Why you should MIX shares and bonds to safeguard your investment gains

Stephen Grootes is joined by regular guest Warren Ingram, director of Galileo Capital.

It's a piece of enduring investment wisdom that people should spread their investments across different types of assets.

This week on the Personal Finance slot, financial adviser Warren Ingram focuses on why you should be mixing shares and bonds in your portfolio.

When the stock markets crashes, the losses can be frightening to those who're new to investing or who rely on their investments for their retirement, he says.

Just think, right now, of the volatility US President Donald Trump is causing with his tariff threats.

However, when the markets are doing well, it's tempting to allocate all your money to shares.

Ingram explains why it's not wise to be lulled into complacency.

"These runs in the stock market can carry on for quite some time, sometimes up to five or six years... A false sense of security can make us think we're going to get rich and then all of a sudden one day the wheel turns and everything stops. Just think of the financial crisis of 2008, when the dramatic virtual stop of the stock market would have caught virtually everyone by surprise."

Warren Ingram, Director - Galileo Capital

On average, a stock market crash will result in losses of 33%, Ingram warns.

So, what happens if you mix your shares with bonds?

If you invest 60% of your money in shares and 40% in bonds, in a classic balanced portfolio, a market crash would mean your average loss will be 20% rather than 33%.

"For most of us, the loss will still be uncomfortable but we can usually ride it out without panicking and selling our investments."

Warren Ingram, Director - Galileo Capital

"It will take a bit longer for our investments to break even again, nearly 2.5 years... but the big benefit of the asset mix is that we can use the income from bonds to cover our living costs or to buy shares during a crash. We don't need to sell our shares when they are 33% down."

Warren Ingram, Director - Galileo Capital

Scroll to the top of the article to hear Ingram's detailed investment advice