One of the biggest names in the financial advice world is Tony Robbins, who is known for his books, his lecture series, and most of all, his wisdom when it comes to being fiscally savvy. Recently, The Street featured Robbins’ latest comments stressing the necessity of including bonds in your portfolio, especially during retirement.
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“Bonds are the foundation of the mind-blowing portfolio that work in all economic climates,” said Robbins, expounding on the many benefits of investing in bonds, which he viewed as more stable bets during these tough economic times. Robbins continued to describe how “bonds are the big guns in the portfolios of the ultrawealthy and the bedrock of the Security/Peace of Mind Bucket for the average investor.”
Do you have any bonds in your portfolio or plan to invest in for retirement? There might be some good reasons behind Robbins’ retirement bond logic.
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What Is a Bond?
Owning a bond is not like owning a stock, whereby you have a slice of the company in your name. Instead, bonds are issued by entities that allow you to make a loan to the organization of issued bond. The issuer of the bond promises to return the loan payment at a specified date, along with an agreed-upon interest rate.
While bonds can come from a business, they are typically issued by governments at all levels because of their relative stability, while also having the ability to raise tax revenue to meet the bond requirements once cashed in for payment. The bad and good news about bonds is that there are no significantly high returns on investment, depending on how the issuer does financially, though that also means there is less chance of loss if loan payments are kept up.
Robbins championed the notion that bonds are more stable investments during these turbulent economic times, where the global markets are shaky and those in retirement are trying to keep their nest eggs intact. Bondholders can also expect to receive interest on a regular quarterly or semi-annual payout, providing an additional stream of earnings to retirees who might live on a fixed income.
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Should You Add Bonds to Your Retirement Portfolio?
Robert Johnson, the chairman and CEO at Economic Index Associates, agreed with Robbins’ insights on bonds, as well as provided a slight caveat. Johnson said, “One’s appropriate asset allocation — the mix between stocks, bonds and cash — is a function of many individual specific factors, primarily time horizon and risk tolerance.”
According to Johnson, once a person is within five years of retirement, they need to de-risk their portfolio to some extent. “A large downturn in the equity markets immediately preceding retirement can have devastating effects on an individual’s standard of living in retirement. The exact time a person retires can have an enormous impact on the quality of their retirement if their assets are focused in the equity markets,” he said.
As with any big fiscal investment, it is important to consult with a financial advisor or specialist to make sure that your money moves work for you and your lifestyle. Bonds might just be one aspect of your retirement account that you need to take into consideration per Robbins’ recommendation.
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Sources:
The Street, “Tony Robbins has urgent advice about adding bonds to retirement portfolios“
Robert Johnson, Economic Index Associates
This article originally appeared on GOBankingRates.com: Tony Robbins: You Need This Investment in Your Portfolio During Retirement
