Right now 100% of my portfolio is equities. Here’s the way I’m thinking about it right now:

I’m young (32) and have lots of investing left to go. If the market pulls a 2008, I’m not going to be super happy about it, but I have time to weather the storm. I’m counting on myself to not get panicked and sell (which is an unproven assumption at this point). If the market does pull a 2008, I hope that it’s tomorrow. I still have lots of money left to invest and I would much rather have bad returns now and great returns later.

Where bonds will come in is to protect against sequence of returns risk when I’m making withdrawals. Technically, sequence of returns risk affects you whether you’re putting money in (as mentioned above) or taking money out, but it really is only scary in the latter situation. Obviously it would be great if I retired and the market went on a multi-year bull run, but that’s beyond my control. The situation that really kills you is the reverse, you retire and the market tanks. I think bonds are a great way to mitigate that risk.

Where I struggle is whether to incorporate bonds before retirement. The obvious answer seems like yes, since the market crashing in the years just before retirement could significantly delay retirement, but it’s hard to know what the exact right move here is in terms of timing and percentage. That’s why some of those traditional rules of thumb are nice, they just take care of it without a lot of thought or energy required. That said, they are probably more conservative than necessary, especially when an investor is young and it’s really too early to be putting any money in bonds.

At least I have some time to figure a strategy out. I’m going to keep rolling with 100% stocks for now.