For many Americans, though, that's too much in bonds. This allocation can put too much of a drag on a long-term portfolio. Cash is stable. Bonds are not. Bonds can be nearly as volatile as stocks when interest rates change rapidly.
Cash provides the additional advantage of flexibility.
With a portion of your portfolio in cash, you can move into the stock market gradually or to take advantage of a dip in the market. Now let's look at income, the second reason to buy bonds. The issuer of a bond agrees to pay a specific rate of interest, which provides the bond holder with income much like a bank certificate of deposit. Retirees who are living off their investments may well need some income. The argument for bonds is strongest for them.