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Total market index funds don't go to zero. You would have a bond fund and stock fund and rebalance to more stocks as you get nearer retirement. Sure, but maybe
by njarboe 3y ago
Total market index funds don't go to zero. You would have a bond fund and stock fund and rebalance to more stocks as you get nearer retirement. Sure, but maybe not when there have been very low interest rates for a long time. Holding cash in that case seems better than bonds to me. No upside in bonds, just downside.
- nradov 3y agoBond funds generate higher risk-adjusted returns than cash over most historical periods. You have to factor in income from coupon payments. You can cherry pick a few brief periods when this wasn't true but no one has the ability to reliably predict when that will happen in the future so it's a foolish approach to retirement planning. Most target date mutual funds do include some cash and equivalents in the portfolio as the target date approaches.
- gymbeaux 3y agoPeter Lynch’s mantra is to not bother with bonds, and his arguments are compelling enough for me to only stick with low-expense-ratio index funds.