Nobody gets excited about bonds. No one brags at a dinner party about their fixed income allocation. And if you’ve ever looked at your portfolio statement and wondered why a chunk of your money is sitting in something that seems to barely move — you’re not alone.
But here’s the thing: that boring corner of your portfolio might be the most important decision you make before the next bear market arrives. And one is coming. It always does.
This episode makes the case for bonds using one of the more memorable analogies you’ll hear in financial planning — an 80-mile-per-hour bobsled ride on the 2002 Olympic course in Park City, Utah, past a sign that genuinely warned of severe injury or death.
Stick with it. The analogy earns its place.
Why Most Investors Tune Out When Bonds Come Up
The complaints about bonds are predictable — and not entirely wrong. Returns are modest compared to stocks. Bonds lose value during inflationary periods. With the federal government carrying nearly $40 trillion in debt, lending more money to Washington feels counterintuitive. And for many investors, the mechanics of how bonds actually work remain genuinely unclear.
All four objections have some legitimacy. None of them, on their own, is a reason to abandon fixed income altogether.
Before going further: bonds are not for everyone in equal measure. Whether you have too much or too little in fixed income relative to your situation — your age, your income needs, your risk tolerance, your timeline — is a conversation worth having with your financial advisor. This isn’t a tutorial on bond mechanics. It’s a case for why bonds belong in the conversation at all.
The Bobsled Analogy That Actually Works
A few years ago, Dave and a friend strapped into a two-man bobsled on the Olympic course in Salt Lake City — the same course used in the 2002 Winter Games, repurposed for civilians with more courage than sense.
The sign at the start of the run did not say “caution.” It warned of severe injury or death. That turned out not to be hyperbole.
At speeds exceeding 80 miles per hour through 40, 45, and 60-degree banked turns, the helmet was essentially useless for keeping your head stable — it just prevented the worst of the impacts as your skull bounced off the sides of the sled. A bruise lasted days. Both men — seasoned daredevils with a long list of adventures between them — agreed afterward it was the most terrifying thing either had ever done.
Now think about investment portfolios in those terms.
Every investor has a course in front of them. At one end, there’s the gentle beginner slope — modest returns, minimal volatility, a small pot of gold at the end. At the other end is the Olympic run — maximum aggression, maximum upside, and a very real risk of the kind of stomach-dropping loss that causes people to make catastrophic decisions at the worst possible moment. Most investors belong somewhere in between. Bonds help determine where.
What the Historical Record Actually Shows
Here is the data that tends to surprise people: over the last 100 years, the bond market has posted negative returns in only 20 of those years. Compare that to the equity market, which has experienced far more frequent and far more severe drawdowns.
Of those 20 down years for bonds, 18 saw single-digit losses. Only twice in a full century has the bond market dropped into double-digit territory — and both times the decline stopped in the teens. There has never been a bond crash comparable to what equity investors experienced in 2000–2002 or 2007–2008.
That is not a coincidence. It is the structural characteristic that makes fixed income valuable in a diversified portfolio — not because bonds generate exciting returns, but because they don’t do what stocks do when things go wrong.
The Real Question: How Big Does the Pot of Gold Need to Be?
There is a psychological pull in investing toward always wanting more. More growth, more upside, more aggressive positioning. It feels rational. More is better than less.
But there’s a clarifying question worth sitting with: how much is actually enough?
The goal of a retirement portfolio is not to maximize the theoretical terminal value. It is to generate enough income to sustain the lifestyle you want, weather the unexpected costs that come with aging, and potentially leave something meaningful for the people you care about. Once you are clear on what “enough” looks like, the case for taking on maximum equity risk starts to soften considerably.
A Note on Leaving Money for Your Kids
This one tends to catch people off guard. Many investors say they want to leave as much as possible for their children — and picture those children as the teenagers or young adults they know today. The math tells a different story.
If you and your spouse live long, healthy lives — which is both the goal and increasingly the statistical reality for affluent, health-conscious investors — your children will likely be in their 60s or 70s when they inherit. They will have already navigated most of their own financial lives without your assets. What you leave them will be meaningful. It will not be the financial foundation they built on.
That realization changes the calculus around how much additional risk is worth taking in pursuit of a larger terminal number.
Bonds as the Helmet on the Bobsled
The analogy comes full circle here. Bonds don’t eliminate the ride. The market will still go up and go down. Bear markets will still arrive — and the next one, whenever it comes, will test the same emotions and convictions that every previous one has.
What bonds provide is a cushion. A harness. A helmet. They reduce the amplitude of the swings enough that when the ride gets violent — and it will get violent — you are less likely to make the decision that permanently damages your long-term financial health: selling at the bottom because you simply cannot tolerate watching the number go lower.
That decision, made in a moment of genuine fear during a genuine bear market, costs more than the drag of carrying bonds through a decade-long bull market. It costs more every time.
For the Investors With Iron Stomachs
There is a subset of investors for whom a bond allocation genuinely may not make sense — people who have been through the twin bear markets of the early 2000s fully invested in equities, didn’t flinch, didn’t sell, and came out the other side with their plan intact. If that is genuinely you, and not just who you imagine you’ll be in the next downturn, that’s a real data point. Know who you are.
For most investors, though — including most high-net-worth investors who have accumulated substantial wealth precisely because they’ve been disciplined and rational — the bear markets that test you haven’t fully arrived yet. The one in 2022 was a correction. The ones in 2000 and 2008 were the real thing. If you haven’t been through one of those while watching a significant portfolio decline in real time, you don’t yet know how you’ll respond.
Bonds are, in part, insurance against the version of yourself that makes decisions under that kind of stress.
The Bottom Line on Fixed Income
Bonds are not exciting. They are not going to generate the kind of returns that make for good conversation. They will drag on performance in bull markets and look unnecessary in years when equities run.
And when the next bear market comes — not if, when — they will be the reason some investors stay on the course while others bail out at exactly the wrong moment.
Talk to your advisor about whether your current fixed income allocation reflects your actual risk tolerance, your timeline, and your income needs. Not the risk tolerance you think you have. The one you’ll actually have when the market is down 30% and the headlines are uniformly terrible.
Those are two different numbers for most people. Bonds help close the gap.
If you have questions about how bonds fit into your specific situation — or if you’re not working with an advisor and want a straight answer — give us a call at 636-214-1005 or visit our contact page. No sales pitch, just a conversation about where your portfolio stands and whether it’s built for the ride ahead.
