The role that bonds might play in building portfolios will vary from not using them at all to depending on them heavily. Therefore, there can be no one right way to build portfolios with them (or not). But here is how I’m doing it in my E*Trade IRA. As you can see, I’m over-weight Cash & Equivalents and under-weight my other categories, which are deficiencies that I’ll correct as opportunities arise.
The P/L column is misleading, because the bulk of the positions are zeros. E.g., 02/24/10, I bought FNMA’s 0’s of '28 at 44.314 for a projected YTM of 4.5% that’s now marked to market at 92.300, giving me a 108% gain. Stuff a portfolio with enough of such purchases, and the P/L column looks pretty good. But the YTM column (not shown) isn’t remarkable and ranges from a TVA low of 2.6% for their 0’s of '38 to a foreign sovereign high of 10.2% I lucked into back in '09, Jamaica’s 8’s of '39.
My one position in default is Venezuela’s 13-5/8’s of '18, whose mark to market value --inexplicably – keeps improving and is now 5x what it was 2 years ago.