Many investors are too conservative at an early age. In other words, they are “stock market shy.” Don’t load up your portfolio with bonds when you are in your twenties and you have forty years to save.
Let me illustrate this mistake with a real example. Husband and wife saved identical amounts during their working years. The wife’s savings were divided almost equally between a portfolio of bonds and stocks. The husband’s portfolio contained only stocks. Upon retirement, the husband’s portfolio was worth approximately twice that of the wife even though the amount invested was the same. This example illustrates the reasons I tend to shun bonds or use them with caution. There is an argument to be made that the longer one invests, the greater the probability of a “Black Swan” or “Fat Tail” market event. Search for Zvi Bodie for more information.
Upon retirement, will you have a pension? Do you know the approximate monthly payout from that pension? If one can retire on a pension and social security, then the portfolio need not include bonds. One can read more about this position in William Bernstein’s second book, “The Four Pillars of Investing: Lessons for Building a Winning Portfolio.“
Summary: Plan to live longer than you might expect and do not be too conservative when constructing your portfolio, particularly when you are young and have time to rebound from a bear market.