Do you have bonds in your investment portfolio? Do they do anything for the returns on your investment portfolio at all? Despite all the well-meaning advice to hold bonds to reduce risk in our investments, the typical 80:20 or 60:40 portfolio is still overwhelmingly dominated by the risk of stocks. And evidence from the 2000s show that they end up doing worse than 100% stock portfolios.
But things are a little different in the 2010s. Bonds still have a place in the investment portfolio, but as part of a risk-parity portfolio.
Introduction
“Put a portion of your investments in bonds. They help to control the risk of the investments to a level which you are comfortable with, based on your risk appetite“. So goes the usual advice we receive for investing. In fact, some may even go further and make it sound more scientific – “The amount of equities you should have is equal to 100 minus your age“.
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