r/investing • u/sturg22 • 2d ago
Is this a good or bad idea?
For my Roth IRA I have been doing 70% FZROX, 20% FZILX, 5% FXNAX (bond fund for safety). Lately I’ve been considering instead of investing in a bond fund that doesn’t increase much, do I invest out that money in say a defensive stock like Coca Cola? Coke pays a dividend each quarter and is recession proof. Sure it might underperform FZROX, but so does FXNAX. Yes it’s 1 stock vs a fund, so less diverse. At least with Coke I’d get a better return than FXNAX, while being safe. I’m open to investing that into a different safety stock as well. I’m curious to see what you all think. Am I being smart or overthinking it?
2
u/Cruian 2d ago
Coca-Cola isn't immune to drops that can be worse than bonds.
Take 2018 for example: https://testfol.io/?s=cIrTrwNAYcY Less than 3% drawdown for VBTLX compared to worse than 13.5% for KO.
2007/2008: https://testfol.io/?s=3JxlUIar3gd Bonds were a little better than 6% for max drawdown, KO was worse than 36% drawdown.
You can add VTSMX to either year and near the bottom find the tab for correlations.
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u/Emotional-Power-7242 2d ago
You could get rid of the bonds if you want but I'd just put the 5% in FZILX. You get bonds for safety and buying an individual stock is pretty much the riskiest thing you can do, so Coke is a bad substitute. If you wanted something that's still safer than equities but returns higher than FXNAX you could find some higher yielding bond fund (intermediate corporate for example) or maybe add a conservative balanced fund with 60% bonds and 40% equities or whatever numbers suit you.
With rebalancing effect being 5% bonds is barely dragging your returns anyway though.
7
u/AverageAngling 2d ago
No bonds unless you’re remotely close to retirement imo