You'll also want to maintain a diversified portfolio to help guard against unnecessary risk. Although the stock market is generally considered more volatile, bonds carry their own forms of risk. Generally, the higher the risk, the larger the return to the investor. When interest rates rise, bond prices generally fall. If your investment portfolio is heavily weighted with bonds, you could watch your nest egg shrink significantly during some periods.
Bonds also carry credit-quality risk.
Bonds are rated according to the issuer's financial health and ability to make interest payments and repay the principal at maturity. US Treasury bonds, which are backed by the creditworthiness of the United States government, generally pay lower yields than bonds issued by corporations with less creditworthy reputations. When you accept high yields and low credit quality, you risk seeing the bond issuer default on their bond obligations. Fortunately, the bonds used in the Annuity Board funds are high quality corporate or government bonds. Bond Funds Generally, bond funds contain bonds from multiple issuers and have a particular objective, such as intermediate-term investing.