Many clients are concerned about investing in bonds now that U.S. interest rates have started to nudge upward. We think those concerns are misplaced.
It’s true, bond returns are probably not going to be anything to write home about.
But bonds will deserve their place as the “Steady Eddies” of your portfolio, earning dependable income while largely avoiding the rollercoaster price gyrations of the stock market.
No less an expert than Jack Bogle, legendary founder of Vanguard and pioneer of the first index mutual fund, agrees.
Bogle, who’s now retired but remains one of the most influential thought-leaders in investing and personal finance, revealed that more than half of his own personal portfolio is now in bonds.
In an interview with Marketwatch’s Chuck Jaffe, Bogle said bonds now make up 53% of his portfolio, and stocks 47%. In fact, he recently cut back on stocks because he’s more “interested in preservation than growth.”
The lesson is that your portfolio should be customized to reflect your investment objectives and your risk tolerance, not someone else’s idea of how to play the market over the next 6 months.
And here’s another tip from Bogle:
“Whatever you do, don’t open your monthly investment statement until the day you retire.”
It will help you stay focused on the long-term growth of your retirement money, not whether it’s up or down for the month, says Bogle.
“It also makes you less likely to trade in and out of the market, which can be a fool’s errand,” he adds.