Crackerjack Greenback Prudent Advice for a Prosperous Future

December 19, 2008

A Closer Look at a Diversified 100% Bond (0% Stock) Portfolio

Filed under: Diversified Portfolios,Investing,Retirement Planning — Paul Williams @ Crackerjack Greenback @ 3:30 am

       In my example of what a diversified portfolio looks like, I used a 70% Stock portfolio as an illustration. To save you the time and math, I’ve started a series of posts that look at a range of diversified portfolios from 100% Stock to 0% Stock. I’ll break these portfolios down in 10% increments. Today we’ll take a closer look at a 100% Bond (0% Stock) portfolio.

       Here’s a pie chart depicting the asset allocation for a diversified 100% Bond portfolio:

Allocation for 100% Bond Portfolio - Small

       Click here to learn how to invest in a diversified 100% Bond portfolio. Keep in mind that you’ll need $6,000 to meet the fund minimums for this particular portfolio. If you invest at Vanguard, the total expense ratio for this portfolio would be 0.18%.

       Here’s a chart showing the historical returns for this portfolio from 1927-2007:

Historical Returns for 100% Bond Portfolio - Small

Now for some quick facts about this 100% Bond portfolio:

  • The highest calendar year return for this portfolio was 19.5% in 1982.
  • The lowest calendar year return for this portfolio was -2.3% in 1956.
  • From 1927 to 2007, the average annual return for a diversified 100% Bond portfolio was 4.9%.
  • This 100% Bond portfolio never lost money during any consecutive 3 year period from 1927 to 2007.

       I would never recommend that anyone with a long-term time horizon invest in a 100% Bond portfolio. You get a much better return for very little additional risk by using a 20% Stock portfolio instead. That extra 20% of stock really does help to increase your return and long-term results significantly.

       If you have a short-term (< 5 years away) goal that you'd like to save for, I recommend using a high-yield savings account or U.S. Treasury Inflation-Protected Securities (TIPS). These will enable you to save for your goal while earning a reasonable interest rate with little to no risk.


  1. This series has been great. Any chance of posting some sort summary chart comparing all the different portfolios?

    Comment by Nick — December 19, 2008 @ 6:52 am

  2. Thanks, Nick. I was thinking of doing something like that. What kind of information are you specifically interested in?

    Comment by Paul Williams @ Crackerjack Greenback — December 19, 2008 @ 4:14 pm

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