But this dynamic pays off if you are investing for the long termsay, for a goal like funding your retirement. Is now the time to invest my retirement savings in stocks? But perhaps the most important reason to continue to hold bonds is that, rising rates or no, bonds still fulfill what for long-term investors is their most important function: They act as a bulwark against the volatility of the stock market.
In general, bonds tend to do well when stocks do poorly. Aggregate Bond Index gained 5. Of course, bonds can also go through periods where they suffer losses. So rather than avoiding bonds altogether, you should instead be thinking about how best to divvy up your portfolio between stocks and bonds.
When Rates Go Up, Do All Bonds Lose the Same Value?
Ideally, you want to own enough stocks to get the superior long-term growth that stocks have historically provided, but at the same time you want to have enough bonds to provide some stability to your portfolio and to mitigate the downsize when stocks go into one of their periodic slumps. There’s no stocks-bonds mix that’s ideal for everyone. Continue reading