Episode 362: I’m 52 Years Old and Have No Bonds in My Portfolio (Smart or Dangerous?)

David McKnight explains why he has chosen to avoid bonds entirely and why you might want to rethink how you protect your portfolio as you approach retirement. David kicks things off by illustrating the so-called sequence of returns risk. According to conventional wisdom, bonds tend to be less volatile, so they help smooth out the rough years in the stock market.  However, bonds aren’t the safety net they used to be. And over long periods of time, bonds tend to underperform stocks by a wide margin. David warns against “stuffing your portfolio with bonds just to be safe.”  The reason for that is that you’re not only capping your upside, you’re also taking on risks of your own: inflation risk, interest rate risk, and the risk of simply not having enough growth to fund a long-term retirement. Instead of watering down his stock portfolio with bonds, David uses a volatility buffer. He keeps 3-5 years' worth of living expenses in a separate, safe, and productive account – his go-to option is...