June 8, 2019
Here is the article.
Step Two: Get bonds right
Whether your portfolio is heavy or light on bonds, the kind of bonds you own makes a huge difference to your risk and your return. I'm in favor of taking carefully calculated risks with stocks, but I believe in being very conservative with the bond part of this portfolio. Therefore it doesn't include long-term bonds or corporate bonds.
My recommended tax-deferred bond portfolio is exclusively in government bond funds: 50% intermediate-term, 30% short-term and 20% in TIPS funds for inflation protection. This is more stable than the standard mix I described above, yet it provides a very similar return.
With this change, the portfolio would have had an annualized return of 8.7% from 1970 through 2013. The industry standard I described in Step One had a standard deviation (a measure of risk) of 11.3%. This change reduces it to 10.9%.
The best is yet to come when we tweak the equity side of the portfolio.
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