Bonds Can Corral Your Risk

Rainy-day money. Sleep-at-night money. No matter what you call it, you need to put part of your asset allocation in bonds.

"The more nervous my clients are, the higher the bond allocation," says Donald Sowa, financial adviser of the Rhode Island-based Sowa Financial Group. "We let people understand that it will pull down the performance of their portfolio in the long run, but it provides safety."

Safety, as it is often said, comes in numbers. In this case, the most important number is the percentage one allocates to fixed income in his or her portfolio. It's a number that is often difficult for investors to calculate, as they try to balance the value of a good night's sleep with the need to make sure they can generate enough income to retire or to send the kids to college. ...