Warren Buffet Hates Bonds

"Even in the U.S., where the wish for a stable currency is strong, the dollar has fallen a staggering 86% in value since 1965, when I took over management of Berkshire. It takes no less than $7 today to buy what $1 did at that time. Consequently, a tax-free institution would have needed 4.3% interest annually from bond investments over that period to simply maintain its purchasing power. Its managers would have been kidding themselves if they thought of any portion of that interest as “income".”  (Shareholder letter 2011)

"I want to quickly acknowledge that in any upcoming day, week or even year, stocks will be riskier– far riskier– than short-term U.S. bonds. As an investor’s investment horizon lengthens, however, a diversified portfolio of U.S. equities becomes progressively less risky than bonds, assuming that the stocks are purchased at a sensible multiple of earnings relative to then-prevailing interest rates."  (Shareholder letter 2017)

"It is a terrible mistake for investors with long-term horizons– among them, pension funds, college endowments and savings-minded individuals– to measure their investment “risk” by their portfolio’s ratio of bonds to stocks. Often, high-grade bonds in an investment portfolio increase its risk."  (Warren Buffett Shareholder letter 2017)

If you are saving for retirement don't fall into the Wall Street bond trap.  There are much better, more cost-effective ways to protect your future retirement income than using bonds.  A recent study looked at historical returns for US Stocks, international stocks, bonds and bills from 38 countries and nearly 2500 years of return data.  They found that a 100% stock portfolio dominates the traditional stock/bond allocation by generating more wealth at retirement.  In addition, it provided better capital preservation*