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Originally Posted by Brit
Am I missing something.
Regards Brit.
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Yes.
The bond portion is NOT for income. It's to balance out the stock portion and to lower the overall volatility of the portfolio. When stocks go down, you sell some of the bonds and use it to buy stocks, thus rebalancing the portfolio. When stock go up, you sell some of the stocks and buy bonds. That way, as your portfolio (hopefully) grows over time you are reducing the risk back to your original allocation, constantly harvesting from the higher performing assets.
You don't worry about the yield of your investment portfolio. The yield is not to generate income. When you extract your annual withdrawal from the portfolio, you sell whatever has increased in value the most over the year and rebalance the portfolio.
Audrey
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