Do you still invest in bonds?

[JBinKC]

The only bond I see worthy of consideration under current conditions is an I-bond. Over my investing career I never been a fan of holding LT bonds given the erosion of the spending power of the principle. Ever since they greatly lowered the commissions on them (especially the low valued contracts) selling cash secured put options with a delta lower than 10% probability of exercise have been much more lucrative way in percentage terms to invest for income.

[james.hendrickson]

The only bond I see worthy of consideration under current conditions is an I-bond. Over my investing career I never been a fan of holding LT bonds given the erosion of the spending power of the principle. Ever since they greatly lowered the commissions on them (especially the low valued contracts) selling cash secured put options with a delta lower than 10% probability of exercise have been much more lucrative way in percentage terms to invest for income.

But....isn't selling options far riskier?

[srblanco7]

As we approach ER, we continue to hold bonds at roughly 20% of our total portfolio. The one step I did take this year was to exit balanced funds in our 401ks. We exited the 60/40 balanced funds and reinvested proportionately into total stock index and total bond index funds. Did this to create a "cleaner" version of our retirement buckets. Still have a balanced fund in our brokerage account which we have not sold because of the cap gains implications.

[JBinKC]

But....isn't selling options far riskier?

Not when you consider you are losing about about 8% to inflation with what finance considers the risk free rate (a 1 year bond). Another issue is many times I am usually selling a firm that is 1/3rd lower than its current price with a monthly option giving you a decent margin of safety. Granted it is much more work and you can't arbitrarily select a company based upon volatility only which prices the put's premium. You also have to know the company the macros around it and the short term outlook to avoid exercise. The brokerage also pays you the paltry return they give you like the full amount of the options are in a cash account all along. Certain puts for LPs also are considered LTCG for 40% of the premium even though they are not held for a year.

If you are an individual stocks type of person I would recommend it. If you are an ETF or mutual fund investor you are limited in scope and I would not recommend it.

[LivingAlmostLarge]

As we approach ER, we continue to hold bonds at roughly 20% of our total portfolio. The one step I did take this year was to exit balanced funds in our 401ks. We exited the 60/40 balanced funds and reinvested proportionately into total stock index and total bond index funds. Did this to create a "cleaner" version of our retirement buckets. Still have a balanced fund in our brokerage account which we have not sold because of the cap gains implications.

This is something I would consider heading into retirement. But it also depends. If we are way overfunded for retirement, and it's looking that way now, then I'm not sure it's necessary to be using 30-40% bond component to my portfolio because I don't necessarily need stability. But I won't know until I get there. I am still one of those heavily stock invested.

Another reason to not doing a heavy bond portfolio is our home equity is a cash hedge of dead weight. This might not be true in other areas of the country but where we live and the equity we have it is easily a cash equivalent and it is a lot. So I again I think we are already hedging ourselves more other people. We have conservatively $1m in home equity. I don't need more bonds to balance out our stock portfiolio.