Bond Allocation

[concerned]

Hi
Just wondering what others are setting as a percentage of their portfolio for their bond allocation?
My understanding is that the rule is your age minus 10. So at 50 you would have 40% for Bond allocation.
But with bonds down a lot last year, and threat of US default due to the Debt Ceiling issue I am not sure about this anymore.

If one had a broad World Wide Equity Index and you believe in long term Equity Growth, maybe your age -10 is a bit much?

[sutebayashi]

Bonds like other assets have good years and bad years. A asset having a bad year last year is probably not a great reason to reduce their weighting in a portfolio.

There is the debt ceiling theatre going on at the moment, but beyond that there is probably an economic slowdown coming in the US - that’s what their strategy to get inflation back down is. If there is an economic slowdown and inflation comes down, that might be alright for bonds I think.

Still a long long ways from retirement age here, but yes, also below the age minus ten formula in our case. 20 - 25% in our adult accounts, and don’t even consider changing this on an annual basis either. Expecting to be comfortable in retirement though; if we were running things tighter then taking a more risk averse bond allocation could indeed be wise.

[TokyoBoglehead]

O%

Currency risk makes bonds a pretty unstable choice for those paid in yen.

You cap potential profits and open yourself up to large currency losses.

If you're paid in USD or another developed currency things are definitely different

[captainspoke]

0% bonds, too.

(I'm 71)

[RetireJapan]

I aim for 20% bond funds in my portfolio (age 45). Not really planning to increase that in the future either, as we seem to have more than enough for our needs.

[AreTheyTheLemmings?]

Also see When to move away from an all-stocks approach to include bonds

[sutebayashi]

An interesting thing to mess around with is this tool, if you haven’t already:
https://myindex.jp/user/myaa.php
You can see what return / risk profile of any asset allocation that you care to come up with over up to 30 years, including foreign bonds.

One of the default portfolios they have there is for the GPIF pension fund, and I assume the allocation is correct (*), but that does have an allocation of 25% to foreign bonds alone in that.

Amusingly, if I chop those GPIF asset allocations in half, and add 50% gold to the mix, the results seem better - at least a better return and higher Sharpe ratio.

(*) confirmed that, more or less: https://www.gpif.go.jp/en/topics/Adopti ... lio_En.pdf
It’s worth noting that the GPIF has its own objectives, as do each of us.

[captainspoke]

Also see When to move away from an all-stocks approach to include bonds

Not quite a year ago, but yeah, I could easily repeat what I said there.

And I also like might58s comment there, that precedes mine.

[concerned]

Thanks! all for the replies.
I have 60/40 Stocks/Bonds myself, may need to re-think this...

[TokyoBoglehead]

Also see When to move away from an all-stocks approach to include bonds

Not quite a year ago, but yeah, I could easily repeat what I said there.

And I also like might58s comment there, that precedes mine.

I have changed my opinion and have 0% in bonds currently, and only hold the two funds in my signature.

The concept of currency risk and bonds took awhile to click with me. I had read too much American centric investment advice, despite not being American....and living in Japan.