Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.
replyTo point, the economic uncertainties around geopolitics, AI, and war, plus irresponsible debt spending by governments and the prospect of QE (and higher inflation), is pushing long term rates steadily higher. There’s a reasonable chance that 30y treasuries are nearing 6% by the end of next year. Remember that rates and bond prices are inversely related. Anyone who holds bonds in this market will likely lose money. Holding to maturity won’t help much either because if inflation continues to rise, as is a major concern, most or all of that 5% yield gets eaten.
I'm technically not really in pure index funds, I just wanted to avoid trying to complicate my thoughts. Nearly all of my investments are in VFORX or Schwab's equivalent, and have been for a long time. So they are really composed of total market funds, bonds, etc, and Vanguard changes the ratio a bit as 2036 approaches. So while not really an index fund, from my perspective as a lay investor I treat it like that and consider myself an honorary Boglehead. I just put money in and forget about it.
replyThis is absolutely terrible advice and is out of touch with modern financial understanding. Bonds feel psychologically safer, but lead to failure more often than total market equity portfolios, even when you account for market crashes.
replyI feel like I should go learn some more. I'm not in a pure index fund, I'm really in VFORX (almost completely, I'm not too original nor sophisticated financially and don't try to pick my own stock picks these days except with my "lunch money" just for fun). Do you think something like VFORX is a bad option? It's actively managed, so the fees will be a little higher than a pure index fund, but it's Vanguard and the fees are still really low. And it has total market components in addition to bonds.
replyI agree with everything in the video you linked (which is not surprising, given it's Ben Felix). That includes the parts about equities being less risky than bonds in very important ways, but also the parts about behavioral loss tolerance and risk capacity, and how they can indicate higher bond allocation.
replySo I disagree that "If you're dreading equity drawdowns, that's what fixed income is for" is absolutely terrible advice.
I always thought the psychological safety was exactly part of the point, since 100% equity portfolios do better in theory than practice, because people are more likely to panic sell.
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