In the previous article, we looked at what bonds are and how they differ from shares.
Now let’s look at the role bonds actually play in a portfolio – and whether you need them at all.
What Bonds Are For
Bonds aren’t there to make you rich.
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They exist to do three main things:
- Reduce volatility
- Provide stability during downturns
- Smooth the ride when shares fall
That’s it.
They’re not growth engines.
They’re shock absorbers.
When shares crash, high-quality bonds often fall less – or sometimes even rise – because investors value predictability and safety in uncertain times.
That stabilising effect is why bonds are included in portfolios at all.
The Real Trade-Off: Growth vs Stability
Every dollar you put into bonds is a dollar not fully exposed to long-term share market growth.
Historically:
- Shares have delivered higher long-term returns
- Bonds have delivered lower returns, but with less volatility
So the real question isn’t “are bonds good or bad?”
It’s:
How much volatility can you tolerate without panicking or changing course?
Bonds aren’t useless for long-term investors – they just serve a different job: protecting you from the emotional cost of volatility so you can stay invested.
So When Should You Think About Bonds?
Here’s the thing: as a doctor, you already own a very valuable, low-risk, bond-like asset.
Your career.
Think about what a high-quality bond provides:
- Low volatility
- A high likelihood of paying out
- Reliable “income” over time if you stay the course
For many Kiwi doctors – particularly those in hospital roles – once you reach senior levels, your income is relatively stable, resilient to recessions, and not tightly linked to market cycles.
There will always be demand for doctors. Compared with many other professions, medicine has proven to be unusually resilient – even through economic shocks and pandemics.
The main uncertainty usually isn’t “will I be employed?”
It’s “how long do I want to keep working?”
Over a 30–40 year career, the present value of that future income can easily run into the millions.
You Already Own the Bond
Early in your career, this “career bond” often makes up a huge proportion of your total wealth, even if it doesn’t show up on a balance sheet.
From a total-wealth perspective, that means you’re already heavily weighted toward stability.
Adding a large allocation of actual bonds to your investment portfolio at this stage can mean doubling up on stability – and under-allocating to growth.
Your investment portfolio should ideally provide what you don’t already have.
For many young doctors, that’s growth.
As You Age, Your Career Bond Shrinks
This is where conventional age-based advice starts to make more sense.
As your remaining working years decrease, the size of your career bond shrinks too:
- At 30: ~35+ years of earnings ahead → enormous career bond
- At 50: ~15 years of earnings ahead → smaller career bond
- At 65: 0 years of earnings ahead (if retiring) → no career bond
At that point, many people introduce more actual bonds into their investment portfolio – not because bonds suddenly become “better”, but because they’re replacing the stability that future income used to provide.
The Bottom Line
For many young doctors:
- You already own a large, high-quality bond (your career)
- Your investment portfolio’s job is to provide growth
- Blindly copying conservative asset allocations may unnecessarily limit that growth
This doesn’t mean you should never own bonds.
It means you should think about your total wealth, not just the assets you can see in an account.
And one important caveat:
if a high-equity portfolio would cause you to panic, lose sleep, or abandon your plan during downturns, then some bonds may still be worth it – even if they reduce expected returns.
The “best” portfolio is the one you can actually stick with.
What’s Next?
We’ve covered why many young doctors probably don’t need bonds.
But what about doctors approaching retirement, when that career bond is running out?
Conventional wisdom says you must shift heavily into bonds as you stop working — but recent research challenges even that assumption.
Next: what the evidence actually says about bonds in retirement, and what you might do instead.
This article is for educational purposes only and is not personalised financial advice.