[k2enemy]

> Bonds are no longer recommended. Current research indicates 100% equities to be the best composition leading up to, and past, retirement.

Are you referring to Anarkulova et al? Might be worth mentioning that the fixed income part is replaced with international equity, not more domestic equity.

[dhosek]

That’s been something I’ve started doing. The nice part of the bond chunk of my investment portfolio is the current income aspect of it, with monthly dividends that give an annualized return of a touch under 4% on top of the capital growth.

[chrisweekly]

4% on top of the capital growth? Please ELI5.

[dhosek]

So there’s two ways you make money from any mutual fund: the first is that the value of the shares can go up (that’s called capital growth). The second is through dividends and distributions. Dividends will be higher with a bond fund than stocks just because the trend for the last few decades has been for corporations to focus on growing share price rather than paying out dividends to shareholders. Distributions are realized capital gains in the fund that are paid out to shareholders, typically annually or semiannually.¹ Stock funds usually pay dividends on a quarterly basis, while bond funds may pay monthly. In my case, I’m getting a monthly dividend of about ⅓% from my bond fond (Fidelity bond index fund), although checking my records, the share price has been relatively steady over the last few years so my IRR is not that much above the dividend rate.

Another good option for something that can give good current income is REIT stocks. The management fees on the funds that specialize in these tend to be high for my tastes (I like passively managed funds with management fees that could be rounding errors) so when I’ve had money in REITs, I’ve typically looked at the top stocks in the REIT funds and just bought those directly with dividend reinvestment. Note that because of the nature of REIT dividends and taxes, it’s better to use tax-advantaged accounts to buy these than to put money in a regular retail account towards them.²

⸻

1. Back during the first dotcom goldrush when tech stocks were especially volatile (1999–2001 in particular), people who bought dotcom mutual funds in taxable accounts often ended up with a big distribution from the fund and a drop in share price greater than that distribution so that they would end up not only losing money on their investment but they also had a tax bill for their troubles since distributions will count as realized capital gains.

2. Important to note that I’m not a financial advisor and my advice is probably garbage.

[jonfromsf]

Stocks for the Long Run makes the pretty compelling case that over longer holding periods stocks are less risky than bonds.

[zie]

Their definition of long run and your definition of long run are probably different.

Also, it should be noted, just because it's the optimal to have the most $'s that shouldn't be the goal. The goal should be to survive your retirement with "enough".

And it should also be mentioned, most people can't stomach holding 100% equities, for a very good reason. When the 40-60% market crash happens, people get emotional and make emotional decisions. Sure there are the lucky few that can hold out, but most can't. Are you going to be one of the few lucky ones? If you haven't yet been through it once(last one in the USA was 2008/9), how do you know for sure?

[skywhopper]

Yes, and “I’m nearing retirement” is the opposite of the long run.

[gommm]

What would you recommend to increase international equity exposure? Index funds ETF like VWRA?

[Gareth321]

For most people, $VT (or VWRA) is optimal. You should have a U.S. tilt because most growth is coming out of the U.S. $VT will naturally rebalance into international equities on that growth. If you already have a U.S. heavy portfolio and want more international exposure, $VXUS.