InvestorQ : What should be your total exposure to bonds and debt markets in the overall portfolio?
Dilmini Mercia made post

What should be your total exposure to bonds and debt markets in the overall portfolio?

Answer
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Dawn Cherian answered.
1 year ago


How much of equity you need to own and how much of bonds? That is the fundamental question that most investors have in their mind. One of the most commonly used (although not scientifically proven) methods is the popular (100 – Age) formula. What this formula basically says is that if you are 30 years old then you must have a 70% exposure to equities and if you are 60 then you must have a 40% exposure to equity. While there is no real scientific basis to this formula, what it captures is that as your risk appetite reduces with advancing age. This is intuitively correct!

You basically need to understand the role of investment bond in your portfolio and why you need to be invested in bonds. Let us look at what is a bond and what is a bond fund and why you should invest in them? What are the benefits of investing in debt mutual funds and why invest in debt mutual funds in the first place? Should you invest in debt funds at all, or are there better options available.