Keep Maturities Short
Longer maturity instruments are riskier and returns are not consistently greater: The long term government bonds actually achieved about the same return as the five year government bonds; however, the long-term bonds also experienced much greater volatility. Keeping maturities to around 5 years or less seems to produce the highest return per level of risk.
Short-term bonds have a lower correlation with equity portfolios than do long-term bonds as evidenced below: Maturity Correlation W/ S&P 500 Correlation W/ EAFE 1 Month 0.028 -0.117 6 Months 0.026 -0.124 1 Year 0.060 -0.187 5 Years 0.186 -0.043 20 Years 0.271 0.078 (Lower correlation results in greater diversification)   Our Question:  Why invest in fixed-income with stock-like volatility without stock-like premiums for returns?