I often read that if one doesn't understand what a proposed investment is or does, one shouldn't invest in it. But if I followed that rule, I'd have no investments at all. The truth is, when the talk goes to stocks and bonds, my eyes glaze over. The best I can do is stick with mutual funds, cross my fingers and hope for the best.
That worked well for me in 2010. In 2008 and 2009, not so much.
But at age 61 and 8 years from retirement, I need to get a lot more serious about bonds and bond funds. (Will the blogger at Living Almost Large please stop smirking and muttering "I told you so" under her breath!)
So far, I have almost a 10% stake in bonds. That's up from 7% in 2008 but it needs to be at least 25% so I have reallocated more of my future deposits in my 401(k) to get me up to that mark.
As usual, my timing is impeccably bad. Grace is buying bonds when everyone else is--never a good sign when it comes to investments. Money Magazine has been warning its readers for months now that we are in the midst of a bond bubble and that it is due to burst soon.
But what do I do? Clearly, my retirement funds are still top-heavy with stocks, and my stomach (not to mention my bank account) cannot take another couple of years like the last ones. I need bonds so I have to buy them. Just my luck that I'm buying them at the top of the market.
My solution, if you can call it that, is NOT to reallocate the monies or funds I already have, but to put new contributions mostly into a bond index fund, and a smidge into an international index fund where I'm a bit low at the moment.
While I was at it, I increased my 401(k) contribution by another $10 a month. Don't laugh. My wages are frozen for three years, so I wasn't planning to make any increases. But since my payroll taxes are going down, I tossed in another $10 toward my future retirement.