At what age did you begin adding bonds?

Post by FreeAtLast »

At age 55, just three years before I retired. And the day I retired, my asset allocation had become 65/35 stocks/bonds.
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Re: At what age did you begin adding bonds?

Post by 1789 »

36 not yet
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Re: At what age did you begin adding bonds?

Post by GoldenFinch »

Started at 49 which has worked out pretty well.

(I agree with KlangFool’s post up above though. I just didn’t understand bonds until a few years ago.)
CityMillennial1
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Re: At what age did you begin adding bonds?

Post by CityMillennial1 »

KlangFool wrote: Sun Feb 16, 2020 7:07 pm OP,

When you asked the wrong question, you will never get the right answer!

In the coming recession, if the stock market drops 50% and you are unemployed, how long can you survive is the right question. Will you survive long enough to wait for the recovery. It won't matter what our answer is. We will not be paying your bills.

Some people are either lucky or have very good job security. They survived multiple recessions across many years without unemployment. So, they could be 100% stock and it won't matter. For those people that are 100% stock and did not survive, they would not be posting in this forum. This is survivorship bias. You only hear posting from those survived.

You should be at least 30% bond at any age. Please check the following URL. There is no reason to be 100% stock.

https://personal.vanguard.com/us/insigh ... llocations

The average annual return for 70/30 is 9.1%. The average annual return for 100/0 is 10.1%. The difference is only 1% per year.

But, the loss difference in terms of the worst year between 70/30 and 100/0 is 13%.

Can you count on that there will not be a recession over the next 13 years and you will not be unemployed at the same time?

Bad things tend to happen at the same time in the coming recession. Please make sure that you are not one of those capitulated.

KlangFool
What you're saying makes a lot of sense to me, but in a retirement account that you don't plan on accessing for at least 10 years why does it matter? I'm in my early 30's and my retirement accounts are 100% stocks. That 1% growth isn't a lot but I can stomach it since I don't plan on retiring for 40 years.

If I were in my mid/late 50's I would be reconsidering my asset allocations to be more in the 70-30 or potentially even lower depending on how the rest of my financial picture looks.
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Re: At what age did you begin adding bonds?

Post by KlangFool »

CityMillennial1 wrote: Sun Feb 16, 2020 8:30 pm
KlangFool wrote: Sun Feb 16, 2020 7:07 pm OP,

When you asked the wrong question, you will never get the right answer!

In the coming recession, if the stock market drops 50% and you are unemployed, how long can you survive is the right question. Will you survive long enough to wait for the recovery. It won't matter what our answer is. We will not be paying your bills.

Some people are either lucky or have very good job security. They survived multiple recessions across many years without unemployment. So, they could be 100% stock and it won't matter. For those people that are 100% stock and did not survive, they would not be posting in this forum. This is survivorship bias. You only hear posting from those survived.

You should be at least 30% bond at any age. Please check the following URL. There is no reason to be 100% stock.

https://personal.vanguard.com/us/insigh ... llocations

The average annual return for 70/30 is 9.1%. The average annual return for 100/0 is 10.1%. The difference is only 1% per year.

But, the loss difference in terms of the worst year between 70/30 and 100/0 is 13%.

Can you count on that there will not be a recession over the next 13 years and you will not be unemployed at the same time?

Bad things tend to happen at the same time in the coming recession. Please make sure that you are not one of those capitulated.

KlangFool
What you're saying makes a lot of sense to me, but in a retirement account that you don't plan on accessing for at least 10 years why does it matter? I'm in my early 30's and my retirement accounts are 100% stocks. That 1% growth isn't a lot but I can stomach it since I don't plan on retiring for 40 years.

If I were in my mid/late 50's I would be reconsidering my asset allocations to be more in the 70-30 or potentially even lower depending on how the rest of my financial picture looks.
CityMillennial1,

<<in a retirement account that you don't plan on accessing for at least 10 years why does it matter? >>

Life happened!

Nobody plan to be unemployed in the coming recession. But, many people will be unemployed in the coming recession. Some will be unemployed long enough that they need to use the money in the retirement account to pay their bills. How do you know that you will not be one of them?

I have been through too many recessions/economic crises over the past 30+ years.

Houston Oil Bust, Texas Saving & Loan Crisis, Asian Currency Crisis, Telecom Bust, 2008/2009 recession.

The same story repeats itself. Nobody plan to be unemployed. But, many people will be unemployed. Some will not survive financially.

You have to survive in order to succeed.

KlangFool
CityMillennial1
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Re: At what age did you begin adding bonds?

Post by CityMillennial1 »

That's a fair point. I guess it really depends on job security and people's entire financial picture.
KlangFool
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Re: At what age did you begin adding bonds?

Post by KlangFool »

CityMillennial1 wrote: Sun Feb 16, 2020 8:38 pm That's a fair point. I guess it really depends on job security and people's entire financial picture.
CityMillennial1,

1) And, in general, everyone assumes that their jobs are secured until their employer starts laying off people. This is especially true for folks that had never faced a laid off. They assumed that unemployment is somebody else's problem.

2) Younger folks tend to have a smaller portfolio. It won't take much unemployment to wipe the person out.

KlangFool
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Re: At what age did you begin adding bonds?

Post by bgf »

this year, at 34, when i decided to roll with target date and balanced funds.
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mikeyzito22
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Re: At what age did you begin adding bonds?

Post by mikeyzito22 »

KlangFool wrote: Sun Feb 16, 2020 7:07 pm OP,

When you asked the wrong question, you will never get the right answer!

In the coming recession, if the stock market drops 50% and you are unemployed, how long can you survive is the right question. Will you survive long enough to wait for the recovery. It won't matter what our answer is. We will not be paying your bills.

Some people are either lucky or have very good job security. They survived multiple recessions across many years without unemployment. So, they could be 100% stock and it won't matter. For those people that are 100% stock and did not survive, they would not be posting in this forum. This is survivorship bias. You only hear posting from those survived.

You should be at least 30% bond at any age. Please check the following URL. There is no reason to be 100% stock.

https://personal.vanguard.com/us/insigh ... llocations

The average annual return for 70/30 is 9.1%. The average annual return for 100/0 is 10.1%. The difference is only 1% per year.

But, the loss difference in terms of the worst year between 70/30 and 100/0 is 13%.

Can you count on that there will not be a recession over the next 13 years and you will not be unemployed at the same time?

Bad things tend to happen at the same time in the coming recession. Please make sure that you are not one of those capitulated.

KlangFool
Klangfool, If a person has a pension and multiple income streams, you are saying that someone shouldn't be less than 30% bond at any age? That's rich. I guess that throws people who are 90/10 or 80/20 under the bus even though they have retirement plans that include a high quality pension and eventual social security. Are you saying that 30% bond are applicable taken that into consideration?
mikeyzito22
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Re: At what age did you begin adding bonds?

Post by mikeyzito22 »

mikeyzito22 wrote: Sun Feb 16, 2020 8:59 pm
KlangFool wrote: Sun Feb 16, 2020 7:07 pm OP,

When you asked the wrong question, you will never get the right answer!

In the coming recession, if the stock market drops 50% and you are unemployed, how long can you survive is the right question. Will you survive long enough to wait for the recovery. It won't matter what our answer is. We will not be paying your bills.

Some people are either lucky or have very good job security. They survived multiple recessions across many years without unemployment. So, they could be 100% stock and it won't matter. For those people that are 100% stock and did not survive, they would not be posting in this forum. This is survivorship bias. You only hear posting from those survived.

You should be at least 30% bond at any age. Please check the following URL. There is no reason to be 100% stock.

https://personal.vanguard.com/us/insigh ... llocations

The average annual return for 70/30 is 9.1%. The average annual return for 100/0 is 10.1%. The difference is only 1% per year.

But, the loss difference in terms of the worst year between 70/30 and 100/0 is 13%.

Can you count on that there will not be a recession over the next 13 years and you will not be unemployed at the same time?

Bad things tend to happen at the same time in the coming recession. Please make sure that you are not one of those capitulated.

KlangFool
Klangfool, If a person has a pension and multiple income streams, you are saying that someone shouldn't be less than 30% bond at any age? That's rich. I guess that throws people who are 90/10 or 80/20 under the bus even though they have retirement plans that include a high quality pension and eventual social security. Are you saying that 30% bond is applicable taken that into consideration?
RonBurgAM
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Re: At what age did you begin adding bonds?

Post by RonBurgAM »

What you're saying makes a lot of sense to me, but in a retirement account that you don't plan on accessing for at least 10 years why does it matter? I'm in my early 30's and my retirement accounts are 100% stocks. That 1% growth isn't a lot but I can stomach it since I don't plan on retiring for 40 years.

If I were in my mid/late 50's I would be reconsidering my asset allocations to be more in the 70-30 or potentially even lower depending on how the rest of my financial picture looks.

Do some reading. The point is that on average you can get very similar returns with much less risk. Though this is based on historical averages. What gets lost in this argument is the advantages of a balanced portfolio. If you were 100% equities in the 90s or 2010s, it was technically the correct choice. But in the 2000s a 70/30 or even an 80/20 portfolio with periodic re-balancing did very well even though it was considered the "lost decade." Hindsight is always 20/20.

If you think 100% stocks will yield a better return, why not 100% tech stocks? Might as well be a baller and invest 100% in the NASDAQ.

I'm 50. 30% in bonds down from 35% five years ago. I'd be a helluva a lot closer to my nut if I would have been 0% bonds the last 10 years. But I didn't have a crystal ball back then and still pressed my luck. I don't regret any gains that I've missed, but am rather thankful of the gains that I've had. In the early 2000s I had most of my 401k in Janus Twenty. Would have been a lot better if I had 20-30% in bonds when that fund got destroyed.

I'll leave you with this. Make a plan and stick to it. And if we run into another lost decade, don't falter. Godspeed.
UpperNwGuy
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Re: At what age did you begin adding bonds?

Post by UpperNwGuy »

I think young investors should have at least a small portion of their portfolio in bonds so that they learn how bonds work under a variety of circumstances.
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Re: At what age did you begin adding bonds?

Post by mikeyzito22 »

UpperNwGuy wrote: Sun Feb 16, 2020 9:25 pm I think young investors should have at least a small portion of their portfolio in bonds so that they learn how bonds work under a variety of circumstances.
+1 If a person is interested in learning. This is right on.
TG2
Posts: 202
Joined: Sat Nov 25, 2017 6:50 pm

Re: At what age did you begin adding bonds?

Post by TG2 »

At what age did you begin adding bonds?
Well, let's see. I'm 60 now, retired for over two years.... Ummm, never yet. My investments are essentially 99.9% stocks, 0 bonds. It may change at some point, but I just don't see it yet. I did try to do bonds when I rolled over my 401k, but just couldn't.
HawkeyePierce
Posts: 1755
Joined: Tue Mar 05, 2019 10:29 pm
Location: Colorado

Re: At what age did you begin adding bonds?

Post by HawkeyePierce »

At least 20% starting at 22 when I bought my first mutual fund.
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