Quote:
Originally Posted by retiredguy123
If you expect to earn significantly more than 4 percent in investment grade bonds, you are dreaming. You need to invest in low grade bonds or stocks that will carry some risk.
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For bonds, one is looking for 1-2% over the rate of inflation for a decent return.
The purpose of bonds is to reduce risk to the portfolio, as well as to have a return which is negatively correlated to equities. There are occassions when bonds and stocks are positively correlated, but that is not the long term relationship.
Bonds also provide cash return when stocks are losing. . effectively constantly supplying cash for withdrawal without impacting the equity portfolio.
I am sure that you would not like bonds at 8% or so as it will upset your equity portfolio much more than just a better return on bonds. .