“Revolutionize Your Investment Strategy: Why Young Investors Should Skip Bonds – Listen to Stocks in Translation Now!”

In a recent episode of Yahoo Finance’s Stocks in Translation podcast, Chartered Market Technician and portfolio manager Trent Smalley challenged the traditional wisdom of holding bonds in a balanced investment portfolio. Smalley argued that younger investors may not need bonds in their portfolios unless they become extremely uncomfortable with market volatility.

According to Smalley, the historical performance of the S&P 500 over the past 30 years has been impressive, with a compound annual growth rate of 7.8%. Reinvesting dividends would have boosted that return to 9.9%. In contrast, the Bloomberg US Aggregate Bond Index had a compounded annual growth rate of 3.3% over the same period, with a significant drawdown of 17.4% from its peak in late 2021 to its bottom a year later.

Smalley emphasized that for young investors with decades of earning potential ahead of them, the stability and income generation offered by bonds may not be necessary. He pointed out that the correlation between stocks and bonds has been increasing since 2021, diminishing the diversification benefits traditionally associated with holding both asset classes.

In 2022, both stocks and bonds experienced significant losses, challenging the conventional wisdom of holding a 60/40 portfolio. Bonds, which have historically been seen as a safe haven during periods of high inflation and rising interest rates, failed to provide the expected protection.

Smalley recommended that young investors focus on dollar-cost averaging into index funds as a reliable long-term investment strategy. He cautioned against active trading, noting that it often leads to poor outcomes for investors.

The podcast Stocks in Translation, hosted by Yahoo Finance editor Jared Blikre, aims to provide essential insights and conversations from the investing landscape to help investors make informed decisions. Listeners can find more episodes on the Yahoo Finance video hub or their preferred streaming service.

In conclusion, the traditional advice of holding bonds in a balanced portfolio may not be as relevant for younger investors, according to Trent Smalley. As market dynamics evolve and correlations between asset classes change, it’s essential for investors to reevaluate their investment strategies and consider alternatives that align with their financial goals and risk tolerance.