It has become a common advise from most advisors that the percentage of bonds in your portfolio should be ‘100 – your age’. This gives you a rough idea of the importance of bonds, but should not be followed as a hard written rule. Benjamin Graham, the father of value investing, gives a simple (and in my opinion, better) rule of thumb to follow. Relative allocation between stocks and bonds should be between 25% and 75%, one way or the other. He goes on to say “any such variations should be clearly based on value considerations, which would lead [the investor] to own more common stocks when the market seems low in relation to value and less…when the market seems high in relation to value”.
My Bond Allocation
I only hold high grade near term maturity bonds as of this writing. I hold bonds using the iShares 1-5 Yr Laddered Government Bond Fund (TSE: CLF) ETF, which is composed of Canadian federal and provincial bonds maturing between 1 and 5 years.