The High Risk of Bonds

The conventional wisdom is that bonds and fixed income are safe investments and you need them to stabilize your portfolio. The truth is much more complex.

Understanding the high risk of bonds can be one of the easiest ways to get higher investment returns and achieve your life goals.

While bonds are less risky short-term and medium-term, they are actually quite risky as a long-term investment – more risky than stocks. You will need to adjust your investment binoculars to a long-term focus to see this high risk of bonds.

I apologize for the length of this article, but it is worth your time. The conventional wisdom about the safety of bonds is so ingrained. There is a ton of evidence about the risk of bonds that is rarely discussed. The benefit of seeing risk clearly is huge.

Why is the conventional wisdom so wrong? The investment industry is focused on short-term ups and downs of your investments. It is also more concerned about compliance rules than about your future. Recent bond returns have been highly inflated by the super-weird “bond bubble” from 1982-2015.

Here is what this article will cover:

1. A summary to give you the big picture.
2. The high risk of bonds and the in-depth research behind it.
3. How to use this knowledge. Adjust your investment binoculars to focus long-term and get much higher and more reliable long-term returns.
4. The 10 Steps to learn to focus long-term.

Summary – The Big Picture

If your focus is short-term, stocks look risky because they go up and down, while bonds look safe because they are stable and just pay interest. When your focus is long-term, you can suddenly see that the opposite is true!

Stocks can be volatile short and medium-term, but have historically been very consistent in providing long-term solid growth. For example, the worst 25-year calendar return of the S&P500 since 1930 is a solid 7.9%/year.

By comparison, bonds often make nothing after inflation for many decades, and if there is one period of higher inflation, they can permanently lose you a lot of money. In Canada, bonds made zero after inflation from 1900-1982.

Bonds are not immune to large losses. Some countries, including France, Germany, Italy and Japan, have had losses of over 90% after inflation in their government bonds. Their bond crashes were larger than any stock market crashes in their history. The worst year for bonds in Canada was a loss of 27%.

More significantly, these losses tend to be permanent. In the last century, a few countries had their government bonds essentially wiped out when inflation went out of control. They show shockingly large losses for the entire 100-year period!

You may find this surprising, but bonds are actually less predictable and riskier than stocks for 20-year and 30-year periods of time. You can see the “high risk of bonds” clearly when your perspective is long-term.

The 33-year “Bond Bubble” from 1982-2015 just ended. It followed the 40-year “Bond Collapse” from 1940-80 when bonds lost 1.0%/year for 40 years! You should ignore essentially all research and historical rates of return of bonds during the “Bond Bubble” that do not also include the “Bond Collapse”. Our future is highly unlikely to look anything like the “Bond Bubble” period. The future will probably look more like the first 80 years of the last century with zero returns after inflation.

The “high risk of bonds” is really a “high risk of fixed income” investments. Many investors have a “safety delusion” about fixed income investments and do not see this high risk. Big permanent losses tend to be in fixed income – not in the stock market.

You can see the “high risk of fixed income” investments much more clearly when you think long-term. If you invest in fixed income investments for the next 30 years, how likely is it that you will not have a permanent loss from a default or interest rate rise, or a purchasing power loss from higher inflation?

The insightful statement: “Be an owner, not a loaner” refers to owning stocks instead of bonds for the higher returns. It also helps explain the big losses in bonds. Owners can adjust when bad things happen. Loaners can’t. Losses in fixed income tend to be permanent losses.

Bonds can be a high risk to your retirement. They can make it impossible for you to retire with the lifestyle you want.

With today’s low interest rates, bonds can be a huge drag on your portfolio. You should expect lower returns. To estimate the effect on your long-term returns, the “Asset Allocation Loss Ratio” estimates the drag on your returns by your allocation between stocks, bonds and cash. Remember this formula:

Asset Allocation Loss Ratio (AALR)

25% bonds or cash = 1.5% MER

This means that having 25% in bonds has about the same effect on your returns as 1.5% higher fees (MER). Some investors searching for lower fees may buy ETFs or work with a robo advisor, only to lose all the savings with a higher allocation to bonds.

Long-term investors have a huge advantage. The difference in long-term growth is huge. And the growth can be more reliable.

Are you truly a long-term investor? You think 20+ years ahead? Will you be fully invested for all of the next 20+ years, and stay invested or buy more when the market is down?

If you are truly a long-term investor, you probably do not need bonds or fixed income in your portfolio – at all. You can expect a higher long-term return and a more reliable and comfortable retirement.

Your financial advisor or robo advisor may not be helpful for you here. Because of “compliance advice”, your advisor may insist on you investing partially in bonds – whether or not this is good for you.

Think long-term and you can clearly see the “high risk of bonds”. You can use this knowledge to give yourself a more predictable and comfortable retirement.

The High Risk of Bonds

To clearly see the high risk of bonds, you first need to focus your investing binoculars on the long-term.

Perspective: Long-term vs. Short-term

To see the risk of bonds clearly, shift your perspective to long-term. Forget about what happened last year and what might happen this year. Focus on where you will be financially 20 or 30 years from now.

Focus your investment binoculars long-term. Here is how a long-term perspective changes your outlook:

Long-Term Perspective                                                      Short-term Perspective

How can I get reliable growth over 20-30 years?               Is this a good time to invest?

Purchasing power (returns after inflation)                          Simple rate of return or interest rate

Risk is a permanent loss of capital                                    Risk is market fluctuations (temporary declines)

Confidence in your long-term future.                                 Fear about short-term events.

Conventional wisdom about bonds

Let’s look at the common beliefs about bonds and see whether they are true.

Here are the main conventional wisdom beliefs about bonds and other fixed income investments:

1. Bonds provide a predictable return.
2. Bonds are safe and don’t lose money.
3. Bonds are safe and immune to huge crashes.
4. Bonds provide a “risk-free return”.
5. Bonds have historically had good returns.
6. Fixed income investments with higher interest rates are safe.

1. Do bonds provide a predictable return?

The most common measure of predictability and of investment risk is “standard deviation”. It measures how much returns vary.

The investment industry for some reason tends to focus on the 3-year standard deviation. That’s a relatively short time period. As a long-term investor, we should look at the 20-year and 30-year standard deviation to see how predictable long-term returns are. We should also look after inflation, because the purchasing power of your money matters over long periods of time.

Research over the last 200 years shows that bonds are more consistent than stocks for shorter periods, but bonds are less consistent and more risky than stocks for 20-year and 30-year periods.

This is a critical point to understand. Note the risk level of bonds vs. stocks for different time periods in this chart:

Standard Deviation for Stocks, Bonds & Cash after Inflation (1802-2006)

• • “Stocks for the Long Run” – Jeremy Siegel

To quote Jeremy Siegel: “Historical data show that we can be more certain of the purchasing power of a diversified portfolio of common stocks 30 years hence than we can of the buying power of the principal on a 30-year U.S. Treasury bond.”

2. Is it true that bonds are safe and don’t lose money?

Bonds lose money in mainly 3 ways: when they default and you lose 100%, when interest rates rise and when they lose purchasing power by not keeping up with inflation. Let’s look at the last 2 risks:

• Interest rates rising: Why do bonds lose money when interest rates rise? If you own a bond with a face value of $100 that pays 2%/year interest and the current market rate rises to 5%/year, then nobody would buy your bond for $100. It would be worth quite a bit less.

Interest rates have been low and declining the last few years, but there have been periods in the past with large interest rate increases. With today’s interest rates at historic lows, it is very likely that interest rates will be higher at least part of the next 20 or 30 years.

• Inflation: When you think long-term, you need to include inflation. What will the purchasing power of your money be in 20 years? For example, if you expect to have $1 million 25 years from now, it will probably buy about half of what it would buy today.

The fact here is that bonds often lose money after inflation. Today, a 10-year bond pays has a yield of about 1.5% and inflation is about 2%. The money you invest in bonds buys less next year than it does this year. Through history, bonds have had 40-year periods when they lost 50% of their purchasing power!

If you are a long-term investor, you are not really concerned about market fluctuations. You are concerned about anything that causes a permanent loss in capital.

This is a fundamental difference between stock market declines and bond declines. Stock markets fluctuate, have market crashes and bear markets, but historically they have always bounced back – nearly always within only one or two years.

Bonds, however, can lose money for decades.

Bonds are the blue line in this chart. Note that during the “Bond Collapse” from 1940 to 1982, bonds lost money in terms of purchasing power steadily for over 40 years. In fact, bonds made zero after inflation from 1900 to 1982. That’s 82 years with no growth at all!

If you had enough money to buy 2 cars, invested it in bonds in 1940 and collected all your interest until 1980, you could not even buy one car! You would have lost more than 50% of your purchasing power after 40 years! This type of permanent loss of capital has never happened with a properly diversified portfolio of stocks.

It’s important to note that the last time interest rates were as low as they are today was in the 1950s, which was near the beginning of this 40-year “Bond Collapse” that ended in 1982.

The fact is that bonds can lose money for decades at a time. As a long-term investor, you could invest for your retirement for 40 years from age 25 to 65 and bonds could lose money the entire time!

² “Triumph of the Optimists” – Dimson Marsh & Staunton

Outside of Canada, this is even more clear. If you invested in bonds all over the world in 1900 for 85 years, you could buy less in 1985 than you could in 1900!

Bottom line: Bonds are not safe long-term. They have a high risk of a large loss in the purchasing power of your investments.

² “Triumph of the Optimists” – Dimson Marsh & Staunton

3. Is it true that bonds are safe and immune to huge crashes?

The big risks of bonds are default risk, high inflation and sharp rises in interest rates. When you invest in bonds, you are making a long-term bet that there will be no significant inflation and interest rates will stay low as long as you own the bonds. The longer the time period, the more likely there will be a period of higher inflation or high interest rates. This is why the risk of bonds tends to be relatively higher long-term.

To get a big crash with bonds, you need high inflation or a sharp rise in interest rates. Bonds have had huge crashes in history, just like stocks:

• Bonds around the world lost 60% after inflation from 1910-1920. This is not just a short-term loss. Investors were down 60% after 10 years!
• Some countries, including France, Germany, Italy and Japan, have had losses of over 90% after inflation in their government bonds. Their bond crashes were larger than any stock market crashes in their history.
• In Canada, the worst year was a lost of 27% in 1915.

More significantly, these losses tend to be permanent. A few countries had their government bonds essentially wiped out when inflation went out of control. They show shockingly large losses for the entire 100-year period from 1900-2000!

The biggest examples are:

Total Return of Bonds after inflation after 100 Years (1900-2000)

Germany             100% loss

Italy                       90% loss

Japan                     80% loss

France                  65% loss

Every major country has had a big loss in their bonds. The worst 1-year loss is in the right 2 columns:

³ “Triumph of the Optimists” – Dimson Marsh & Staunton

4. Do bonds provide a “risk-free return”?

Bonds are a particularly questionable investment today. Bond yields today are generally lower than inflation. Interest rates have dropped to historical lows and inflation is low. There is not much room for them to go down.

Bond investments for the next 20-30 years will almost definitely follow one of 2 paths:

1. Interest rates and inflation stay low. Bond investments make zero after inflation or lose a bit each year in purchasing power. Today, bonds yield 1.5%, while we have 2% inflation. This is a .5%/year loss in purchasing power.
2. Interest rates and/or inflation rise sometime in the next couple decades. Bond investments will lose actual money if interest rates rise and purchasing power if inflation rises.

Bond investing today: “Heads you make zero. Tails you lose money.”

A more accurate term many writers have used recently is that bonds are “return-free risk”.

5. Have bonds historically had good returns?

Why have investors been so confident in bonds, despite all the charts in this article? Why is the “conventional wisdom” so strong?

First, investors tend to forget about inflation. Remember in the chart above that bonds in Canada made zero after inflation from 1900-1982. You cannot possibly consider 80 years with no growth to be a good return!

Second, we are at the end of a 33-year “Bond Bubble” from 1982 to 2015. We just lived through several decades when bonds performed well. It’s like looking at stock market returns only during the tech bubble. Nearly all investors’ memories and research on bonds is based on this “Bond Bubble” period.

It followed the 40-year “Bond Collapse” from 1940-80 when bonds lost 1.0%/year for 40 years!

In 1982, interest rates were over 20%. Since then, interest rates declined almost every year until 2015 when they dropped to about 2%. Bond returns were not a lot less than stock market returns during this “Bond Bubble”. The blue lines for bonds in the charts above show that bonds made zero after inflation from 1900-1982. All of the return of bonds in the last 100 years happened since 1982 in the “Bond Bubble”.

Today, since interest rates bottomed in 2015, we are back to normal. Interest rates may stay flat or might rise, but the steady decline is almost certainly over. This is why for bonds it is: “Heads you make zero. Tails you lose money.”

You should ignore essentially all research and historical rates of return of bonds during the “Bond Bubble” from 1982-2015 that does not also include the “Bond Collapse”. It would be like looking at stocks only during the tech bubble and ignoring the bear market that followed.

Our future is highly unlikely to look anything like the “Bond Bubble” period. The future will probably look more like the first 80 years of the last century.

Here is the history of interest rates. Note the extreme peak in 1982 and the extreme low in 2015.

6. Are other fixed income investments with higher interest rates safe?

The “high risk of bonds” is really a “high risk of fixed income” investments. Fixed income includes any investment you buy for the income, such as cash, bonds, mortgages, GICs, annuities, REITS, and even dividends (to the extent you buy stocks for the income).

Fixed income investments risk losing purchasing power to inflation for long periods of time. Many types of fixed income investments also risk losing money if interest rates rise and/or have default risk that you lose your principal.

I talk with investors regularly that have a “safety delusion” about fixed income:

• They think an investment is safe, just because it pays interest and has something as collateral.
• They think high interest rate investments are safe because they are fixed income. The general rule is: “The higher the interest rate, the riskier the investment.” Whenever interest rates are higher, make sure you understand the risk.

The “safety delusion” is particularly dangerous if it leads you to think diversification doesn’t matter. I have seen investors with most of their investments in 2 or 3 private mortgage investments. For all practical purposes, a second mortgage is an unsecured loan to someone that cannot qualify for a bank mortgage.

These investors could have the safety of a diversified portfolio of stocks all over the world. Instead, they have lent all their money to 2 or 3 people or companies in private mortgages. Because it “pays interest and is backed by real estate”, they don’t see the high risk.

With little diversification, they have a significant default risk, in addition to the normal “high risk of fixed income”.

In fact, big permanent losses tend to be in fixed income – not in the stock market. The stock market has fluctuations and temporary declines that have historically always recovered with time. However, with fixed income, the “search for yield” often leads to permanent losses.

Most people who get swindled in Ponzi schemes go in thinking they have found a safe source of high-yielding fixed income. Bernie Madoff, perpetrator of the biggest Ponzi scheme in history, sucked his victims in by offering them a fixed-return opportunity that was just a little bit too good to be true. His investors lost $65 billion.

The insightful statement: “Be an owner, not a loaner” refers to owning stocks instead of bonds for the higher returns. It also helps explain the big losses in bonds. Owners can adjust when bad things happen. Loaners can’t.

Losses in fixed income tend to be permanent losses. For example:

• Financial crisis in 2008: The financial crisis was a “mortgage-backed security” crisis. “NINJA mortgages” (no income, no job, no assets) were packaged into fixed income investments. Investors assumed that because they were backed by mortgages, they were safe investments.
• Income trust fiasco: In 2006, Jim Flaherty shut down the income tax deferral of income trusts because investors’ “search for yield” had distorted the market. The income trust index fell 47%.
• Private mortgages: Many investors have lost money in private second mortgages. They are essentially unsecured investments, because if the people you lent money to do not pay, you cannot foreclose unless you invest a lot more money to buy out the first mortgage. You are lending to someone that cannot qualify for a normal mortgage.
• Syndicated mortgages are a group of investors lending to companies or individuals. They might fund one specific project. In Ontario, we just had one of the largest collapses in history when Fortress Real Developments collapsed after raising $960 million from 14,000 Canadians. Many lost all their money permanently. There are so many investors with permanent losses, they have their own web site: “Victims of Syndicated Mortgage Investments” (vosmi.ca ). Read the stories. They are classic examples of the “safety delusion” of fixed income.
• Mortgage Investment Corporations (MICs): This is a pool of private investments. The MIC lends to many investors that cannot qualify for normal mortgages. Many MICs in Alberta recently collapsed with the decline in real estate prices.

Bottom line: There is a “high risk of fixed income” investments. The “safety delusion” that fixed income is safe leads many investors to big losses. You can see the risk much more clearly when you think long-term. If you invest in fixed income investments for the next 30 years, how likely is it that you will not have a permanent loss from a default or interest rate rise, or a purchasing power loss from higher inflation?

The Risk of Bonds to your Retirement Plan

The biggest risk of bonds is that they can make it impossible for you to retire with the lifestyle you want. Most Canadians never see this biggest risk until it’s too late.

If you do not have a Retirement Plan, you probably won’t realize this until you retire. You will think you just didn’t save enough, when the real reason might be that you invested too much in bonds.

From experience having written over 1,000 Financial Plans, I can tell you that bonds can make it difficult for you to live the life you want. With 100% bonds at a 2%/year return, the life you want is probably impossible. With 50% bonds/50% stocks at a 5%/year return, the life you want will probably be difficult. With 100% stocks at an 8%/year return, you can probably live the life you want.

The risk in your life related to retirement is the risk of not achieving your retirement goal. This can happen because your investments lost money. But much more commonly, this results from investing too conservatively.

In your Financial Plan, the definition of “risk” is the risk that you do not achieve your life goals. Market fluctuations are not risk, unless they make you do something stupid. If you need 8%/year to achieve your financial independence, then risk for you is the likelihood that your investments will make less than 8%/year long-term. Bonds have a high 100% risk of a return lower than 8%/year. This risk for stock market investments is far lower.

An example of a typical family can make this clear.

Adam and Jennifer have a family income of $100,000/year. They want to retire in 30 years on $75,000/year before tax. Government pensions are expected to give them $25,000, so they need $50,000/year from their investments. In 30 years with 3% inflation, they will need $121,000/year to buy what $50,000/year buys today.

If they invest with 100% in stocks and a long-term average 8%/year return on their investments, they need to accumulate $2.15 million in 30 years. They can achieve this by investing $1,525/month. This is $18,000/year, which is the RRSP contribution room each year. This is reasonable. Adam and Jennifer can do this.

If they invest in a balanced portfolio with 50% stocks and 50% bonds, and a long-term average 5%/year return on their investments, they need to accumulate $3.18 million in 30 years. They can achieve this by investing $3,900/month. This is $47,000/year! They would have to contribute their maximum $18,000 to their RRSPs, $12,000 to TFSAs, plus $17,000/year more. Adam and Jennifer only make $100,000/year before tax. Investing $47,000/year is completely unreasonable!

Bottom line: Adam and Jennifer cannot achieve their retirement goal if they invest 50% in bonds. Their investments will only provide them with $20,000/year when they retire (today’s dollars), not the $50,000/year they want. If they invest with zero in bonds, the $50,000/year (today’s dollars) they want is quite achievable.

Should you invest in bonds?

Investing with too much fixed income is one of the main reasons that most people do not retire with the lifestyle they want. It is difficult to make the rate of return you need for your life goals with a lot in bonds.

This is part of why you need a Financial Plan. Then you will know the rate of return you need to achieve your life goals. If you need 8%/year to live the life you want, then you can focus on how to get that return reliably.

Without a Financial Plan, you might need 8%/year to achieve your life goals – but you don’t know it. So, you invest more conservatively in a “safe” portfolio with a 5%/year return. Then you retire on far less than you wanted and have to make large cuts in your lifestyle.

Your Financial Plan is the “GPS for your life”. Only with a Plan will you know the fastest route to your destination.

Long-term investors have a huge investing advantage

Long-term investors have a huge investing advantage. They can expect far higher long-term returns. Over 30 years, stock market returns will likely be about 10 times bond returns.

If you invest $100,000 in bonds for 30 years at 2%/year, you have $180,000. If you invest $100,000 in stocks for 30 years at 8%/year, you have more than $1 million. This is the huge benefit of a long-term focus.

The first question to ask yourself: Are you truly a long-term investor?

If you are truly a long-term investor, you think in 20+ periods of time. If your investments fall by 30% or 40%, you will continue to hold them or buy more while they are low. You can tolerate these market fluctuations. You believe in progress and want to participate in long-term growth.

If you are truly this type of long-term investor, you probably do not need bonds – at all. That means you should expect a much higher long-term return and a much more reliable and comfortable retirement.

Most Canadians cannot tolerate this. If you think short-term and may sell investments that go down and are affected by how your investments performed last year, then you need something to stabilize your investments. You could hold some bonds or cash or other more stable investment. You should expect a significantly lower long-term return and a less comfortable retirement.

Conservative investors tend to be short-term thinkers focused on short-term risks. However, if you are a conservative investor with a long-term outlook, you can still minimize your bonds. Based on the research of Jeremy Siegel, the lowest risk portfolio depends on your holding period:

Holding Period                 Minimum Risk

           1-year                               13% stocks/87% bonds

          20-year                               58% stocks/42% bonds

         30-year                                68% stocks/32% bonds

With today’s low interest rates, bonds can be a huge drag on your portfolio. You should expect lower returns. To estimate the effect on your long-term returns, the “Asset Allocation Loss Ratio” estimates the drag on your returns by your allocation between stocks, bonds and cash. Remember this formula:

Asset Allocation Loss Ratio (AALR)

25% bonds or cash = 1.5% MER

This means that having 25% in bonds has about the same effect on your returns as 1.5% higher fees (MER). Some investors searching for lower fees may buy ETFs or work with a robo advisor, only to lose all the savings with a higher allocation to bonds.

If stocks average 8%/year and bonds average 2%/year, then 25% in bonds can be expected to reduce your long-term returns by 1.5%/year compared to zero in bonds.

Your financial advisor or robo advisor may not be helpful for you here. They are more motivated by their compliance department than by what is best for you. “Compliance advice” is about protecting your advisor and their firm. Because of “compliance advice”, your advisor may insist on you investing partially in bonds – whether or not this is good for you.

If your advisor has not prepared a Retirement Plan for you, he does not know your life goals or the rate of return you need. But he still tries to reduce the volatility of your investments. If your advisor follows “compliance advice”, but has not done a Financial Plan for you (which is 90+% of financial advisors), it is like driving with your foot on the brake and never stepping on the gas.

Think long-term and you can clearly see the “high risk of bonds”.

Now that you have seen the evidence, you can use this knowledge to give yourself a more predictable future and a more comfortable retirement.

Adjust your investment binoculars and get much higher long-term returns

Most investors focus on the short-term. Will there be a recession this year? What will the Bank of Canada do with interest rates? What did Trump tweet? How did my investments perform last year?

If you are a short-term thinker, you probably need asset allocation. Decide on the right mix of stocks, bonds and cash that is within your risk tolerance.

You should assume that the fixed income (bonds and cash) will probably make almost nothing after inflation over the long-term, but it stabilizes your investments short-term.

However, you can learn to focus long-term. Changing your focus to long-term is the most effective step you can take to get far higher long-term returns.

Here are the 10 steps to learn to focus long-term:

10 Steps to Learn to focus Long-term

1. Understand that bonds and fixed income are inherently risky long-term. They are a bet that interest rates & inflation will stay low for all of the next 30 years. Bonds and fixed income will not protect your long-term retirement.
2. Think of bonds as a drag on your portfolio. Look at your statements. How much do you have in bonds? “Balanced and “income” in an investment name are code for half bonds. How much are you affected by the Asset Allocation Loss Ratio (AALR): 25% bonds = 1.5% MER?
3. Understand that long-term investors can easily out-perform. To get higher returns, focus on the long-term. Own only investments that should give you the highest, reliable long-term returns. Your questions about your investments should be about risk and return after 20 or 30 years.
4. Become confident that your investments will perform long-term. Get educated on the long-term returns of higher growth investments like stocks. You will see they are reliable long-term. (Read “Stocks for the Long Run” by Jeremy Siegel.)
5. Calculate the huge difference higher returns will make in your life. If you invest $100,000 in bonds for 30 years at 2%/year, you have $180,000. If you invest $100,000 in stocks for 30 years at 8%/year, you have more than $1 million. This is the huge benefit of a long-term focus.
6. Ignore everything short-term. Ignore “market noise”, business news, short-term returns, market predictions, the dividends of your stocks, guarantees, etc. When you are confident your investments should be 10 times higher in 30 years, you can ignore what happens along the way.
7. Change your definition of “risk”. Risk is the risk that you do not achieve your life goals. Market fluctuations are not risk. If you need 8%/year to achieve your financial independence, then risk for you is the likelihood that your investments will make less than 8%/year long-term. Bonds have a high 100% risk of a return lower than 8%/year. This risk for stock market investments is far lower.
8. Ask yourself: Are you truly a long-term investor? If you are truly a long-term investor, you think in 20+ periods of time. If your investments fall by 30% or 40%, you will continue to hold them or buy more while they are low. You can tolerate these market fluctuations. You believe in progress and want to participate in long-term growth.
9. If you are truly a long-term investor, you probably do not need bonds or fixed income – at all. Review all your investments and only own only investments that should give you the highest, reliable long-term returns.
10. Revise your Financial Plan and your life goals based on your new higher-growth portfolio with less or no fixed income. You should expect a far higher long-term return and a more reliable and comfortable retirement.

Adjust your investment binoculars to focus on the long-term. Then you will see the high risk of bonds. You can achieve your life goals by investing for much higher and more reliable long-term returns.

Ed