Nude beekeeping isn't a popular hobby. Alvéole, a Canadian advocate for rooftop hives in cities, once put out a calendar of apiarists tending to their colonies in the buff, but that was only for publicity. Some pursuits just aren't meant to go together.

I've used the term financial nudism in this space to describe a stripped-down approach to investing. It doesn't have sector, leveraged, or inverse exchange-traded funds. There are no themes, no private equity, no long-short anything, no high-fee principal-protection schemes. It's just cheap stock and bond exposure through a couple of index funds.

The stock side is looking good. The S&P 500 index is sitting on a double-digit return this year, its fourth in as many years. Overseas shares are jumping, too. But bonds have left investing minimalists feeling exposed, and maybe a little stung.

A basket of Treasuries and high-grade corporate bonds of varied maturities has lost money over five years. Another of just long-term Treasuries is underwater for the past decade. Both have been dismal performers since summer.

The research investment committee at Bank of America has been warning that long Treasuries might not provide the diversification and protection they used to. I recently listed in this space some alternatives that it recommends. Tony, a listener of the Barron's Streetwise podcast, asks how this fancy fare squares with my nudist portfolio philosophy. Let's bare the matter to a little more sunshine.

A minimalist approach is sufficient for most investors, but it doesn't rule out add-ons for the tactically inclined-more on those Treasury alternatives in a moment. Indexing has always been more awkward for bonds than for stocks. With stocks, the most important thing is to own the handful of winners that drive the bulk of returns, and it's difficult to know those in advance, so a scattershot approach works well. As companies do better, they get higher weightings.

With bonds, indexes tend to weight holdings by issuance, giving top honors to the biggest borrowers, which is the opposite of what a credit officer might do. Indexes are still a good idea for most investors. It takes millions of dollars to properly diversify a bond portfolio, and most active bond managers struggle to beat indexes after fees. But if I were a financial nudist looking to add a fig leaf or two to my portfolio, I'd look to the bond side first.

For quality bonds, a pretty good predictor of long-term returns is the yield that you start at. The best time to get nervous about the 10-year Treasury was six years ago, when it paid less than 1%. Now it's closer to 5%. The price can still fall from here, driving the yield higher, but at some point, higher yields provide more cover. Deutsche Bank points out that the yield would have to rise to the mid-6% range for buyers here to lose money over the next two years. The latest reading on inflation, meanwhile, is 3.4% over the past year.

The outlook seems benign, barring runaway deficits, or the government handing out checks willy-nilly. Speaking of which, we have runaway deficits, and the president just promised to pay every American adult $5,000 if his party wins the midterm election.

U.S. government debt recently topped $40 trillion, which is an alarming $167,000 per adult citizen. This fiscal year's deficit is already pegged at $2.1 trillion, or $9,000 more per adult. If the $5,000 check thing happens, we would borrow more this year than during 2020-when Covid-19 shut down the economy, tanking tax receipts, and around 85% of households got relief checks. The good news, I think, is that markets don't seem to be taking the check proposal seriously.

But circumstances don't cry out for hugging long-dated Treasuries. The iShares 20+ Year Treasury ETF pays 5.2%, not enough extra over the broader and shorter mix in iShares Core U.S. Aggregate Bond ETF, which yields 4.8%. BofA's argument is that investors should add other categories to provide better diversification and ballast.

One is emerging market bonds, which double as a currency hedge, and will make sense to bond indexers. The Vanguard Emerging Markets Government Bond ETF pays 6.2%.

Another is fallen angel bonds. Many institutional investors stick with investment-grade bonds as policy. When a debtor falls one tick into junk territory-the cleanest shirt in the dirty laundry, so to speak-prices for its bond often plunge. BofA finds that these bonds outperform both better- and worse-rated ones over time. Just don't expect them to rally or even hold their ground during a panic. The iShares Fallen Angels USD Bond ETF pays 6.8%.

Two more. Collateralized loan obligations sound like the things that blew up the world economy back in 2008. But that was collateralized debt obligations, which back then held toxic mortgages. CLOs, on the other hand, stick with floating-rate debt from companies with collateral. By bundling these loans, slicing them, and creating rules around which slice gets paid first, you can conjure AAA-rated CLOs, which had zero losses during the housing bust. The complexity is a turnoff, but if you don't mind it, you can get a dash of extra yield. Janus Henderson AAA CLO pays 4.6%, versus 3.9% for the shortest Treasuries.

Finally, commodities. BofA points out that since 1945, a 60/40 portfolio of stocks and commodities has outperformed one of stocks and bonds by more than a percentage point. It likes iShares GSCI Commodity Dynamic Roll Strategy, which uses futures for exposure, is more about the total return than the yield, and has made 53% this year-yowza.

Basically, Tony, I wouldn't go whole-hog on these things, but nor would I fault a financial nudist from adding a dash of coverage here or there, lest government profligacy continue kicking beehives in the Treasury market.