Your 30s are the perfect time to start focusing on long-term financial security. After all, once you hit your 30s, there's a good chance you'll have paid off your student debt (or at least most of it), gotten promoted, and reached a point where you can afford to invest more of your money for the future.

In fact, if you're ready to invest for the first time, which is the case for many workers in their 30s, you may be wondering: Should you put your money into bonds? And the answer is, yes, you should put some money into bonds -- but definitely not a lot.

30-something male

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Why buy bonds?

Investors tend to like bonds for two reasons -- first, because they're relatively safe and, second, because they provide a steady stream of income in the form of semiannual interest payments. Furthermore, if you buy municipal bonds, those interest payments will always be free of federal taxes, and in some cases, state and local taxes as well. And, if you pledge to reinvest those interest payments as they come in, you'll have even more opportunities to grow your wealth.

Here's the problem, though: Bonds have historically delivered much lower returns than stocks, so while they are safer, they're also far less likely to help you meet your retirement savings goals. For example, whereas a stock-heavy portfolio might give you an average annual 7% return over the life of your investments, a bond-centric portfolio might offer more like a 4% return. And that difference alone might seriously inhibit your ultimate growth.

The following table illustrates this point based on a number of varying investment scenarios:

Monthly Investment

Total Accumulated Over 30 Years -- Stocks (7% Average Annual Return)

Total Accumulated Over 30 Years -- Bonds (4% Average Annual Return)

$100

$113,000

$67,000

$200

$227,000

$134,000

$300

$340,000

$202,000

$400

$453,000

$269,000

$500

$567,000

$336,000

$1,000

$1.133 million

$673,000

TABLE AND CALCULATIONS BY AUTHOR.

As you can see, if you load up on stocks, you can turn a series of relatively small contributions into a considerable sum over a 30-year period. With bonds, you'll still see some growth, but nowhere near the amount stocks are likely to give you. Case in point: Assuming you invest $500 a month, choosing a stock-heavy portfolio over a bond-heavy portfolio will leave you $231,000 richer by the time retirement rolls around. And if you're able to set aside $1,000 a month (which, admittedly, is a tall order for some people), you'll have an additional $460,000 sitting in your nest egg by focusing on stocks over bonds. Yowza!

A smarter way to invest in bonds

Many people look at bonds as a risk-free alternative to stocks, but in reality, bonds do come with certain risks -- namely, interest rate risk. Anytime you lock your money away for a given period of time, you're taking the risk that a more attractive investment won't come along in the interim. If it does, you stand to lose money.

Say you buy a 10-year bond today paying 4% interest. That might seem like a decent return right now, but what happens if market conditions shift in two years, at which point that same bond is being offered at 5% interest? Suddenly, your bonds are worth less.

Furthermore, locking your money away in bonds means taking on liquidity risk. If bond prices fall and you want or need that money, you'll be stuck taking a loss or waiting until your bonds come due, at which point you risk losing out on better investment opportunities. On the other hand, if you ladder your bonds so that you have different investments coming due every few years, you'll eliminate some (though not all) of the aforementioned risks.

Here's how you might pull off a bond ladder. Say you're 35, you have $50,000 to invest, and you're hoping to retire in 30 years' time. Rather than dump that entire $50,000 into a single bond, or a series of bonds, with one maturity date, divide your investment dollars into five buckets of $10,000 each. Then, you can buy five different bonds that come due in 10, 15, 20, 25, and 30 years, respectively. What this does is give you reasonably consistent access to your money between now and retirement so that you have the option to change your investment strategy without getting too badly burned.

The bottom line on bonds

Although most folks in their 30s are better off putting the bulk of their money into stocks, it pays to invest a small portion of your portfolio in bonds. But don't tie up too much of your money in long-term, low-yield investments, because if you do, you could wind up falling short in retirement. As long as you have another three decades of work ahead of you, which is typically the case for those in their 30s, you have plenty of time to ride out the stock market's ups and downs. And if history tells us anything, it's that sticking to stocks is the best way to make the most of your investment dollars and grow your wealth.

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