If you love stocks

Some longtime investors who think a lot about risk, like Peter
Bernstein, the author of Against the Gods: The Remarkable
Story of Risk (John Wiley & Sons, 1996), want to have an
added hedge in their portfolio just in case the worst happens. A
hedge is a bet against your main strategy—which is why you
pray you are wrong to make this bet. You should hedge
against a low-probability occurrence that could have very big
consequences.
Here is an example: If you love stocks, load up, but put a
small portion of your portfolio into long-dated zero coupon
bonds—5 percent to 10 percent, say, depending on the seriousness
of the consequences if the worst happens. You pay well
under the face value for these bonds because there are no cash
interest payments to you. You get the implied interest payments
back when the bond matures and you are paid its face value. If
something bad happens that drives interest rates and stocks
sharply lower, like a recession, 30-year zero coupon bonds do
very well. If interest rates fall by two full percentage points, the
value of the zero coupon bonds would go up 60 percent.