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What's a good ratio of bonds to stocks for a typical portfolio?
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676 points
RobSmith answered one year ago …
Typical rule of thumb is that the percentage of stocks you have should be 100 minus your age.
So if you're 30, then you should have 70% stocks and 30% bonds.
If you're 65, then you should have 35% stocks and 65% bonds.
Basically, as you get older you want to reduce your exposure to the volatility in the equity markets and focus on current income and preservation of capital.
2769 points
Oldman answered one year ago …
One way to reduce the amount of bonds in an overall portfolio is to count the "guaranteed" pension and social security payments as part of the overall holdings. If you're 10 or fewer years from stopping work, these payments have a discounted value of about $700.00/month (pretax) for life /per 100,000 of "imputed"value: for example,
If you know that, because of pension benefit guarantees and social security projections, you will receive $22000/year or more from these sources, this is an equivalent of $300-350000 bond component of your portfolio.
When you do your own financial projections, don't forget the reverse mortgage possibility on your primary residence as a "tax-free' component, in case the investments don't keep pace with inflation.
The most important plannin you can do is to create a current budget and a "retirement " budget. they won't be perfect, taxes may change as will market returns and inflation, but some costs are likely to decrease or stay fixed, and others may sky-rocket, so be prepared to revise the budgets as you get older.
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