Why Do I Own No Bonds In My Portfolio?
Someone recently asked me why I don't own any bonds in my portfolio.
It’s a great question, here is my current justification:
- I am not convinced bond funds are a great investment. After all, the reason to invest in bonds is you are purchasing a series of future cash flows (even in the case of a zero-coupon bond, its just all paid at once) that are usually predefined; or bonds can act as a "stabilizer" for stock market volatility. Bond funds, may offer diversification, but I don't see the benefits I would be looking for.
- My cash balance pension earns a return that is indexed to 1 yr treasury yields so in effect a sizable portion of my portfolio is already invested in government treasury bills.
- Both I and my family still hold savings bonds in my name (my family holds a few savings bonds that will eventually be given to me as gifts).
- I haven't figured out how to inexpensively purchase corporate bonds. Corporate bonds have some appeal to me, but I haven't found a vehicle to cost effectively purchase and hold bonds in. When I do, Im ready to take a closer look at some bond investing. Perhaps a bond ETF?
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