During the tech boom of the 1990s, we saw an influx of stock-only portfolios. And while a lot of people thought that the rocket ride would never end, it did. And when the stock market came crashing down after years of influx, a lot of people lost everything in their portfolios. During this time, bonds suffered, because people did not pay as much attention to them. After all, why invest in bonds when they cannot earn you as much on the short term level?

Well, as it turns out, there is one VERY good reason to invest in bonds. You see, while a lot of people just invested in stocks during the 90s, the people that had more diversified portfolios were the ones who got to experience the stock rocket ride without the crash. Bonds can provide stability and a reduced level of volatility to any portfolio, which will increase your chances of maintaining good, long term returns.

So, what percentage of your portfolio should include bonds? Well, 70/30 is a pretty popular ratio, but there are a lot of specialists who believe that you will actually do better with a 60/40. Why? Because keeping this many bonds in your portfolio will still yield great rewards while eliminating most of the risk.

So, start with no less than 25% in bonds when you start to build your portfolio, and make these treasury bonds, as these are very reliable. Later on, you can switch to bonds that are more getting more commercial recognition, as these can usually out perform treasury bonds in a very hot market. All in all, bonds can really help you to build a more diverse portfolio for yourself, while still giving you great returns on your money.

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