Adding Bonds to a portfolio is supposed to reduce volatility, offer diversification and hedge against a bear market. It used to be true but not anymore. Recently bonds switched from negatively to positively correlated with stocks. What does that mean for your portfolio?
2022 has been a roller coaster year for our portfolio and expenses. Nevertheless, we managed to stay calm although an impressive drop along the year. As we learned a few years back, the best thing to do is actually nothing, and let the storm pass. It is thus important to design a plan in less turbulent times, and stick to it when facing some headwinds.
Although our asset mix, portfolio value and CAPE ratio evolved over time, Big ERN’s Safe Withdrawal Rate formula helped us navigate through the past turbulent 3 years, and strategize our distribution strategy. Portfolio valuation needs to be examined with the CAPE ratio to be meaningful.
Invest regularly into Stock ETF, then add Bond ETF to your portfolio when you are 5-10 years away from your retirement. Thank