Different kinds of investors will want to have portions of their portfolios diversified across the investment board. Conservative investors may elect to lean much more towards having a lot of bonds in their portfolio. Perhaps as much as 80%-90% bonds for an ultra-conservative investor.

Aggressive investors may choose not to have any of their portfolio in bonds. They might have all of their money in individual stocks, risky private equity, or in some aggressive growth mutual funds.

But the average investor would be wise to keep no more than 30% of his investments in bonds. This is because the very nature of investment is defined as making your money grow at a substantial rate. Bonds don’t usually offer a very high rate of return. But they are useful as a hedge in one’s overall investment strategy.

Bonds can be invested in in several forms. There are individual bonds, just like individual stocks. There are bond mutual funds that solely invest in corporate bonds.

Bonds can also be invested in by using a mixed mutual fund, where in the fund is an assortment of bonds and stocks, and even other investment vehicles, such as real estate investment trusts.

The typical investor in bonds is quite conservative overall. He seeks a modest return, but thrives on not being exposed to very much investment risk. This type of investor would also probably stray away from the more risky bonds, such as junk bonds, even though they offer a much higher potential return.

One can definitely make a profit soley by investing in bonds, but the monetary growth curve may simply not be as quick as particular stock investments. If one is leaning towards investing a lot of money in bonds, the best way to approach this strategy is to go with a group of solid bond funds.

Pick a strong investment company and perform due diligence on the returns and ratings of specific types of bond funds. When you’re certain you have found a good group of bond funds, then if you’re so inclined to be a strong bond investor, it would be wise to diversify into as much as 50% of your portfolio in bond funds.

The balance of your money could be invested in potentially higher rate of return mutual funds that invest only in stocks. Or you could split your balance into 15% stock mutual funds, 15% individual stocks, and 20% in gold and other precious metals. Or you could even have a real estate investment component to your overall bond-driven portfolio.

Making the assessment as to how much you should specifically invest in bonds all depends on your risk profile, and your overall investment goals. The greater the return you seek, the less should be invested in bonds. But the less risk you want, the more you should invest in bonds at any given time.

The Permanent Portfolio Fund, which is one of the mutual funds that Easy Investing Blog heartily endorses, puts government bonds and Treasury Bills at roughly 45% of the portfolio.

However, having that much of the portfolio in the form of bonds is something that is fairly risky in the sense of potential lost opportunity cost, and it’s suggested that you invest in a mutual fund if you’re going to be that heavily invested in bonds.

To answer the question in a simple format: it depends on how much risk you want to take. The older you are and the closer you are to retirement, the more you should have bonds and Treasury Bills in your portfolio. The younger you are, the more risky and potentially lucrative your investments should be.

There’s no hard math or formula here — it’s a question of preference and comfort.

Keep learning more:

1. The Disadvantages of Investing in Bonds


2. Bonds Are a Low-Risk, Low Return Investment


3. Corporate Bonds 101: An Introduction to Corporate Bonds


4. The Advantages of Investing in Bonds


5. Bonds 101: How to Invest in Bonds


6. Municipal Bonds 101: An Introduction to Municipal Bonds


7. Government Bonds 101: Introduction to US Treasury Bills

Learn How to Invest

This website provides completely free investing courses for normal people so they can learn how to invest correctly, retire early, and find financial freedom and security.

Enter your email below, and I'll personally email you a free course on investing in gold, a free guide to dividend stocks, and a free course on building a passive investment income.

You'll also get weekly free tutorials on financial security, getting debt free, and living a wealthy lifestyle on a limited budget.

And it's all free. Get it all right now: