Looking at my blog you probably wouldn't think I hold any fixed income. Surprise! 10% of my investments are infact fixed. I hold them in my thrift savings plan (federal employee 401k) account which I don't really talk about. I have an aggressive allocation of 90% stocks, 10% fixed income. Here's why:
#1: I believe in dividend growth investing. The concept simply makes sense and is easy to execute. Buy and monitor stock in companies who pay a decent yield and will increase dividends faster than the inflation rate. Over time the 2.75%, 3%, 4% yields will grow to a substantial YOC. My timeline for retirement is 16 years. 3% caterpillars have a long time to morph into butterflies.
#2: Interest rates are historically low. Low interest rates mean bond yields are also low. I actually like bonds because of the safety they provide, but right now it is hard to justifiy ownership. Why own an asset that is guaranteed to be eaten away by inflation when you can get something else with a similar yield that can outpace? I'm not bold enough to go 100% stocks, which is why I maintain the 90/10 ratio. If rates were higher I'd have no problem being 75/25 (possibly higher depending). Yes, certain flavors of fixed income such as TIPS can meet inflation. But can they beat it?
#3: I am young. Conventional wisdom says more stocks, less bonds while you are young. I do follow this advise. Not so much for additional risk/reward, but because investments that makes the most sense to me are dividend growth stocks.
Why not further diversify with precious metals, specifically gold? There is no doubt gold has performed extremely well the past few years. Everyone loves gold right now, I even supervise a young soldier who invests $100/mo in a gold fund. Gold is a good store of value, but would pay me absolutely nothing. You'd have to sell it to pay bills; the exact opposite of my goal. As a side note, I always encourage my Joes to save and invest even if it's something I personally wouldn't buy such as a gold fund.
Eventually I will be over allocated to stocks unless I buy fixed income in my brokerage accounts. It's only a matter of time. Once in a while I'll need to make purchases to maintain the balance I want. I'll probably continue to avoid bonds due to low yields, but have thought about preferred stock and possibly junk bond etfs. Look for me to purchase fixed income soon, maybe this month.