I spent a semester studying bonds, and I was just scratching the surface of the subject. However, rather than regurgitating a bunch of facts and boring data, lets keep it simple and start with Bond Funds. I recommend a few:
1) PIMCO Total Return
2) Vanguard Total Bond Funds VBMFX, VIPSX, and others: Vanguard Bond Link
The question used to be “why buy bonds?” Lately the question is “why didn’t I own *more* bonds?”
Either way, I seldom recommend sudden large changes to portfolios. Assuming you’ve been beaten up by stocks (I have) and have lost some of the risk tolerance you thought you had, maybe its time to consider looking at bonds. Rather than moving funds around, why not just change your allocation of new funds. If you have a 401(k) consider changing your new investment elections.
Bonds and bond funds can help you sleep better at night. Especially Treasury Bonds and TIPs.
Another bond-like investment is a CD (certificate of deposit). The FDIC insurance (now up to $250K) helps peaceful slumber. The wrinkle is getting them into your retirement account.
Bottom line: Any portfolio should contain bonds (or bond-like) investments to be considered balanced.
P.S.: Today’s Fun money update: $21,066. Decreases in my SPY call are approximately offsetting decreases in my SPY underlying. (Yes, that sentence is correct.)