Any reason to hold on to bonds now???
Any reason to hold on to bonds now???
As bonds have dropped to such low returns, is there any reason to keep them instead of converting to cash equivalents? Inflation is present and very real. When interest rates go up, bonds will take a hit. I recall the Carter era very well.
It's not a matter of timing, though interest rates have taken a long and slow decline, I believe there will be a rebound (maybe even a whipsaw) to 'revert' to the mean. It's a matter of not having any desire to fight the Fed.
It's not a matter of timing, though interest rates have taken a long and slow decline, I believe there will be a rebound (maybe even a whipsaw) to 'revert' to the mean. It's a matter of not having any desire to fight the Fed.
If I have seen further, it was by standing on the shoulders of giants.
Re: Any reason to hold on to bonds now???
Do whatever your IPS says.
Sure are a lot of Nervous Nellie's posting about inflation and bonds lately.
Sure are a lot of Nervous Nellie's posting about inflation and bonds lately.
VTI 48%, VXUS 12%, BND 40%
Re: Any reason to hold on to bonds now???
Yes, the reason is that one should not be willy-nilly moving around the pieces of a thought-out long term plan.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
Re: Any reason to hold on to bonds now???
I like high quality bond funds and plan on keeping them; many of these funds are paying out around 2%.Swampy wrote: ↑Thu Jun 10, 2021 11:22 am As bonds have dropped to such low returns, is there any reason to keep them instead of converting to cash equivalents? Inflation is present and very real. When interest rates go up, bonds will take a hit. I recall the Carter era very well.
It's not a matter of timing, though interest rates have taken a long and slow decline, I believe there will be a rebound (maybe even a whipsaw) to 'revert' to the mean. It's a matter of not having any desire to fight the Fed.
If I could get a CD paying more, I'd go with the CD.
Inflation protected bonds are worth a look.
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Re: Any reason to hold on to bonds now???
I'm holding on to my bonds, all of which are nominal, intermediate-term treasury or corporate. I don't focus on the short-term volatility of the NAV, just the longer-term total return.
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Re: Any reason to hold on to bonds now???
It is "a matter of market timing".Swampy wrote: ↑Thu Jun 10, 2021 11:22 am As bonds have dropped to such low returns, is there any reason to keep them instead of converting to cash equivalents? Inflation is present and very real. When interest rates go up, bonds will take a hit. I recall the Carter era very well.
It's not a matter of timing, though interest rates have taken a long and slow decline, I believe there will be a rebound (maybe even a whipsaw) to 'revert' to the mean. It's a matter of not having any desire to fight the Fed.
However holding cash in your fixed income allocation is reasonable in my opinion. Morningstar (4/13/2021) "Which Bonds Provide the Biggest Diversification Benefits?", link. " . . . it is notable that cash has recently looked a bit better than Treasuries from the standpoint of diversification benefits."
Nevertheless, we continue to use Vanguard Intermediate-term Bond Index Fund (VBILX) for our fixed income allocation.
Higher interest rates are good for the long-term bond fund investor.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
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Re: Any reason to hold on to bonds now???
Appreciate you having posted this. It's nice knowing not everyone is of the opinion "cash is trash".ruralavalon wrote: ↑Thu Jun 10, 2021 3:13 pm However holding cash in your fixed income allocation is reasonable in my opinion. Morningstar (4/13/2021) "Which Bonds Provide the Biggest Diversification Benefits?", link. " . . . it is notable that cash has recently looked a bit better than Treasuries from the standpoint of diversification benefits."
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Re: Any reason to hold on to bonds now???
Keep in mind that correlations, and diversification benefits, vary over time.Robot Monster wrote: ↑Thu Jun 10, 2021 5:26 pmAppreciate you having posted this. It's nice knowing not everyone is of the opinion "cash is trash".ruralavalon wrote: ↑Thu Jun 10, 2021 3:13 pm However holding cash in your fixed income allocation is reasonable in my opinion. Morningstar (4/13/2021) "Which Bonds Provide the Biggest Diversification Benefits?", link. " . . . it is notable that cash has recently looked a bit better than Treasuries from the standpoint of diversification benefits."
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Any reason to hold on to bonds now???
I agree with Swampy. When investment environment changes, investors should not be rigid in moving forward regardless of what IPS says.
Bonds were great the past 20 plus years. Highly unlikely but not impossible that bonds will show appreciation in the near future. I prefer HYS in place of bonds...I could be wrong. It won’t be the first time.
Bonds were great the past 20 plus years. Highly unlikely but not impossible that bonds will show appreciation in the near future. I prefer HYS in place of bonds...I could be wrong. It won’t be the first time.
Re: Any reason to hold on to bonds now???
I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
Re: Any reason to hold on to bonds now???
Would TIPS work for you? https://investor.vanguard.com/mutual-fu ... view/vipsxrockstar wrote: ↑Thu Jun 10, 2021 7:10 pm I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
Re: Any reason to hold on to bonds now???
TIPS won't keep up with inflation. They have negative yields that offset the inflation protection, and I'll be even worse after taxes.hudson wrote: ↑Thu Jun 10, 2021 7:13 pmWould TIPS work for you? https://investor.vanguard.com/mutual-fu ... view/vipsxrockstar wrote: ↑Thu Jun 10, 2021 7:10 pm I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
Re: Any reason to hold on to bonds now???
My VBTLX rose 2.3% since March 19, 2021. Are we living on the same planet?
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Re: Any reason to hold on to bonds now???
You sound like me. We own bonds for one reason only. That is to protect my savings from a large drawdown from a market correction. We don't buy bonds for total yield. We don't chase yield with junk bonds, corporate bonds or total bond.dave1054 wrote: ↑Thu Jun 10, 2021 6:06 pm I agree with Swampy. When investment environment changes, investors should not be rigid in moving forward regardless of what IPS says.
Bonds were great the past 20 plus years. Highly unlikely but not impossible that bonds will show appreciation in the near future. I prefer HYS in place of bonds...I could be wrong. It won’t be the first time.
If cash works for you then good. We're still a few years away from retirement so I worry about inflation. Therefore, our bonds are 70% intermediate treasuries and 30% intermediate Tips. Our emergency fund is being transitioned to I-bonds from HYSA.
We plan. G-d laughs.
Re: Any reason to hold on to bonds now???
rockstar wrote: ↑Thu Jun 10, 2021 7:20 pmTIPS won't keep up with inflation. They have negative yields that offset the inflation protection, and I'll be even worse after taxes.hudson wrote: ↑Thu Jun 10, 2021 7:13 pmWould TIPS work for you? https://investor.vanguard.com/mutual-fu ... view/vipsxrockstar wrote: ↑Thu Jun 10, 2021 7:10 pm I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
That's likely correct in the short term....unless high unexpected inflation arrives.
I plan to go with TIPS at some point in the next few years....for the long term....maybe a duration matched non-rolling ladder.
I'm not going to buy any stocks. I would rather reduce spending, do real estate, or some kind of small business.
SPIAs/MYGAs are a limited option.
I also agree that we need to figure this out.
Last edited by hudson on Thu Jun 10, 2021 7:55 pm, edited 3 times in total.
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Re: Any reason to hold on to bonds now???
Nominal bonds will keep up with expected inflation and Tips will outperform with unexpected inflation. That's why we doing a mix of intermediate bonds, intermediate Tips and max I-bonds every year.hudson wrote: ↑Thu Jun 10, 2021 7:33 pmrockstar wrote: ↑Thu Jun 10, 2021 7:20 pmTIPS won't keep up with inflation. They have negative yields that offset the inflation protection, and I'll be even worse after taxes.hudson wrote: ↑Thu Jun 10, 2021 7:13 pmWould TIPS work for you? https://investor.vanguard.com/mutual-fu ... view/vipsxrockstar wrote: ↑Thu Jun 10, 2021 7:10 pm I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
That's likely correct in the short term.
I plan to go with TIPS at some point in the next few years....for the long term....maybe a non-rolling ladder.
I'm not going to buy any stocks. I would rather reduce spending, do real estate, or some kind of small business.
SPIAs are a limited option.
I also agree that we need to figure this out.
We plan. G-d laughs.
Re: Any reason to hold on to bonds now???
I thought the proper response to bonds going down is to sell stocks and buy more bonds, to rebalance your AA.
What's different?
What's different?
Re: Any reason to hold on to bonds now???
Yes I have whatever percentage bonds are in the target retirement funds I’m invested in.
Re: Any reason to hold on to bonds now???
Only if your AA has changed by your IPS amount.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Re: Any reason to hold on to bonds now???
If I interpret the OP correctly, low returns means low interest rates, I rather agree with them especially because of what you describe. A total bond fund has returned much more than a year of yield in just a few months. One could sell it today, eat the taxes, and invest it in Ally and still come out ahead on the expected return of total bond for the year to come. I got out of total bond once I built up enough I bonds and happy to have done it. 1.3% yield in the face of higher inflation is a raw deal.
70% Global Stocks / 30% Bonds
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Re: Any reason to hold on to bonds now???
Thinking outside the box and way outside my experience but there is a lot of chatter on the internets about ditching bonds and going with covered call strategies to pay dividends.rockstar wrote: ↑Thu Jun 10, 2021 7:10 pm I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
You can DIY or buy ETFs like Qyld, Nusi, Jepi, etc. Make sure you understand the risks and benefits and tax consequences.
I'm way too risk adverse (and uneducated) to do this but maybe it's a good fit for you.
We plan. G-d laughs.
Re: Any reason to hold on to bonds now???
The last time I sold cover calls was 2016 on the ETF OIL. It made sense then because of the volatility premium. I struggle for that to make sense for QQQ or VOO.MishkaWorries wrote: ↑Thu Jun 10, 2021 8:03 pmThinking outside the box and way outside my experience but there is a lot of chatter on the internets about ditching bonds and going with covered call strategies to pay dividends.rockstar wrote: ↑Thu Jun 10, 2021 7:10 pm I'm not holding any bonds now.
If I was retired, I wouldn't know what to do. I need to figure this out.
The reasons I hear for holding bonds are:
1) less volatile than stocks
2) negatively correlated to stocks (I don't think this is still true)
3) alternative to sell during a downturn when having RMDs
Right now, I know they won't keep up with inflation. This is worse when you back out taxes. I also know that with yields so low, it doesn't take a big drop to wipe out my yield. Total return becomes more challenging. But I can't predict rates. I only know what they pay now.
You can DIY or buy ETFs like Qyld, Nusi, Jepi, etc. Make sure you understand the risks and benefits and tax consequences.
I'm way too risk adverse (and uneducated) to do this but maybe it's a good fit for you.
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Re: Any reason to hold on to bonds now???
Bond valuations haven't gone down, they've gone up, as interest rates sank. The issue is the long-term return of bonds from bonds held now is guaranteed to be low.
Re: Any reason to hold on to bonds now???
This is how I think about stocks and bonds. If you want "return on capital" buy more stocks. If you want "return of capital" buy more bonds.
Which return do you want? "on capital" or "of capital".
Everything else to me is noise.
Which return do you want? "on capital" or "of capital".
Everything else to me is noise.
Re: Any reason to hold on to bonds now???
The original question is a good question.AnEngineer wrote: ↑Fri Jun 11, 2021 9:00 amBond valuations haven't gone down, they've gone up, as interest rates sank. The issue is the long-term return of bonds from bonds held now is guaranteed to be low.
I agree that current and future fixed income payouts are down.
If not fixed income, what?
Re: Any reason to hold on to bonds now???
OP,
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Any reason to hold on to bonds now???
KlangFool wrote: ↑Fri Jun 11, 2021 9:12 am OP,
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
Bases on your holdings you feel pretty good about equities ....
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
Re: Any reason to hold on to bonds now???
smitcat,smitcat wrote: ↑Fri Jun 11, 2021 9:16 amKlangFool wrote: ↑Fri Jun 11, 2021 9:12 am OP,
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
Bases on your holdings you feel pretty good about equities ....
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
My allocation to stock has nothing to do with my feeling about the stock. I allocate at least 10 years of my annual expense to FI/Bonds. At 25X, it means 40%. Aka, AA of 60/40.
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
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Re: Any reason to hold on to bonds now???
I don't want to argue terminology, as it's almost always useless, but looking at current bond yields and being un-enticed is very different than speculating whether stock or bond valuations will go up or down in the short term.ruralavalon wrote: ↑Thu Jun 10, 2021 3:13 pmIt is "a matter of market timing".Swampy wrote: ↑Thu Jun 10, 2021 11:22 am As bonds have dropped to such low returns, is there any reason to keep them instead of converting to cash equivalents? Inflation is present and very real. When interest rates go up, bonds will take a hit. I recall the Carter era very well.
It's not a matter of timing, though interest rates have taken a long and slow decline, I believe there will be a rebound (maybe even a whipsaw) to 'revert' to the mean. It's a matter of not having any desire to fight the Fed.
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Re: Any reason to hold on to bonds now???
What were your original reasons for holding bonds? Did they have anything to do with expected real return or nominal interest rates?
Re: Any reason to hold on to bonds now???
Agreed - no debate. You must feel that the markets will always be positive within 10 years then.KlangFool wrote: ↑Fri Jun 11, 2021 9:23 amsmitcat,smitcat wrote: ↑Fri Jun 11, 2021 9:16 amKlangFool wrote: ↑Fri Jun 11, 2021 9:12 am OP,
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
Bases on your holdings you feel pretty good about equities ....
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
My allocation to stock has nothing to do with my feeling about the stock. I allocate at least 10 years of my annual expense to FI/Bonds. At 25X, it means 40%. Aka, AA of 60/40.
KlangFool
Re: Any reason to hold on to bonds now???
No. The reverse is true. With an average gross saving rate less than 5% and most American has no emergency fund, it would no longer be a financial problem if it lasted more than 5 years. So, 10 years of expense in fixed income/bond is more than enough.smitcat wrote: ↑Fri Jun 11, 2021 10:01 amAgreed - no debate. You must feel that the markets will always be positive within 10 years then.KlangFool wrote: ↑Fri Jun 11, 2021 9:23 amsmitcat,smitcat wrote: ↑Fri Jun 11, 2021 9:16 amKlangFool wrote: ↑Fri Jun 11, 2021 9:12 am OP,
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
Bases on your holdings you feel pretty good about equities ....
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
My allocation to stock has nothing to do with my feeling about the stock. I allocate at least 10 years of my annual expense to FI/Bonds. At 25X, it means 40%. Aka, AA of 60/40.
KlangFool
KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Re: Any reason to hold on to bonds now???
You have 10 years expenses covered in fixed income and a majority of your holdings in equity.KlangFool wrote: ↑Fri Jun 11, 2021 10:10 amNo. The reverse is true. With an average gross saving rate less than 5% and most American has no emergency fund, it would no longer be a financial problem if it lasted more than 5 years. So, 10 years of expense in fixed income/bond is more than enough.smitcat wrote: ↑Fri Jun 11, 2021 10:01 amAgreed - no debate. You must feel that the markets will always be positive within 10 years then.KlangFool wrote: ↑Fri Jun 11, 2021 9:23 amsmitcat,smitcat wrote: ↑Fri Jun 11, 2021 9:16 amKlangFool wrote: ↑Fri Jun 11, 2021 9:12 am OP,
My AA is 60/40. I am enjoying my rebalancing bonus from March 2020 while folks keep on claiming that it is a bad idea to hold bond. But, the news("noise") claim that stocks are overpriced too. So, do folks sell everything and only hold CASH? But, the news ("noise") claim that CASH is trash too.
I have stocks, bonds, CASH, and physical Gold/Silver. They are separate asset classes. Diversification is the only rational answer in an uncertain time.
I know that I know nothing. As to folks that think they can predict the future, I wish them the best of luck.
KlangFool
Bases on your holdings you feel pretty good about equities ....
40% VWENX | 12.5% VFWAX/VTIAX | 11.5% VTSAX | 16% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 40% Wellington 40% 3-funds 20% Mini-Larry
My allocation to stock has nothing to do with my feeling about the stock. I allocate at least 10 years of my annual expense to FI/Bonds. At 25X, it means 40%. Aka, AA of 60/40.
KlangFool
KlangFool
You must feel the markets will always be positive within 10 years.
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Re: Any reason to hold on to bonds now???
Cheap Dollars Attract Foreign Investors to Treasuries
https://www.wsj.com/articles/cheap-doll ... 1623403801
Syndicated link:
https://texasnewstoday.com/cheap-dollar ... ds/309447/
Pensions are boosting bond holdings to match assets and liabilities.
Cheap US dollars is encouraging lot of overseas inflows into US treasuries.
All of this is just noise mostly but reassures my decision to keep my bond allocation the same as previous.
https://www.wsj.com/articles/cheap-doll ... 1623403801
Syndicated link:
https://texasnewstoday.com/cheap-dollar ... ds/309447/
Pensions are boosting bond holdings to match assets and liabilities.
Cheap US dollars is encouraging lot of overseas inflows into US treasuries.
All of this is just noise mostly but reassures my decision to keep my bond allocation the same as previous.
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- Location: West coast of Florida, near Champa Bay !
Re: Any reason to hold on to bonds now???
OP, what was your reason to hold bonds initially?
Has that reason changed?
The reason we hold bonds has not changed, so we have the same reason to hold bonds as when I bought them in the first place.
Broken Man 1999
Has that reason changed?
The reason we hold bonds has not changed, so we have the same reason to hold bonds as when I bought them in the first place.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
Re: Any reason to hold on to bonds now???
I guess a lot of people stood the course in the wiemar republic too.dbr wrote: ↑Thu Jun 10, 2021 11:33 am Yes, the reason is that one should not be willy-nilly moving around the pieces of a thought-out long term plan.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
Re: Any reason to hold on to bonds now???
I guess a lot of people stood the course in the wiemar republic too.dbr wrote: ↑Thu Jun 10, 2021 11:33 am Yes, the reason is that one should not be willy-nilly moving around the pieces of a thought-out long term plan.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
Re: Any reason to hold on to bonds now???
That may be the case but how much does what we're going through now in the USA (or in the 1970's) compare to the hyperinflation of the Weimar Republic?JC Denton wrote: ↑Fri Jun 11, 2021 1:43 pmI guess a lot of people stood the course in the wiemar republic too.dbr wrote: ↑Thu Jun 10, 2021 11:33 am Yes, the reason is that one should not be willy-nilly moving around the pieces of a thought-out long term plan.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
Re: Any reason to hold on to bonds now???
i always hold bond in my portfolio until the deals/ stocks on sale show up .
Thanks!
- ruralavalon
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Re: Any reason to hold on to bonds now???
Don't forget Zimbabwe and Venezuela, if you want examples that don't apply to today's U.S. investors.JC Denton wrote: ↑Fri Jun 11, 2021 1:43 pmI guess a lot of people stood the course in the wiemar republic too.dbr wrote: ↑Thu Jun 10, 2021 11:33 am Yes, the reason is that one should not be willy-nilly moving around the pieces of a thought-out long term plan.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
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Re: Any reason to hold on to bonds now???
Assuming you are talking about bond funds, not individual bonds, as I have learned from the wiki and any number of past threads related to this - if you expect rates to go up, bond funds are going to be buying those newer bonds too, and the weighted yield would track along with that, over a period of time on the order of the bond maturities... So, I don't agree that the long term returns from bond funds are guaranteed to be low. If you said 'short term' returns in a rising rate environment, I could certainly see that.AnEngineer wrote: ↑Fri Jun 11, 2021 9:00 amBond valuations haven't gone down, they've gone up, as interest rates sank. The issue is the long-term return of bonds from bonds held now is guaranteed to be low.
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Re: Any reason to hold on to bonds now???
Bond funds are more complicated because, as you point out, it will buy new bonds automatically.PDX_Traveler wrote: ↑Fri Jun 11, 2021 3:58 pmAssuming you are talking about bond funds, not individual bonds, as I have learned from the wiki and any number of past threads related to this - if you expect rates to go up, bond funds are going to be buying those newer bonds too, and the weighted yield would track along with that, over a period of time on the order of the bond maturities... So, I don't agree that the long term returns from bond funds are guaranteed to be low. If you said 'short term' returns in a rising rate environment, I could certainly see that.AnEngineer wrote: ↑Fri Jun 11, 2021 9:00 amBond valuations haven't gone down, they've gone up, as interest rates sank. The issue is the long-term return of bonds from bonds held now is guaranteed to be low.
However, the what I said is true of bonds you currently own (including those in bond funds). It's also true that returns are guaranteed to be "high" when rates are higher.
This is different than stocks, where the long-term return can change from your expectation at purchase due to change in fortune of the company.
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Re: Any reason to hold on to bonds now???
Weimer Republic only lasted 15 years, there was no course to stay…JC Denton wrote: ↑Fri Jun 11, 2021 1:43 pmI guess a lot of people stood the course in the wiemar republic too.dbr wrote: ↑Thu Jun 10, 2021 11:33 am Yes, the reason is that one should not be willy-nilly moving around the pieces of a thought-out long term plan.
When you decided to invest in certain way what rules did you put in place regarding what changes to make in response to things such as present yields, present stock valuations, etc.? If you don't have any, you can think about what rules those might be and then implement them as may be. But the condition is that the rules have to cover all conditions and not just the present "environment."
I don't have any rules like that so I am not changing my allocation to bonds nor the properties of that allocation, meaning duration and default risk. The duration is intermediate and the default risk is none, meaning Treasury bond funds.
Re: Any reason to hold on to bonds now???
I’m using VEA as a bond proxy. I still have a lot of bonds on a ladder but I’m reluctant to roll them as they come off. I have a nice slug of TIPS bonds purchased back when you could still get a positive real yield, but they are irreplaceable as they mature.
- LittleGreenSoldiers
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Re: Any reason to hold on to bonds now???
YES!Swampy wrote: ↑Thu Jun 10, 2021 11:22 am As bonds have dropped to such low returns, is there any reason to keep them instead of converting to cash equivalents? Inflation is present and very real. When interest rates go up, bonds will take a hit. I recall the Carter era very well.
It's not a matter of timing, though interest rates have taken a long and slow decline, I believe there will be a rebound (maybe even a whipsaw) to 'revert' to the mean. It's a matter of not having any desire to fight the Fed.
Seven years ago when I laid out my IPS. Pandemic and all my IPS was put in place and I have not stayed. Good luck.
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Re: Any reason to hold on to bonds now???
I have considered shifting some or all of the bond index fund in my 401k to the stable value fund that's at a 2.16% rate currently (right now it's a 50/50 split between them) but really I'm just not sure it makes that much difference in the long run.
Re: Any reason to hold on to bonds now???
I hold bonds to give my portfolio a buffer against the volatility of stocks. Bonds still do that. The return is not great, but I can accept that since I. am a using my slowly grown portfolio.
Re: Any reason to hold on to bonds now???
I went back to Taylor Larimore's post from three years ago:
My portfolio allocation, which was decided upon about a decade ago, has served me well (Far better than nearly three decades of mismanagement by so-called professional investment and money managers). There is no reason to change anything currently.
My thanks to Taylor for posting this back in 2018.Historical returns for Total Bond Market, Inflation and S&P 500 Index
by Taylor Larimore » Mon Jul 23, 2018 9:28 pm
Bogleheads:
This is an update of my earlier post showing the historical returns (1976-2017) of the U.S. Aggregate Bond Index (benchmark for Vanguard's Total Bond Market Index Fund) and Inflation (CPI-U). I have now added the S&P 500 Index returns
YEAR--INFLATION--BOND INDEX--S&P 500
1976-------4.9%--------15.6%--------23.8%
1977-------6.7-----------3.0---------(-7.0)
1978-------9.0-----------1.4-----------6.5
1979------13.3-----------1.9---------18.5
1980------12.5-----------2.7---------31.7
1981-------8.9-----------6.3---------(-4.7)
1982-------3.8----------32.6---------20.4
1983-------3.8-----------8.4---------22.3
1984-------3.9----------15.2----------6.1
1985-------3.8----------22.1---------31.2
1986-------1.1----------15.2---------18.5
1987-------4.4-----------2.8-----------5.8
1988-------4.4-----------7.9----------16.5
1989-------4.6----------14.5----------31.5
1990-------6.1-----------8.9----------(-3.1)
1991-------3.1----------16.0----------30.2
1992-------2.9-----------7.4------------7.5
1993-------2.7-----------9.7-----------10.0
1994-------2.7---------(-2.9)-----------1.3
1995-------2.5----------18.5----------37.2
1996-------3.3-----------3.6----------22.7
1997-------1.7-----------9.7----------33.1
1998-------1.6-----------8.7----------28.3
1999-------2.7---------(-0.8)---------20.9
2000-------3.4----------11.6---------(-9.0)
2001-------1.6-----------8.4--------(-11.5)
2002-------2.4----------10.3--------(-22.0)
2003-------1.9-----------4.1----------28.4
2004-------3.3-----------4.3----------10.7
2005-------3.4-----------2.4-----------4.8
2006-------2.5-----------4.3----------15.6
2007-------4.1-----------7.0-----------5.5
2008-------0.1-----------5.2--------(-36.6)
2009-------2.7-----------5.9----------25.9
2010-------1.5-----------6.5----------14.8
2011-------3.0-----------7.7-----------2.1
2012-------1.7-----------4.3----------16.0
2013-------1.5---------(-2.0)---------32.2
2014-------1.6-----------6.0----------13.5
2015-------0.7-----------0.5-----------1.4
2016-------2.1-----------2.6----------12.3
2017-------2.1-----------3.5----------21.8
Source: U.S. Department of Labor, Barclays, DowJones Indices and Seeking Alpha
Observations:
* Inflation increased from 4.9% in 1976 to 13.3% in 1979; nevertheless the Bond Index had positive returns during that entire period of high inflation.
* The Aggregate Bond Index had only three negative years (all small) reflecting very low risk.
* Stocks are much riskier than bonds.
* It is very important to Stay the Course.
* Past performance does not forecast future performance.
Best wishes.
Taylor
My portfolio allocation, which was decided upon about a decade ago, has served me well (Far better than nearly three decades of mismanagement by so-called professional investment and money managers). There is no reason to change anything currently.
If I have seen further, it was by standing on the shoulders of giants.
Re: Any reason to hold on to bonds now???
I recently bought more intermediate and long treasuries in my IRA, because my IPS says to rebalance annually after filing tax returns and these have gone out of whack. Long treasuries appear to be on sale at the moment, but they have served me well over the decades so no reason to change anything now. Besides, I never could resist a good sale.
Re: Any reason to hold on to bonds now???
I remember this post quite well. I had made the decision to get out of a very risky position in a company stock and enter an age-appropriate asset allocation, but I was unsure about the bond index fund in my 401k because I did not really understand it. Thanks to Taylor I did invest in this fund. I also have part of my fixed-income allocation in the stable value fund in my 401k, which has outperformed the bond index fund this year thus far.Swampy wrote: ↑Sat Jun 12, 2021 10:22 am I went back to Taylor Larimore's post from three years ago:
My thanks to Taylor for posting this back in 2018.Historical returns for Total Bond Market, Inflation and S&P 500 Index
by Taylor Larimore » Mon Jul 23, 2018 9:28 pm
Bogleheads:
This is an update of my earlier post showing the historical returns (1976-2017) of the U.S. Aggregate Bond Index (benchmark for Vanguard's Total Bond Market Index Fund) and Inflation (CPI-U). I have now added the S&P 500 Index returns
YEAR--INFLATION--BOND INDEX--S&P 500
1976-------4.9%--------15.6%--------23.8%
1977-------6.7-----------3.0---------(-7.0)
1978-------9.0-----------1.4-----------6.5
1979------13.3-----------1.9---------18.5
1980------12.5-----------2.7---------31.7
1981-------8.9-----------6.3---------(-4.7)
1982-------3.8----------32.6---------20.4
1983-------3.8-----------8.4---------22.3
1984-------3.9----------15.2----------6.1
1985-------3.8----------22.1---------31.2
1986-------1.1----------15.2---------18.5
1987-------4.4-----------2.8-----------5.8
1988-------4.4-----------7.9----------16.5
1989-------4.6----------14.5----------31.5
1990-------6.1-----------8.9----------(-3.1)
1991-------3.1----------16.0----------30.2
1992-------2.9-----------7.4------------7.5
1993-------2.7-----------9.7-----------10.0
1994-------2.7---------(-2.9)-----------1.3
1995-------2.5----------18.5----------37.2
1996-------3.3-----------3.6----------22.7
1997-------1.7-----------9.7----------33.1
1998-------1.6-----------8.7----------28.3
1999-------2.7---------(-0.8)---------20.9
2000-------3.4----------11.6---------(-9.0)
2001-------1.6-----------8.4--------(-11.5)
2002-------2.4----------10.3--------(-22.0)
2003-------1.9-----------4.1----------28.4
2004-------3.3-----------4.3----------10.7
2005-------3.4-----------2.4-----------4.8
2006-------2.5-----------4.3----------15.6
2007-------4.1-----------7.0-----------5.5
2008-------0.1-----------5.2--------(-36.6)
2009-------2.7-----------5.9----------25.9
2010-------1.5-----------6.5----------14.8
2011-------3.0-----------7.7-----------2.1
2012-------1.7-----------4.3----------16.0
2013-------1.5---------(-2.0)---------32.2
2014-------1.6-----------6.0----------13.5
2015-------0.7-----------0.5-----------1.4
2016-------2.1-----------2.6----------12.3
2017-------2.1-----------3.5----------21.8
Source: U.S. Department of Labor, Barclays, DowJones Indices and Seeking Alpha
Observations:
* Inflation increased from 4.9% in 1976 to 13.3% in 1979; nevertheless the Bond Index had positive returns during that entire period of high inflation.
* The Aggregate Bond Index had only three negative years (all small) reflecting very low risk.
* Stocks are much riskier than bonds.
* It is very important to Stay the Course.
* Past performance does not forecast future performance.
Best wishes.
Taylor
My portfolio allocation, which was decided upon about a decade ago, has served me well (Far better than nearly three decades of mismanagement by so-called professional investment and money managers). There is no reason to change anything currently.