Should Bond Allocation Be Based on Age?

NEW YORK (MainStreet) — Bonds are a good asset to add to your portfolio even if you are a Millennial or Gen-Xer and retirement is not on the immediate horizon.

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Using age to determine the proportion of bonds in your portfolio is never a good strategy to follow, said Ted Bovard, managing director and principal at Fort Pitt Capital Group in Pittsburgh.

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"Higher paying dividend stocks, convertibles and high yield bonds may be the only way to get yield," he said. "Younger folks may have to employ a policy of total return -- dividends and stock value increases -- to generate the cash flow they will need in their retirement."

Increasing the percentage of bonds in your portfolio can help investors balance their risk and avoid the volatility from the stock market, experts say.

Bonds add value to a portfolio by preserving your capital, said Abigail Gunderson, a client relationship manager at Tanglewood Wealth Management, a Houston investment management firm.

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"Bonds tend to be more conservative and they hedge your portfolio from the volatility of equities," she said. "They are the part of your portfolio that provides income."

While bonds are not the most prudent choice for a younger investor, they are a good fit for people who are very averse to risk.

"A bond mutual fund can be the best choice instead of picking individual ones because they are liquid and be sold anytime," Gunderson said.

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Gen-Xers and Millennials should invest now in individual bonds with varying maturities, said Bill DeShurko, a portfolio manager on Covestor, the online marketplace for investing with offices in Boston and London."