I’m 29 years old. My wife is 27. Are the bonds portion of a target date index fund a waste compared to the other portions of a target date index fund at this early stage in our careers? I currently have ours set at 75% S&P 500 index and 25% international. I get that I’ll need to invest a portion into bonds over time, but just wanted to know if it’s absolutely necessary these first 10-15 years of our careers.
Hi @Bryan_Bradley!
The short answer is no. They’re not absolutely necessary. Lots of wise, altruistic people thing going 100% equities (75/25 is a reasonable split) is a great asset allocation early in your wealth building career. The flip side is that there is some evidence that a small portion of bonds can actually lead to better performance, depending on the volatility of the market as it enables rebalancing (forcing a buy low/sell high).
You can google to find all sorts of historical studies on different asset allocations. But basically, I think your current strategy is great. Stick with it for a few decades and you’ll build a ton of wealth. 