"The key benefit that bonds confer to a retirement-decumulation portfolio is their lower volatility. Even though bond returns are apt to be lower than stocks', bond returns are much more reliable."
"Holding a component of lower-risk assets mitigates 'sequence risk' - the prospect of encountering big portfolio losses early in retirement. Equity-heavy portfolios are more vulnerable to sequence risk."
"Today's higher yields point to better return prospects from bonds over the next decade than was the case a few years ago. The yield on 10-year Treasury bonds sat at about 50 basis points in the summer of 2020, but today, it's about 4.3%."
"With worries about a slowing economy looming over the market, high-quality bonds will tend to be particularly well situated. Bond returns have been reliably positive in recessionary environments."
Investors approaching retirement should reassess their portfolios by reducing stock exposure and increasing investments in bonds. Stocks have outperformed bonds but have recently shown volatility. Bonds offer lower volatility and mitigate sequence risk, which is crucial for retirees. Current higher yields on bonds provide better return prospects compared to previous years. With economic uncertainties, high-quality bonds are positioned to perform well, making them a safer choice for retirement portfolios.
Read at Fast Company
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