When should I start buying bonds?

[Fantasticmrfox]

Greetings fellow Mustachians,

I've been investing for the last 6 years and I've managed to invest 180K USD currently valued at about 230K on the market. My goal is to reach 550K USD. I'm currently working in a job that despite a travel addiction has helped me to save 50% of my salary for the last 6 years. I am planning on moving to Australia soon where I am not sure how much I will be able to save just yet.

My current portfolio is 100% VWRD. I was wondering when I should start to buy bonds and at what percentage of my portfolio I should have in bonds in the next few years?

As always, I am deeply appreciative of the advice I receive from this forum.

[FireLane]

The usual advice in these situations is that you don't start out by contributing 100% to stocks and then add bonds later on (unless you're building a bond tent, but that's something specific you do when you're approaching your retirement date).

Instead, you should decide on an asset allocation in advance, and every dollar you invest should follow that allocation. So for example, if you want to be 80% stock and 20% bonds, 80 cents of every dollar you contribute should go to your chosen stock fund and 20 cents to your chosen bond fund. If your portfolio drifts from those percentages, you contribute more to the fund that's under-allocated until you're back on target.

80/20 is what I use. From what I've read, it's almost as good for growth as 100% stocks, but with less volatility. But this depends a lot on you - on how aggressive you want to be and whether you have the temperament to stay calm in the face of market swings.

[Fantasticmrfox]

Thank you FireLane. Much appreciated. I have some catching up to do but will start investing in Bonds soon. I was following an aggressive portfolio strategy.

How have your Bonds performed? What kind of return do they give you?

[reeshau]

Two questions for you:

1)  What is your time horizon?

2)  Do you sleep well at night with your 100% allocation to stocks?

If your time horizon is long--more than a decade--and the dips in the stock market don't make you nauseous, then why slow down your growth with bonds?

I have ridden a barbell strategy through 27 years of working, and now 4 years of retirement: 100% stocks, and a healthy amount of cash--1 year's spending.  That's a larger than typical emergency fund, but as a percentage of assets, it's just 4% (Assuming 25x spening as a minimum stache)

There is no one answer--it's what works for you.

[Fantasticmrfox]

Thank you Reeshu.

1) Projected time horizon is 10 years.

2) I'm very comfortable seeing my money plummet, given the past 4 years experience and the above time horizon. Might be a different story closer to retirement though.

That's an interesting strategy. I don't mind having some Bonds to sell when the market crashes and have a decent store of cash for expenses. I really appreciate your feedback. Looks like I have a lot more research to do.

[Greystache]

I clicked on this thinking it was going to be about market timing. We have had a really good run in the stock market and prices are at an all time high. On the other side, interest rates have been climbing for several years and the Fed looks like they are getting ready to cut rates before the end of the year. So, is now a good time to sell some stocks and buy some bonds?

[GuitarStv]

So, is now a good time to sell some stocks and buy some bonds?

Maybe.  It's probably best to just keep to your expected asset allocation though.