What Percentage of your Portfolio should you have in Bonds?

The debate over what percentage you should own in stocks and what percentage you should own in bonds is always a loud one – reminiscent of a large family reunion.

The rule of thumb says that you should have a bond allocation that is roughly equivalent to your age. I’ve heard some experts suggest that it should be your age minus 10. Or if you’re building a riskier portfolio, your current age minus 20. In such an example, a 60 year old would have between 50 and 60 percent of their investment portfolio allocated to bonds.

Common sense should be used here, as always. A government employee or teacher that’s expecting a guaranteed pension when they retire can obviously afford to invest less with┬ábonds and take on a greater risk with stocks (hopefully for higher returns).

Stock returns don’t always beat bond returns over the short term, but over long periods, stocks returns are substantially greater than that of bonds. That said, bonds are a dramatically safer investment – they could be your saving grace when stocks┬áplunge.

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