If stocks outperform bonds, why invest in bonds at all? I do understand that bonds are crucial for people forced to live off income, such as retirees. However the other reason frequently given for holding bonds is to ‘reduce volatility’. I’ve always failed to understand the logic of this argument. As long as you have a long investment horizon, then volatility should not affect your investment. Prices rise and fall, and the value of portfolios do likewise. As long as there is no need to sell, however, then it makes no difference.
This question was answered on: May 23, 2022
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