At what age did you begin adding bonds?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
jhfenton
Posts: 4635
Joined: Sat Feb 07, 2015 11:17 am
Location: Ohio

Re: At what age did you begin adding bonds?

Post by jhfenton » Sun Feb 16, 2020 10:13 pm

We added bonds for the first time at age 45--my wife and I both--in 2015. We were 100% equities through the early 2000 markets. (Although we were so heavily tilted to small value, it was not much of a dip. And we had a small portfolio.) We were 100% equities through the 2008 crash, and on top of it I was unemployed from December 2008 through the first half of 2009.

We're currently at 85/15 at 50/almost 50. That's more than enough to rebalance in any crash. Plus we're still contributing a few percent in new money every year maxing out 4 of our 5 tax-advantaged accounts (2 Roths, 2 401(k)s, 1 family HSA). (It was 5/5, but turning 50 makes batting 1.000 impossible for us.) We're at least 10, probably 12, maybe 15 years from retirement, so I'm not that concerned with volatility. In retirement, I expect we'll be somewhere between 60/40 and 70/30. I'm currently assuming 65/35.

KlangFool
Posts: 16685
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what age did you begin adding bonds?

Post by KlangFool » Sun Feb 16, 2020 10:22 pm

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 are applicable taken that into consideration?
mikeyzito22,

1) Is the pension vested? Can the person withdraw the pension now? If not, how can the pension help the person pays the bill?

2) The person has to survive at least 62 years old before he/she can withdraw social security. Meanwhile, how to pay the bills when the person is unemployed?

<<multiple income streams,>>

3) In a recession, bad things tend to happen at the same time. The business failed too. So, the income streams can disappear at the same time.

You have to survive in order to succeed.

KlangFool

mikeyzito22
Posts: 372
Joined: Sat Dec 02, 2017 5:42 pm

Re: At what age did you begin adding bonds?

Post by mikeyzito22 » Sun Feb 16, 2020 10:30 pm

KlangFool wrote:
Sun Feb 16, 2020 10:22 pm
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 are applicable taken that into consideration?
mikeyzito22,

1) Is the pension vested? Can the person withdraw the pension now? If not, how can the pension help the person pays the bill?
In this case yes it is vested. The pension is an affect of the occupation. I dont see that as a negative.

2) The person has to survive at least 62 years old before he/she can withdraw social security. Meanwhile, how to pay the bills when the person is unemployed?
This person isn't unemployed and is in a government job. It would be very hard to lose, even in a recession.

<<multiple income streams,>>

3) In a recession, bad things tend to happen at the same time. The business failed too. So, the income streams can disappear at the same time.
That's the rub. If our other income streams dried up in a downturn we would still be paying the bills because we bought a modest home in a place
where we can pay our bills.

You have to survive in order to succeed.
So, still 30% bonds?

Bama12
Posts: 227
Joined: Fri Aug 30, 2019 11:48 pm

Re: At what age did you begin adding bonds?

Post by Bama12 » Sun Feb 16, 2020 10:33 pm

10% since 45 in my 401k only none in Roth. I might go to 20% at 50 but will never go higher.

Normchad
Posts: 682
Joined: Thu Mar 03, 2011 7:20 am

Re: At what age did you begin adding bonds?

Post by Normchad » Sun Feb 16, 2020 10:35 pm

I started adding bonds at age 40, about 10 years ago.

For a long time, my plan was to go 60/40 and stay there forever. I’m currently at 60/40.

Now my thinking is shifting away from a fixed lifetime 60/40. I’m considering now having 10 years living expenses in bonds at retirement age, and out the rest in equities, no matter what ration that turns out to be. I.e. once I have ten years expenses in bonds, everything new will go to equites, so I might be 60/40 at retirement, or more likely something like 70/30.

Klangfool has had some serious life experiences that he has shared. My thinking is starting g with ten years expenses in bonds will enable me to weather SOR risk, etc. If that’s not good enough, then I guess I’ll be eating cat food starting in year eleven.

palaheel
Posts: 315
Joined: Wed Mar 22, 2017 7:35 am

Re: At what age did you begin adding bonds?

Post by palaheel » Sun Feb 16, 2020 10:43 pm

My plan was to be 100% stocks until 50, then start adding bonds and retire at 65. I forgot :oops: . In 2009, at 55, laid off, and starting to draw a pension, I began to add bonds slowly. I'm now up to 45%.
Markets crash. Markets recover. Inflation takes your money FOREVER.

KlangFool
Posts: 16685
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what age did you begin adding bonds?

Post by KlangFool » Sun Feb 16, 2020 10:44 pm

mikeyzito22 wrote:
Sun Feb 16, 2020 10:30 pm
KlangFool wrote:
Sun Feb 16, 2020 10:22 pm
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 are applicable taken that into consideration?
mikeyzito22,

1) Is the pension vested? Can the person withdraw the pension now? If not, how can the pension help the person pays the bill?
In this case yes it is vested. The pension is an affect of the occupation. I dont see that as a negative.

2) The person has to survive at least 62 years old before he/she can withdraw social security. Meanwhile, how to pay the bills when the person is unemployed?
This person isn't unemployed and is in a government job. It would be very hard to lose, even in a recession.

<<multiple income streams,>>

3) In a recession, bad things tend to happen at the same time. The business failed too. So, the income streams can disappear at the same time.
That's the rub. If our other income streams dried up in a downturn we would still be paying the bills because we bought a modest home in a place
where we can pay our bills.

You have to survive in order to succeed.
So, still 30% bonds?
mikeyzito22,

1) Let's assume the pension is vested and the person can withdraw the pension, there still could be a penalty for withdrawing the pension earlier.

2) It is hard but not impossible. The government's revenue could go down and decide to cut expenses.

3) The income streams might dry out and it may turn to negative too. So, you need more money to pump in.

<<So, still 30% bonds?>>

Yes.

The gain is an additional 1% per year if you are lucky. The loss is a total wipeout and you lose your house. The risk is greater than the reward.

KlangFool

mikeyzito22
Posts: 372
Joined: Sat Dec 02, 2017 5:42 pm

Re: At what age did you begin adding bonds?

Post by mikeyzito22 » Sun Feb 16, 2020 10:54 pm

Perfect. Makes sense.

mikeyzito22
Posts: 372
Joined: Sat Dec 02, 2017 5:42 pm

Re: At what age did you begin adding bonds?

Post by mikeyzito22 » Sun Feb 16, 2020 10:55 pm

KlangFool wrote:
Sun Feb 16, 2020 10:44 pm
mikeyzito22 wrote:
Sun Feb 16, 2020 10:30 pm
KlangFool wrote:
Sun Feb 16, 2020 10:22 pm
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 are applicable taken that into consideration?
mikeyzito22,

1) Is the pension vested? Can the person withdraw the pension now? If not, how can the pension help the person pays the bill?
In this case yes it is vested. The pension is an affect of the occupation. I dont see that as a negative.

2) The person has to survive at least 62 years old before he/she can withdraw social security. Meanwhile, how to pay the bills when the person is unemployed?
This person isn't unemployed and is in a government job. It would be very hard to lose, even in a recession.

<<multiple income streams,>>

3) In a recession, bad things tend to happen at the same time. The business failed too. So, the income streams can disappear at the same time.
That's the rub. If our other income streams dried up in a downturn we would still be paying the bills because we bought a modest home in a place
where we can pay our bills.

You have to survive in order to succeed.
So, still 30% bonds?
mikeyzito22,

1) Let's assume the pension is vested and the person can withdraw the pension, there still could be a penalty for withdrawing the pension earlier.

2) It is hard but not impossible. The government's revenue could go down and decide to cut expenses.

3) The income streams might dry out and it may turn to negative too. So, you need more money to pump in.

<<So, still 30% bonds?>>

Yes.

The gain is an additional 1% per year if you are lucky. The loss is a total wipeout and you lose your house. The risk is greater than the reward.

KlangFool
Perfect. Makes sense.

User avatar
MN-Investor
Posts: 451
Joined: Mon May 02, 2011 9:04 am
Location: Twin Cities

Re: At what age did you begin adding bonds?

Post by MN-Investor » Sun Feb 16, 2020 10:57 pm

We were 2% bonds until 2015, a year before my husband retired. My sweetie retired in 2016 at age 62 and, by 2017, when his 401(k) was rolled over and fully invested in an IRA, we were then 60% bonds.
The key to success - Save early, save often, invest well.

BillyK
Posts: 68
Joined: Sat Sep 24, 2016 1:30 am

Re: At what age did you begin adding bonds?

Post by BillyK » Mon Feb 17, 2020 3:16 am

As soon as I started investing in my mid 20s during the 1980s I added bonds minimally 20 to 30%. Don’t regret it one bit. My first experience of a market crash was Black Monday in 1987 which was quite eye opening at the time. So often I see recommendations for younger investors to invest 100% in equities, but I know personally bonds helped me stay the course through the decades and resulting market crashes such as 2000, 2008, and I am certain they will during the inevitable next one to occur too.

hudson
Posts: 2918
Joined: Fri Apr 06, 2007 9:15 am

Re: At what age did you begin adding bonds?

Post by hudson » Mon Feb 17, 2020 5:40 am

I'm a bad example. I didn't start investing until my mid 50s. Before that, my credit card was my emergency fund. There was rarely any extra, if so, I spent it. Then the light came on, I stopped borrowing, got debt free, and started saving with a vengeance. With some exceptions, I've been mostly fixed income ever since.
If I was going to start over, I wouldn't buy any stocks until I had a serious pile of fixed income....probably mostly CDs or something almost as safe. The serious pile would be more than an emergency fund....maybe 2-3 years of income. At that point, I would consider adding those risky assets....stocks. I think that living below your means and saving is a better bet than relying on stock market gains.

WannabeBogleHead01
Posts: 63
Joined: Wed Nov 09, 2016 10:12 am

Re: At what age did you begin adding bonds?

Post by WannabeBogleHead01 » Mon Feb 17, 2020 6:00 am

Started buying bonds in early 40’s. Now in early 50’s and at 70/30. Will stay there another few years with long-term AA at 60/40.

KarenC
Posts: 141
Joined: Mon Apr 27, 2015 7:25 am

Re: At what age did you begin adding bonds?

Post by KarenC » Mon Feb 17, 2020 6:43 am

For most of my life, I was 100% stocks—mainly because of a Jane Bryant Quinn article I read when I was young. When the global financial crisis hit around 2008, I started basically ignoring my retirement accounts; when a statement came in the mail, I would take a quick look at the bottom line, think "That looks pretty bad," and throw the statement into a pile. Although I was metaphorically burying my head in the sand, it kept me 100% in stocks until I was about 51 years old.

At that point, financial anxiety prompted me to start paying attention to my retirement accounts (as a way to soothe myself, I suspect). Realizing I was much wealthier than I thought (I'm surprising good at the "burying my head in the sand" thing), I started casting about for financial advice online. I somehow ran across Bogleheads.org at that point, and started shifting my AA away from equities, rapidly going from 100/0 to 80/20, and then to 60/40. About a year after that, after reading some William Bernstein, I settled into my current AA of around 50/50.
"The first principle is that you must not fool yourself, and you are the easiest person to fool." — Richard P. Feynman

maddogio
Posts: 74
Joined: Fri Jan 20, 2017 11:38 am

Re: At what age did you begin adding bonds?

Post by maddogio » Mon Feb 17, 2020 7:44 am

Starting buying TIAA Trad in my late twenties and I've never stopped. At 47, I'm 65% equities, 30% TIAA Trad and 5% bonds for reallocation purposes. I know I probably would need a bit more in bonds to be able to reallocate as I'd like during a steep decline in the market.

I've always struggled with allocation. I'll have neither defined-benefit pension or SS at retirement. I've always thought my asset allocation should be conservative.

RJC
Posts: 564
Joined: Fri Dec 14, 2018 1:40 pm

Re: At what age did you begin adding bonds?

Post by RJC » Mon Feb 17, 2020 7:51 am

For those at 100% stocks, do you have a large savings/emergency fund to substitute as fixed income? I can't imagine being in equities across all accounts only.

pascalwager
Posts: 1804
Joined: Mon Oct 31, 2011 8:36 pm

Re: At what age did you begin adding bonds?

Post by pascalwager » Mon Feb 17, 2020 8:10 am

I always had a small bond allocation (10%) and a too-large cash reserve, but I made a large exchange from bonds to stocks a few years after retiring. Now I'm 55/45 with a small cash reserve (1%). I may gradually go to 60/40 by only withdrawing from bonds for awhile.
Retired, pension, no SS | Bond funds: TIPS, TBM | Global stocks: total market, large value, small company, emerging market funds

visualguy
Posts: 1948
Joined: Thu Jan 30, 2014 1:32 am

Re: At what age did you begin adding bonds?

Post by visualguy » Mon Feb 17, 2020 8:13 am

Overall, it seems that bonds are held by people here a lot less than one would expect... I remember frequently reading about "age" or "age-10" or "age-20" in bonds. Seems like that was nonsense to most, and in reality many hold very little or none until retirement, and maybe not much even then.

Not saying it's a bad strategy by any means, just surprised. I think that if I was following the conventional wisdom on this, I would be disappointed to see that this is not really what is practiced by people here so much. I don't practice it either, but I thought I was in a small minority, and it turns out that this is very common here actually...

User avatar
whodidntante
Posts: 8387
Joined: Thu Jan 21, 2016 11:11 pm
Location: outside the echo chamber

Re: At what age did you begin adding bonds?

Post by whodidntante » Mon Feb 17, 2020 8:18 am

jhfenton wrote:
Sun Feb 16, 2020 10:13 pm
We added bonds for the first time at age 45--my wife and I both--in 2015. We were 100% equities through the early 2000 markets. (Although we were so heavily tilted to small value, it was not much of a dip. And we had a small portfolio.) We were 100% equities through the 2008 crash, and on top of it I was unemployed from December 2008 through the first half of 2009.

We're currently at 85/15 at 50/almost 50. That's more than enough to rebalance in any crash. Plus we're still contributing a few percent in new money every year maxing out 4 of our 5 tax-advantaged accounts (2 Roths, 2 401(k)s, 1 family HSA). (It was 5/5, but turning 50 makes batting 1.000 impossible for us.) We're at least 10, probably 12, maybe 15 years from retirement, so I'm not that concerned with volatility. In retirement, I expect we'll be somewhere between 60/40 and 70/30. I'm currently assuming 65/35.
This makes a lot more sense to me than the typical conservative recommendations I see here. My thoughts are similar to yours and the odds of having better outcomes are favorable to say the least.

msk
Posts: 1470
Joined: Mon Aug 15, 2016 10:40 am

Re: At what age did you begin adding bonds?

Post by msk » Mon Feb 17, 2020 8:26 am

Never bought a single bond. Now age 75. Dabbled in individual stocks, Options and rental RE but also fell into a good job that promised a COLA pension. Was lucky. Ended up with a nice :moneybag I sincerely believe that I could have ended up with :moneybag :moneybag :moneybag if I had taken even more risk but that's what my nerves and family obligations could stand. Individuals have different sensitivities.

Topic Author
pmr2017
Posts: 37
Joined: Tue Dec 31, 2019 11:34 am

Re: At what age did you begin adding bonds?

Post by pmr2017 » Mon Feb 17, 2020 8:58 am

Wow, great responses and opinions by everyone. Really interesting to read the different ages, percentages, reasoning, etc.

I am early 30s right now and 100% equities in my ROTH IRA and 401k accounts. Was going to wait until I hit 40 to move 10% into bonds but now I might reconsider and do that earlier.

fortunefavored
Posts: 112
Joined: Tue Jun 02, 2015 8:18 pm

Re: At what age did you begin adding bonds?

Post by fortunefavored » Mon Feb 17, 2020 9:09 am

We're in a record bull stock market.. of course most posts are going to be humble bragging about who has the lowest bond allocation - it has worked very well recently.

How about from 1999 to 2017? 70/30 re-balanced annually vs. Total Stock Market. Total stock did not overtake until 2017.

These periods are not unusual and you may feel differently with a 50% draw-down that goes no where for 15+ years vs. a 30% draw-down that shows some green and actually out-performs for a decade. I sure did!

Personally I've been age minus 10 until hitting my FI number - I will now sit at 60/40 until past sequence of returns risk, then will likely follow a rising equity glide path.

aristotle'sfootprint
Posts: 31
Joined: Sat Jul 06, 2019 3:05 pm

Re: At what age did you begin adding bonds?

Post by aristotle'sfootprint » Mon Feb 17, 2020 9:16 am

I haven't yet, at 42. I'm aiming for 60/40 in my portfolio, and I take into account future earnings (human capital) when calculating its value. I feel comfortable doing this given that my job is secure and those future earnings are bond-like.

soundwave
Posts: 46
Joined: Thu Jun 28, 2018 10:13 am
Location: USA

Re: At what age did you begin adding bonds?

Post by soundwave » Mon Feb 17, 2020 9:39 am

mikeyzito22 wrote:
Sun Feb 16, 2020 9:48 pm
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.
Agree. After I added bonds (age 60), I was always watching to see how equities & bonds shifted in relation to each other. I was late to the party with bonds but I was also late to the party with my investment education. Now agree with KlangFool.
"Go placidly amid the noise and the haste..." Max Ehrmann

visualguy
Posts: 1948
Joined: Thu Jan 30, 2014 1:32 am

Re: At what age did you begin adding bonds?

Post by visualguy » Mon Feb 17, 2020 9:48 am

fortunefavored wrote:
Mon Feb 17, 2020 9:09 am
We're in a record bull stock market.. of course most posts are going to be humble bragging about who has the lowest bond allocation - it has worked very well recently.

How about from 1999 to 2017? 70/30 re-balanced annually vs. Total Stock Market. Total stock did not overtake until 2017.

These periods are not unusual and you may feel differently with a 50% draw-down that goes no where for 15+ years vs. a 30% draw-down that shows some green and actually out-performs for a decade. I sure did!

Personally I've been age minus 10 until hitting my FI number - I will now sit at 60/40 until past sequence of returns risk, then will likely follow a rising equity glide path.
The thing is that your portfolio would have been higher to begin with in 1999 with a higher stock allocation...

If you can psychologically stomach the volatility of stocks, it's really hard to make the case for bonds. Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money that you wouldn't have had anyway if you had a conservative portfolio.

vipertom1970
Posts: 770
Joined: Fri Jun 21, 2019 7:06 pm

Re: At what age did you begin adding bonds?

Post by vipertom1970 » Mon Feb 17, 2020 9:56 am

visualguy wrote:
Mon Feb 17, 2020 9:48 am
fortunefavored wrote:
Mon Feb 17, 2020 9:09 am
We're in a record bull stock market.. of course most posts are going to be humble bragging about who has the lowest bond allocation - it has worked very well recently.

How about from 1999 to 2017? 70/30 re-balanced annually vs. Total Stock Market. Total stock did not overtake until 2017.

These periods are not unusual and you may feel differently with a 50% draw-down that goes no where for 15+ years vs. a 30% draw-down that shows some green and actually out-performs for a decade. I sure did!

Personally I've been age minus 10 until hitting my FI number - I will now sit at 60/40 until past sequence of returns risk, then will likely follow a rising equity glide path.
The thing is that your portfolio would have been higher to begin with in 1999 with a higher stock allocation...

If you can psychologically stomach the volatility of stocks, it's really hard to make the case for bonds. Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money that you wouldn't have had anyway if you had a conservative portfolio.
Well said sir ! With zero bonds since 1995-2020, I was up over 375%.

fortunefavored
Posts: 112
Joined: Tue Jun 02, 2015 8:18 pm

Re: At what age did you begin adding bonds?

Post by fortunefavored » Mon Feb 17, 2020 10:03 am

visualguy wrote:
Mon Feb 17, 2020 9:48 am
The thing is that your portfolio would have been higher to begin with in 1999 with a higher stock allocation...

If you can psychologically stomach the volatility of stocks, it's really hard to make the case for bonds. Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money that you wouldn't have had anyway if you had a conservative portfolio.
1999 is when I actually started making a legitimate amount of money, so that is why I used that start point - as in, that actually really happened, not theoretical. I lived during that period (including 2 layoffs) wondering if stocks would ever return anything decently, or if we were headed to Japan land.

You cannot choose when you start your investing journey. There were similar extended (10 to 20 year) periods in the 30s (obviously), 60s, and 80s.

Of course, it is hard to argue with any of the "no bonds" posts because objectively it is working right now. We'll see during the next 15-20 year period what happens - I sure don't know, but that is why I hold a diversified set of assets - including international, which also has done poorly and is often a popular thread target ("Why hold international?" etc.)

KlangFool
Posts: 16685
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what age did you begin adding bonds?

Post by KlangFool » Mon Feb 17, 2020 10:05 am

visualguy wrote:
Mon Feb 17, 2020 9:48 am
fortunefavored wrote:
Mon Feb 17, 2020 9:09 am
We're in a record bull stock market.. of course most posts are going to be humble bragging about who has the lowest bond allocation - it has worked very well recently.

How about from 1999 to 2017? 70/30 re-balanced annually vs. Total Stock Market. Total stock did not overtake until 2017.

These periods are not unusual and you may feel differently with a 50% draw-down that goes no where for 15+ years vs. a 30% draw-down that shows some green and actually out-performs for a decade. I sure did!

Personally I've been age minus 10 until hitting my FI number - I will now sit at 60/40 until past sequence of returns risk, then will likely follow a rising equity glide path.
The thing is that your portfolio would have been higher to begin with in 1999 with a higher stock allocation...

If you can psychologically stomach the volatility of stocks, it's really hard to make the case for bonds. Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money that you wouldn't have had anyway if you had a conservative portfolio.
visualguy,

<<If you can psychologically stomach the volatility of stocks, >>

If the person is unemployed long enough to use up the emergency fund, the person would have to sell the stock in order to pay the bills. This is true regardless of the state of the person's stomach.

<<it's really hard to make the case for bonds.>>

It is hard to make the case that no one will be unemployed in the coming recession.

<<Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money >>

Once you sell, it is no longer a paper loss.

KlangFool

Pikel
Posts: 182
Joined: Sat Jan 04, 2020 9:55 am

Re: At what age did you begin adding bonds?

Post by Pikel » Mon Feb 17, 2020 10:27 am

Mid 30s, the event was a company sale that increased assets by about 140%.

Suddenly feel like a 45 year old, the AA allocation is closer to 50/50 for now and am still wondering if I could really stomach a multi-year recession with associated comparisons to Japan at 60/40.

I also think; 5 years from now could many of us really stomach our basis being less than it is today?

User avatar
KingRiggs
Posts: 513
Joined: Wed Dec 12, 2018 12:19 pm
Location: Indiana

Re: At what age did you begin adding bonds?

Post by KingRiggs » Mon Feb 17, 2020 11:31 am

Started contributing to 401k at age 30 in 1996 when I entered medical practice. Was 100% stocks then, because "be aggressive!"

Stayed 100% stocks because I figured I had a long time horizon.

At age 50 (2016), started thinking about bonds, but was told it was a bad time because of interest rates.

At age 52 (2018) became a Boglehead, fired my 1% AUM adviser, and went to 3-fund portfolio at 70/30.

In retrospect, it worked OK for me because I continued to contribute during a long bull market. I would advise others to do differently.

Do as I say, not as I do (did).
Advice = noun | Advise = verb | | Roth, not ROTH

Triple digit golfer
Posts: 5337
Joined: Mon May 18, 2009 5:57 pm

Re: At what age did you begin adding bonds?

Post by Triple digit golfer » Mon Feb 17, 2020 12:08 pm

I am 80/20 without an emergency fund. I do, however, have an emergency plan.

If I subjectively took 1 year of expenses out of the 20%, then I'd be around 87/13 with a 1 year emergency fund.

I wonder if the difference between the 100% equity crowd and the not 100% equity crowd is closer than we think.

Perhaps many not 100% equity people are like me, without an "emergency fund," and perhaps many 100% equity people are really holding a significant emergency fund that they are not counting.

nix4me
Posts: 613
Joined: Sat Oct 13, 2018 9:32 am

Re: At what age did you begin adding bonds?

Post by nix4me » Mon Feb 17, 2020 12:10 pm

Don’t know. 47 and hold no bonds yet.

atdharris
Posts: 437
Joined: Wed Jan 02, 2019 3:18 pm

Re: At what age did you begin adding bonds?

Post by atdharris » Mon Feb 17, 2020 1:02 pm

I'm 31 and have 10% or so in long-term treasuries. Some days, I wonder if there is even a point to holding TLT. It does cut down on my volatility somewhat.

visualguy
Posts: 1948
Joined: Thu Jan 30, 2014 1:32 am

Re: At what age did you begin adding bonds?

Post by visualguy » Mon Feb 17, 2020 1:13 pm

fortunefavored wrote:
Mon Feb 17, 2020 10:03 am
visualguy wrote:
Mon Feb 17, 2020 9:48 am
The thing is that your portfolio would have been higher to begin with in 1999 with a higher stock allocation...

If you can psychologically stomach the volatility of stocks, it's really hard to make the case for bonds. Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money that you wouldn't have had anyway if you had a conservative portfolio.
1999 is when I actually started making a legitimate amount of money, so that is why I used that start point - as in, that actually really happened, not theoretical. I lived during that period (including 2 layoffs) wondering if stocks would ever return anything decently, or if we were headed to Japan land.

You cannot choose when you start your investing journey. There were similar extended (10 to 20 year) periods in the 30s (obviously), 60s, and 80s.

Of course, it is hard to argue with any of the "no bonds" posts because objectively it is working right now. We'll see during the next 15-20 year period what happens - I sure don't know, but that is why I hold a diversified set of assets - including international, which also has done poorly and is often a popular thread target ("Why hold international?" etc.)
Even starting at 1999, you'd be ahead of where you are now without bonds, as you mentioned yourself. Indeed, international is another part of the conventional wisdom that many here don't really follow as it turns out. Also, for good reason since holding it has been quite harmful in the long run, and there's no real-world evidence of a benefit so far.

visualguy
Posts: 1948
Joined: Thu Jan 30, 2014 1:32 am

Re: At what age did you begin adding bonds?

Post by visualguy » Mon Feb 17, 2020 1:26 pm

KlangFool wrote:
Mon Feb 17, 2020 10:05 am
visualguy wrote:
Mon Feb 17, 2020 9:48 am
fortunefavored wrote:
Mon Feb 17, 2020 9:09 am
We're in a record bull stock market.. of course most posts are going to be humble bragging about who has the lowest bond allocation - it has worked very well recently.

How about from 1999 to 2017? 70/30 re-balanced annually vs. Total Stock Market. Total stock did not overtake until 2017.

These periods are not unusual and you may feel differently with a 50% draw-down that goes no where for 15+ years vs. a 30% draw-down that shows some green and actually out-performs for a decade. I sure did!

Personally I've been age minus 10 until hitting my FI number - I will now sit at 60/40 until past sequence of returns risk, then will likely follow a rising equity glide path.
The thing is that your portfolio would have been higher to begin with in 1999 with a higher stock allocation...

If you can psychologically stomach the volatility of stocks, it's really hard to make the case for bonds. Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money that you wouldn't have had anyway if you had a conservative portfolio.
visualguy,

<<If you can psychologically stomach the volatility of stocks, >>

If the person is unemployed long enough to use up the emergency fund, the person would have to sell the stock in order to pay the bills. This is true regardless of the state of the person's stomach.

<<it's really hard to make the case for bonds.>>

It is hard to make the case that no one will be unemployed in the coming recession.

<<Also, once you have some good stock gains, the volatility has much less psychological impact because the paper losses are money >>

Once you sell, it is no longer a paper loss.

KlangFool
We're talking about retirement savings here. Sure, if you are unemployed for a prolonged period of time and eating into your retirement savings to survive, that's a bad situation, but now you aren't really using these funds as planned, you're consuming them way prematurely. I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)

mattshwink
Posts: 390
Joined: Mon Sep 21, 2015 10:01 am

Re: At what age did you begin adding bonds?

Post by mattshwink » Mon Feb 17, 2020 1:28 pm

So my wife added a target date fund which her contributions have been going to for about ~10 years, so since about age 35. But our bond percentage has been really low (<5%) until the last few years. Currently my target is 10% bonds at age 45 (2020). We will be adding 2% bonds a year until age 60, where our portfolio will be 60% stocks and 40% bonds. Allocation was picked from still wanting to be aggressive in retirement (with 30-40 years of spending) while limiting some downside.

fortunefavored
Posts: 112
Joined: Tue Jun 02, 2015 8:18 pm

Re: At what age did you begin adding bonds?

Post by fortunefavored » Mon Feb 17, 2020 1:33 pm

visualguy wrote:
Mon Feb 17, 2020 1:13 pm

Even starting at 1999, you'd be ahead of where you are now without bonds, as you mentioned yourself. Indeed, international is another part of the conventional wisdom that many here don't really follow as it turns out. Also, for good reason since holding it has been quite harmful in the long run, and there's no real-world evidence of a benefit so far.
Yes, NOW I would have.. but not from 1999 to 2013. I had to live every one of those years with my AA. We could have very easily continued that pattern, or worse. This is an issue with all back testing. Anything other than "large growth" has been "worse" - does that mean we should just be 100% S&P500 forever?

I attribute the lack of follow through on AA principles as a highlight of behavioral pitfalls and the importance of having a written IPS - humans are not good at wrapping their brains around 20+ year time periods.

I expect most would probably be better off in a Target Date or Balanced fund and forgetting about it, but people that ARE primarily in those types of funds are not reading/writing on Bogleheads because it is boring. :)

KlangFool
Posts: 16685
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what age did you begin adding bonds?

Post by KlangFool » Mon Feb 17, 2020 1:37 pm

visualguy wrote:
Mon Feb 17, 2020 1:26 pm


We're talking about retirement savings here. Sure, if you are unemployed for a prolonged period of time and eating into your retirement savings to survive, that's a bad situation, but now you aren't really using these funds as planned, you're consuming them way prematurely. I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)
visualguy,

Life happened! Bad things do happen!

Who and what guaranteed us that we will be fully-employed enough all the way until the retirement age?

<<I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)>>

Who and what guaranteed us that we will not be unemployed long enough in the coming recession that we need to use our retirement fund?

This is across 30+ years and multiple recessions. It just needs to happen to us once across multiple future recessions. Then, the 100/0 will lose to 70/30.

Counting on being lucky is not a good planning strategy.

Many of my peers are permanently unemployed and under-employed in their 40s and 50s.

Many people capitulated in a recession. Make sure that you are not one of them.

KlangFool

cs412a
Posts: 94
Joined: Sun Dec 17, 2017 1:37 pm

Re: At what age did you begin adding bonds?

Post by cs412a » Mon Feb 17, 2020 2:15 pm

Prior to my divorce, my ex and I didn't have any investments, we just had savings (as in credit union & bank savings accounts). After my divorce, I received "maintenance in gross" instead of spousal support. I also received my share of the IRAs.

As an unemployed single female head of household (I had sole custody of a minor child and was a graduate student), the thought of losing any of the principal was extremely disturbing. It was at this time that I learned about no load, low-cost Vanguard bond funds - through a Consumer Reports article on investing and from a good friend and her husband. So in December of 1990, I invested the maintenance amount into Vanguard bond funds in a taxable portfolio, and the money from the IRAs was rolled over into IRAs (stock funds, primarily at Dodge & Cox). The allocation was 12% stock funds, 88% bond funds.

I know intellectually that I would have more money in retirement now if I had gone with, say, a 50/50 allocation. But psychologically, I simply wasn't able to do that at the time. I did try to contribute to traditional (and later Roth) IRAs when I could, but I was underemployed for a long time, so no 403bs for me until much later.

Now, in retirement, my allocation is 55% stock funds, 44% bond funds, 1% cash. In large part, the stock funds caught up to the bond funds.

visualguy
Posts: 1948
Joined: Thu Jan 30, 2014 1:32 am

Re: At what age did you begin adding bonds?

Post by visualguy » Mon Feb 17, 2020 2:48 pm

fortunefavored wrote:
Mon Feb 17, 2020 1:33 pm
visualguy wrote:
Mon Feb 17, 2020 1:13 pm

Even starting at 1999, you'd be ahead of where you are now without bonds, as you mentioned yourself. Indeed, international is another part of the conventional wisdom that many here don't really follow as it turns out. Also, for good reason since holding it has been quite harmful in the long run, and there's no real-world evidence of a benefit so far.
Yes, NOW I would have.. but not from 1999 to 2013. I had to live every one of those years with my AA. We could have very easily continued that pattern, or worse. This is an issue with all back testing. Anything other than "large growth" has been "worse" - does that mean we should just be 100% S&P500 forever?

I attribute the lack of follow through on AA principles as a highlight of behavioral pitfalls and the importance of having a written IPS - humans are not good at wrapping their brains around 20+ year time periods.

I expect most would probably be better off in a Target Date or Balanced fund and forgetting about it, but people that ARE primarily in those types of funds are not reading/writing on Bogleheads because it is boring. :)
Target Date funds don't stay the course, actually. They've become more aggressive - lower percentage in bonds. Also, the ex-US percentage has been increased. The target date fund companies keep changing things based on whatever is in vogue in their research group, and what they see other companies do.

Regarding your other comments - it's hard to argue with what works. If someone has been 100% S&P500, I wouldn't argue that this was somehow wrong. It's quite diversified, lots of domestic as well as global business, domestic currency, not subject to foreign taxes on dividends, strongest capitalist economy, shareholder-centric, etc. Based on what would I say it's wrong? This has proved itself to be a really good strategy so far in terms of growing the portfolio size, and it has worked fine even in retirement, providing good SWRs. It's strange to tell them that they need to add bonds or ex-US or whatever when that did worse over the long run in the past, and when bonds yield so little now. The extra diversification of bonds and ex-US is just that - extra diversification, but into assets with questionable performance.

visualguy
Posts: 1948
Joined: Thu Jan 30, 2014 1:32 am

Re: At what age did you begin adding bonds?

Post by visualguy » Mon Feb 17, 2020 2:57 pm

KlangFool wrote:
Mon Feb 17, 2020 1:37 pm
visualguy wrote:
Mon Feb 17, 2020 1:26 pm


We're talking about retirement savings here. Sure, if you are unemployed for a prolonged period of time and eating into your retirement savings to survive, that's a bad situation, but now you aren't really using these funds as planned, you're consuming them way prematurely. I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)
visualguy,

Life happened! Bad things do happen!

Who and what guaranteed us that we will be fully-employed enough all the way until the retirement age?

<<I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)>>

Who and what guaranteed us that we will not be unemployed long enough in the coming recession that we need to use our retirement fund?

This is across 30+ years and multiple recessions. It just needs to happen to us once across multiple future recessions. Then, the 100/0 will lose to 70/30.

Counting on being lucky is not a good planning strategy.

Many of my peers are permanently unemployed and under-employed in their 40s and 50s.

Many people capitulated in a recession. Make sure that you are not one of them.

KlangFool
Seems like what you're saying is that many could be forced into retirement earlier than they expected. If you are potentially vulnerable to that, you need to save accordingly. Maybe base your planning on 20 years of work instead of 30, or whatever makes sense based on your circumstances. I think this is orthogonal to the question of whether your retirement portfolio should have a significant amount of bonds or not.

csage
Posts: 97
Joined: Wed Feb 03, 2010 3:00 pm

Re: At what age did you begin adding bonds?

Post by csage » Mon Feb 17, 2020 3:04 pm

My spouse and I have been 65/35 since we were around 25, now 35. We're both pretty conservative and it's worked well enough.

Plan to stop accumulating bonds when we hit 10 years of expenses.

remomnyc
Posts: 841
Joined: Mon Jan 04, 2016 4:27 pm

Re: At what age did you begin adding bonds?

Post by remomnyc » Mon Feb 17, 2020 3:22 pm

I was in my early 30s when I first had the opportunity to contribute to a 401k. I chose an aggressive portfolio that was 25% bonds. After meeting with a financial planner in my mid-30s, I chose 20% bonds and stayed there until I hit my target, at which point I increased to 45% bonds.

KlangFool
Posts: 16685
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what age did you begin adding bonds?

Post by KlangFool » Mon Feb 17, 2020 3:52 pm

visualguy wrote:
Mon Feb 17, 2020 2:57 pm
KlangFool wrote:
Mon Feb 17, 2020 1:37 pm
visualguy wrote:
Mon Feb 17, 2020 1:26 pm


We're talking about retirement savings here. Sure, if you are unemployed for a prolonged period of time and eating into your retirement savings to survive, that's a bad situation, but now you aren't really using these funds as planned, you're consuming them way prematurely. I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)
visualguy,

Life happened! Bad things do happen!

Who and what guaranteed us that we will be fully-employed enough all the way until the retirement age?

<<I agree that it makes sense to have a robust emergency fund for people who are concerned about this (sole-earners without much job security, etc.)>>

Who and what guaranteed us that we will not be unemployed long enough in the coming recession that we need to use our retirement fund?

This is across 30+ years and multiple recessions. It just needs to happen to us once across multiple future recessions. Then, the 100/0 will lose to 70/30.

Counting on being lucky is not a good planning strategy.

Many of my peers are permanently unemployed and under-employed in their 40s and 50s.

Many people capitulated in a recession. Make sure that you are not one of them.

KlangFool
Seems like what you're saying is that many could be forced into retirement earlier than they expected. If you are potentially vulnerable to that, you need to save accordingly. Maybe base your planning on 20 years of work instead of 30, or whatever makes sense based on your circumstances. I think this is orthogonal to the question of whether your retirement portfolio should have a significant amount of bonds or not.
visualguy,

<<Seems like what you're saying is that many could be forced into retirement >>

No. I am saying that short-term unemployment in a recession is enough to wipe out any advantage of 100/0 versus 70/30. The person will be forced to sell the stock at a significant loss.

<<Maybe base your planning on 20 years of work instead of 30,>>

How do you know a person would be lucky enough to survive multiple recessions across X number of years without significant short-term unemployment?

I had been unemployed for more than 1 year a few times in my life. For a young person with a small portfolio, it would not take much unemployment to wipe the person out. Especially with a 100/0 portfolio.

KlangFool

vipertom1970
Posts: 770
Joined: Fri Jun 21, 2019 7:06 pm

Re: At what age did you begin adding bonds?

Post by vipertom1970 » Mon Feb 17, 2020 4:15 pm

instead of having bonds, why not use that money to pay off the mortgage and be 100% in equities. Worked for me !

KlangFool
Posts: 16685
Joined: Sat Oct 11, 2008 12:35 pm

Re: At what age did you begin adding bonds?

Post by KlangFool » Mon Feb 17, 2020 4:21 pm

vipertom1970 wrote:
Mon Feb 17, 2020 4:15 pm
instead of having bonds, why not use that money to pay off the mortgage and be 100% in equities. Worked for me !
vipertom1970,

How would that help an unemployed person in the 2008/2009 recession? The house could still be taken away if the person did not pay his property tax.

KlangFool

Wanderingwheelz
Posts: 367
Joined: Mon Mar 04, 2019 9:52 am

Re: At what age did you begin adding bonds?

Post by Wanderingwheelz » Mon Feb 17, 2020 4:23 pm

I started buying bonds immediately after I’d paid off my mortgage. I was almost 40. To me, it made no sense to own bonds until I was no long in debt.

It feels so much nicer to be an interest collector than an interest payer.

BW1985
Posts: 2046
Joined: Tue Mar 23, 2010 6:12 pm

Re: At what age did you begin adding bonds?

Post by BW1985 » Mon Feb 17, 2020 4:25 pm

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.
Shoot, I'm already late then.
I do have about 10% in cash which is a super duper emergency fund.
Chase the good life my whole life long, look back on my life and my life gone...where did I go wrong?

Unladen_Swallow
Posts: 784
Joined: Tue Dec 10, 2019 6:12 pm

Re: At what age did you begin adding bonds?

Post by Unladen_Swallow » Mon Feb 17, 2020 4:28 pm

I'm 45. I have 0% bonds.

My portfolio suits my specific situation. I make no blanket recommendations.
"I think it's much more interesting to live not knowing than to have answers which might be wrong." - Richard Feynman

BW1985
Posts: 2046
Joined: Tue Mar 23, 2010 6:12 pm

Re: At what age did you begin adding bonds?

Post by BW1985 » Mon Feb 17, 2020 4:28 pm

Wanderingwheelz wrote:
Mon Feb 17, 2020 4:23 pm
I started buying bonds immediately after I’d paid off my mortgage. I was almost 40. To me, it made no sense to own bonds until I was no long in debt.

It feels so much nicer to be an interest collector than an interest payer.
This is true, why hold a bond if you also have a mortgage (negative bond)? Would make more sense I think just to pay off your negative bond.
Chase the good life my whole life long, look back on my life and my life gone...where did I go wrong?

Post Reply