I don't mind investing in Bond Index mutual funds. However, right now we don't invest in Bonds. Having bonds usually stabilizes a portfolio and doesn't decrease the returns by very much. However the reason we're not doing bonds right now, is because we have have a heavy cash position at any given time. The reason for this is because of DH's tuition and uncertainty in the job market.
Because of our heavy cash position, it's not necessary to put 20% of our portfolio into bonds, because cash acts pretty much the same way to stabilize the returns of our portfolio. However for most people I'd suggest a 80% stock/20% bond portfolio. I would keep this until retirement at which time I would slowly scale down into a 70%/30% mix. I don't know if I would go less just because you need to keep up with inflation during retirement and don't want to lose your purchasing power.
Now along with buying Bond Mutual Funds, I also like the idea of buying individual bonds with your cash on hand. One of the better ways to do this is using TIPS (Treasury Inflation Protected Securities). TIPS are a good way to buffer against inflation using bonds.
But it matters when you buy TIPS. Why? Because TIPS are not normal bonds. They have a fixed rate component and variable rate component. This allows it to pay different dividends depending on inflation. So you could make as much as 9-11% (back in 2003) using TIPS. Wow! Great returns. Plus they are good for 30 years.
But timing the purchase of TIPS is important. What am I looking for and watching for my mom? Well when the fixed rate component hits 2% I'll tell my mom to dump tons into TIPS. This way she'll be able to keep a minimum 2% plus whatever else the economy is doing. Also there isn't a fee for reedeming after 1 year of holding. That's not a bad deal.
I've read many articles about it, and TIPS are a great way to hold bonds which can help buffer agaisnt inflation in retirement.