It’s been a while since we checked the inbox so let’s see what questions people are asking.
Can I avoid bonds?
Q – My wife and I are both retired and lucky enough to have defined pensions with an annual cost of living index as an additional benefit. I therefore see this as reliable income and do not invest in bonds. Am I wrong to think in this way? – Joseph S.
A – I suggest you’re missing a key point. The bonds in a portfolio are not just for income. In fact, high-yield stocks offer better cash flow. Bonds provide portfolio diversification and reduce volatility. In normal times – 2022 was an exception – bonds provide a buffer if the stock market falters.
The volatility meter on the Steadyhand website illustrates the effect of owning some bonds. In 2018, a 100-per-cent equities portfolio would have lost 4.7 per cent. A traditional mix of 60 per cent equities, 40 per cent bonds would have reduced that loss to 2.3 per cent….
