05 August, 2020
Quora Answer: Should New Investor in Their 20s Have Bonds in Their Portfolio?
The following is my answer to a Quora question: “Should new investors, in their 20s, have bonds in their portfolio?”
It is a good practice to have bonds in your portfolio. Debt instruments lower the overall risk of your portfolio, and stabilise it in the event that equities drop. Equities have the potential to earn well, but they are more volatile. Debt instruments, such as bonds, do not have as high a yield, but the value is stable because the yields are stable – they are fixed payments over specific periods of time.
Generally, for someone just building their portfolio, they need a balanced spread of investments. I would recommend a 40% weightage to debt instruments, and 60% to equity instruments. As they gain a measure of familiarity with the market, they can adjust the weightage according to the anticipated market conditions.