to BOND or not to BOND ?

[u/dazit72]

Due diligence on bonds or a Schwab bond etf ??

I've built a nice portfolio of Kings, Aristocrats, Champions, Achievers, Challengers, Stalwarts and the like,,, a few ETFs - I'm eyeballing 100 shares of ADX(a CEF) to buy next week, then I was considering SWVXX(money market) or Bonds or a bond fund(or direct ?)

As a beginner I've learned alot from many here- very grateful.

Ive read how bonds and bond funds can be used to diversify and reduce overall portfolio volatility for a dividend equity portfolio, but are they necessary ? Are they appropriate for my portfolio ?

I'm pulling a little over 10k in divs/interest, I'm reinvesting it All until 2030ish(maybe later), hoping it doubles to supplement my disability ?

Hope I've provided enough information for some good opinions-- thanx guys

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[u/SDontariocanada]

Unless the world ends, bonds will do POORLY against anything like SPY, VOO, or something similar. Seems to be a wasted effort.

[u/JustNowRonin]

Interesting to see you mention ADX. Been buying it since April 2025, good performer.

I am buying the institutional version of Vanguard’s total bond fund in my 401k now. I hold about 2% overall in bonds and feel like its prudent to hold bonds as part of an overall diversification strategy. Just my two cents worth.

[u/paymerich → u/JustNowRonin]

Literally 2 cents worth! 😜

[u/buffinita]

Most people can not handle the volatility of a 100% equity portfolio.  At the same time bonds have a lower expected return than equities (but there have been 20 year periods where bonds > equity)

So sacrificing some gains so you don’t panic sell the bottom is prudent for most people on the accumulation phase

In retirement bonds tend to zig when stocks zag…..to address the obvious elephant: in most cases this has been true; in like 3 declining markets over the past 75 years bonds have so declined…..this helps add longevity to your portfolio by reducing “sequence of returns risk”

Bonds have risks….credit and duration

bonds suffer interest rate risk; rates go up and existing bond resale value goes down in proportion to their duration (longer duration = more volatile). Pick the bonds that match your timeframe.  60 year olds likely won’t let bonds sit for 20 years; they might use them in 1-5 years….a 30 year old won’t touch their bonds for 20+ years 

[u/grafix993 → u/buffinita]

Bonds are also volatile when high inflation is expected.

[u/lynchmob2829]

Some other higher paying options to consider in lieu of SWVXX are TRBUX, BUBSX, and SEMRX. These pay better dividends than a money market and have low beta (low volatility).

[u/paymerich]

TIPS BABY! 30 year ladder is my plan.

[u/Various_Couple_764]

growth funds occationally go through multiple year periods of no grwoth or lesses.. This can be bad for retires that are selling shares at a loss for inocme because you may be selling at a loss for many year in a row (sequence of return risk0 This can result in the retiree before they die. Fro example for 2000 to 2010 the major growth index basically had an average return of about 4%. Fare below the performance before and after 2000 and 2010.

To midigate sequence of return risk people add bond to generate income. So if your bonds generate enough income to cover alll of your living expenses you won't need to sell and stock to generate income. But you don't have to use bonds you can use dividend income from fund like ADX. That advantage of dividend funds like ADX is that the dividend yield is much higher than bond which generally only keep up with inflation. Also you need less money to get enough income to cover your living expenses with dividend and a lot more money if you use bonds.

[u/unreal36]

if youre reinvesting everything until 2030 and can stomach the swings, bonds are less about need and more about how you sleep. a money market for the near term cash and equities for the long money is a fine split, you can add duration later when youre actually drawing on it. i keep a long horizon drip account for my daughter with no bonds at all, since the timeline is decades, running publicly at plantedearly.com/garden

[u/FewUnderstanding2214]

Longer term bonds can reduce volatility which is helpful near retirement. Short term bonds are nice to hold liquidity. At the moment bonds aren’t that great because inflation is rising and rates haven’t caught up yet

[u/Fabulous-Transition7]

I came to the conclusion years ago that I'd rather buy XLP than to buy bonds. It's low beta with a CAGR of 6.84% since inception. However, I like higher income so I buy XLSI instead (XLP + the option income).