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does well in a bear market, really, did you happen to notice corporate bonds were down in 2008 in the big drop along with stocks?
corporates lost 8-10% , high yields lost 24%
did you know corporate stocks follow stocks more ofton than not?
So what do you recommend people invest in that dont have access to treasuries or precious metals in their 401k? My only options are large, mid, small cap, international, blended funds, and income.
sometimes it pays not to put all your investment money into your 401k. it may not be worth it for a number of reasons..
the deferred taxes may not be a big benefit compared to:
having a poorly designed portfolio.
having to much risk for your own pucker factor because your throwing to much into equities in your 401k ,then you get scared and run.
a well designed portfolio keeps only whats taxed at regular income rates in a defered plan like a 401k or or ira.
stuff that spins off interest like bonds and bond funds are taxed regardless at regular income tax rates. income generating assets are what belongs in a 401k or traditional ira.
equities are taxed at a max of 15% so they should be in your taxable account to benefit.
you can write off loses in your taxable account.
your heirs can inherit tax free at a stepped up basis the equities in your taxable account.
folks get the above backwards all the time. they own all equities in their 401k.
as you see there are loads of reasons why a good plan needs to use all the vehicles available to you , roth, traditional ira,taxable and 401k.
you need to harvest the best of them all .
this is why i say everyone needs to learn the basics first and not just copy others. how you structure things effects your after tax bottom line by as much as 30% more by using the right vehicles for the right investment.
bonds are not up reliably when stocks are down. only treasuries respond that way reliably not corporate bonds.
there is no answer as to what percentage. it all depends on your risk level, the types of bonds and duration, the overall plan and strategy and where rates are..
one portfolio i use has 25% long term treasuries , but that could be financial suicide in a different portfolio with different accompanying funds.
i used to use another mix that was 80% equities and moved the 20% around to different types of bonds depending on the big picture and where rates were.
i use a portfolio today thats about 70% bonds and income funds but shorter term bond funds.
today even 75% total market fund and 25% cash maybe not a bad idea and forget the bonds. the risk of rising rates outweighs the extra interest you would get on the cash portion. use the cash portion to buy more if we fell otherwise the rise in the 75% will more than make up for the zero on cash.
there is no one word answer and anyone who gives you one is shooting from the hip or using old useless myths like the 100 less your age formula that proved to be a bad idea.
Last edited by mathjak107; 03-24-2012 at 03:40 AM..
Does well in the bear market but lower returns. The other person says I should have 20%.
20% of what kind of bonds.?
using the word bonds is like using the word stocks.
there are many many types of bonds and bond funds .
some respond to prosperity , some to recessions and depressions, some to inflation. there are to many types to generalize and say buy bonds. nor is it wise to even come up with a percentage on the fly because of what i said in the above thread.
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