Quote:
Originally Posted by jc3900
Wouldn't a 100% equity be better for a very young investor?
|
It might, or it might not. There a couple of compelling reasons to have at least a small portion of bonds in your portfolio, although if you look at the reasons and decided that 100% equity was better for you, I wouldn't say that that's a wrong decision, and it's certainly one many people have made.
Some reasons you might want some bonds in your portfolio:
1. They reduce volatility a great deal for a very small reduction in expected rate of return.
2. There is a chance (albeit small) that bonds will outperform stocks even over your very long time horizon
3. Get the rebalancing bonus- if you rebalance to a target allocation (say, 90/10) you will be selling stocks when they are high and buying bonds when they are low, or selling bonds when they are high and buying stocks when they are low.