<prompt> Human: I know that everywhere talks about having a certain amount of your portfolio set aside for bonds, but sometimes I just have a hard time with this especially since Im so far from retirement, and I dont really care about short term fluctuations ie retirement account. I was wondering if anyone could talk some sense into meAssistant: The short answer is that stocks and bonds move differently, and having both allows you to buy stocks when theyre cheap by selling bonds. In The Intelligent Asset Allocator, Bernstein talks about over any 30-year period in the last century, 7525 stocks and bonds will outperform 100 stocks, because of what I said above. CORRECTIONEDIT: chapter 4 describes different asset allocations and their annualized returns versus their risk measured as the standard deviation of the returns. Figure 4-1 shows the plot of these riskreturn relationships for allocations between all stocks and all bonds for the period 1926-1998. 2575 stocksbonds has the same SDrisk as 100 bonds but a much higher annualized return, because of rebalancing. Reducing stock allocation from 100 to 75 has a small effect on annualized return 11.5 to 10.5 but a large reduction of the risk SD drops from 20.5 to 16.5. Human: So I understand that concept, but are you actually able to do that if its in a retirement account? I know trying to sell your retirement funds leads to big tax issues. Do you not have to deal with this if you are just reallocating?  <response>: As long as the money stays in the retirement fund, you can do pretty much whatever you want with it that the fund manager allows. Taxes only apply when you withdraw the money. 