Q&A: Savings Bonds in Portfolio

Q:

When figuring out one's stock/bond mix should I count my savings bonds in the bond "bucket" or just emergency cash (to borrow a term from another radio guy)? I have been buying a low denomination of savings bonds weekly for the past few years, but I am only 43 and don't want to have too much money in bonds. I consider myself willing to accept risk and want to have as much in stocks as makes sense.

A:

Bonds are the foundation of a portfolio. We suggest owning them primamrily for this purpose. Since savings bonds are very safe, you should absolutely consider them part of your bond allocation. However, as you get older, you must start considering liquidity. This will require that you eventually start investing some of your portfolio in short to intermediate maturity government bond funds.

To help you determine a reasonable allocation, you might want to take our quick, easy risk survey at growrighthere.com.