I personally don't invest in stocks, I follow a couch potato approach. But regardless, everywhere I read people say that it's essential to include bonds in a well diversified portfolio.
I never understood the reason, and I can't seem to find it. I recently read the book Millionaire Teacher, which was the closest I got to actually giving a reason for it: he said that during the 2008 crash, thanks to having bonds, he was able to sell some of his bonds and transfer it to buy cheap index funds. Other than that, he kept mentioning dozens of times how bonds are so important, but never gave a reason.
So essentially the only reason I could find was "it'll ensure you have money to put in the market when a terrible dip happens". But that seems pretty weak an argument.
To me it seems like if it's so agreed upon that the markets will generally always win in the long run, then why do we need to place money in bonds for the few years when markets don't win? It seems counter intuitive.
Any explanation would be appreciated!
Submitted May 12, 2017 at 12:18AM by deanat78 http://ift.tt/2qaZLVI
