The “Stay Rich” Part of Your PortfolioThere should be two parts to your investments. You want to have a “get rich” part of your portfolio. Those are the stocks that fuel growth in your retirement savings. You also want to have a “stay rich” part of your portfolio. Those are the boring bonds that provide stability, and recently started paying a little bit more income again.
Everyone should have some money invested in the “get rich” part and some in the “stay rich” part. How much to put in each is a topic for another day. The point of today’s post is to make sure your “stay rich” part of your portfolio actually allows you to do that.
Your bonds should be boring. They should put you to sleep because they just kick off a reliable amount of interest. They will go up and down a little bit with changes in interest rates, but they shouldn’t move much at all when the stock market drops. If anything, they should go up then.
What makes for a good, boring bond? It’s high quality, aka investment grade. Its maturity isn’t too long (less than 10 years). It’s denominated in U.S. dollars. Did you fall asleep yet? You did? Good. You should. There shouldn’t be anything to keep you awake in your bond portfolio.