"Why Bother With Bonds" -- A Gem

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"Why Bother With Bonds" -- A Gem

Post by Taylor Larimore »

Bogleheads:

Rick Van Ness is a successful private investor and retired executive who provides investor education using online videos, short books, and workshops. Rick has an MBA in Finance and is a valuable contributor to our forum and our wiki. Below are excerpts from his latest book, Why Bother With Bonds:
"Dedication:
To John C. Bogle, champion of ordinary investors, who points out the common sense amid all teh noise and confusion. You helped me see the difference between investing and speculating, and the genius in common sense.

To all Bogleheads. I learn from each of you. And more than anything, you've been excellent role models--generously sharing your wisdom, often anonymously."
____________________________________________________________________________________

"While education can be expensive, ignorance is generally far more costly, especially in the investment world." (From the Forward by Larry Swedroe)

"Bonds are a key ingredient in all good investment portfolios, and the part that assures great investor behavior."

"Bonds are simple interest-only loans."

"Although the stock market often commands more media attention, the bond market is bigger."

"Your allocation between stocks and bonds is your most important investment decision."

"Do you realize that stocks can lose in one day what bonds might lose in a year?"

"Saving part of every paycheck is your most important habit.

"Financial success starts with living below your means."

The Bogleheads site is arguably the internet's best discussion board and wiki for personal investing advice."

"People that don't develop a plan and commit to it are the ones most likely to make costly investment mistakes."

"For young investors, savings rate is more important than all the other investing advice we talk about.

"Here's a good rule of thumb: Stocks could lose 50% or more of their value in any year."

"You can get into trouble by chasing after high-yield bonds from companies with low credit ratings."

"Choose a fund of high-quality bonds that will add stability to your investment portfolio when the stock market plummets."

"A useful rule of thumb is that everyone should own between 20% and 80% bonds."

"Your overall ratio of stocks to bonds is the primary lever that controls volatility"

"U.S. Treasury bond returns have almost no correlation with stock returns--adding valuable stability to an investment portfolio."

"A money market fund is an ideal place to park your money temporarily."

"A bond price (not yield) always changes in the opposite direction as interest rates."

"Bond markets are extremely efficient (no free lunch)"

"Using past returns for bond funds is particularly dangerous and usually misleading."

"In addition to default risk, junk bonds tend to go south when the stock market tanks, exactly the wrong time!"

"Bond ladders are a collection of individual bonds; a self-managed fund."

"Should you own individual bonds or a bond fund? For most of us, a bond fund is the easy answer."

"Nearly all the risk from owning bonds is driven by two factors: the time to maturity and the credit quality of the issuer."

"The 30-day SEC Yield is the best way to compare bond funds."

"Never forget: With higher yield comes higher risk."

"Total return is ultimately what we care about--and we want this to be larger than inflation."

"The duration of a bond, or bond fund, is a measure of its price sensitivity to interest rate changes."

"There are currently a lot of people that think rates are so low that there is nowhere to move but up. They have thought this for six years now."

"Hold short or intermediate-term high-quality bonds based on when you need the money--avoid speculating on future interest rate changes."

"TIPS are special bonds where the principal adjusts with the consumer price index; TIPS investors win if inflation is higher than expected."

"Nominal interest rates are not inflation adjusted. Real interest rates have inflation subtracted out from them."

"If you are not choosing a Treasuries fund, or a total bond market fund, then you need to look a little closer about what you are investing in."

"Treasury instruments with a maturity of two to ten years are called notes; and maturities beyond ten years are called bonds."

"It is better to take risks in the stock market and use (high-quality) bonds to anchor the portfolio."

"It is tempting to think that deciding which fund to own will betermine your success, but it is very minor compared to your big decisions."

"Retirement is so costly it should be a primary focus for everybody. Any plan is better than no plan."

"There are significant advantages to begin saving for retirement as early as possible."

"Wave warning flags at yourself if you own investments earning less than your auto loan or credit card interest."

"A 4% draw from your investments can usually cover inflation-adjusted expenses for 30 years. Much more sophisticated models don't add more certainty."

"Each of us individually, must determine how much risk to take and how that translates to stocks and bonds."

"Key point: Treat your entire portfolio as a whole (including spouse)."

"Avoid judging yourself as having more ability or willingness to take stock market risk than you actually have, and then do a panic sell to get out of a plunging stock market."

"Caution: There are no guarantees that by choosing higher risk you'll achieve a higher return."

"Focusing on the long-term is far superior to focusing on the short term. It is a lesson too few investors have learned." (Bogle quote)

"Bear in mind that investing isn't science. Returns, correlations, and standard deviations vary over different time periods. Don't get bogged down in this or other investing models. Keep it simple."

"Choose a balance of stocks and bonds according to your unique circumstances--your investment objectives, your time horizon, your level of comfort with risk, and your financial resources. Then stick to your plan!"

John C. Bogle suggests a good starting point is to consider owning 'your age in bonds'."

"The loser's game is to be dazzled by the excitement and the chance to win big by hiring the right fund manager, actively trading stocks, and choosing the next winning mutual funds."

"Don't try to time the market. Buy what you need now. As hard as it is to time the stock market, it's even harder to time the bond market. Avoid speculating in interest rates."

"The pros and cons of international bonds seem to cancel each other. So when in doubt, choose simplicity. Stick with U.S. bonds."

"Use index funds for liquidity, low cost and diversification."

"If your transactions are long-term and infrequent, then you can consider an ETF fund if you don't have good low-cost mutual fund choices."

"If you are willing to put in the time and effort, you can actively mine long-term CDs with above-market yields and attractive withdrawal penalties."

"Start early to build a tax-advantaged account so that you'll have room to hold bonds there when you'll need it."

"Roth IRAs and Roth 401k's are ideal for young adults because you can withdraw the principal contributed without a penalty if you need to, making it an Emergency Fund."

"Investing doesn't require high IQ; It requires discipline."

"Start early. Keep it simple. Stick with your plan. And live life fully."

"Owning individual stocks is accepting additional risk that is uncompensated by the stock market."

"If your 401k only has poor fund choices, use it to get the company match, then use an IRA of your own. Later, roll your bad 401k to a self-managed IRA after you leave the company."

"You get to keep what you don't have to pay in fees."

"It is difficult for investors to let wisdom in and keep the noise out. The noise comes from people who have something to sell."

"The same base instincts that drive people to lottery tickets also drive them to buy books about how to beat the market."

"Develop radar for recognizing conflicts of interest. Go ahead and ask how they get compensated for selling you particular products."

"Go read about active investing. The vast weight of evidence is against this . Identify all your costs. Ultimately passive investing with index funds prevails. It's because of the lower cost."

"A total U.S. market index fund contains thousands of stocks/bonds weighted to their market capitalization."

"Cheapness uses price as a bottom line; frugality uses value as a bottom line."

"The marginal enjoyment from the bigger car, the bigger boat, the newest gadgets, has diminishing return. It keeps you from saving and investing adequately to eventually achieve financial freedom."

"The Bogleheads' forum is a wonderful resources. Ask any and all questions. This forum is loaded with some pretty astute individuals with no motive other than to help others succeed financially. It's one of the gems of the internet."
Thank you, Rick!

More Investment Gems

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Why Bother With Bonds" -- A Gem

Post by Ganacel »

Would this book be helpful for someone who wants to learn about all the different types of bonds and bond funds, as well as rules of thumb for choosing one versus another in various situations? I feel like I've picked up some of that info over the past few months from reading this website and various books, but I'm still kind of fuzzy on questions like whether to choose I-bonds versus VG's intermediate tax exempt bond fund if I were going to hold bonds in a taxable account, for example. And I still don't have a very good feel for the role of TIPS in a portfolio.

If anyone wants to recommend a different book on bonds that goes through all of this stuff the way that Rick Ferri's ETF book explains everything you could possibly ever want to know about ETFs, I'd really appreciate the rec.
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Re: "Why Bother With Bonds" -- A Gem

Post by nedsaid »

Thanks Taylor for posting this. This is a good antidote to the 100% stock threads that are out there. Having bonds and cash in my portfolio really helped me weather the 2000-2002 and the 2008-2009 bear markets.

Ganacel, the role of TIPS in your portfolio is to protect against unexpected inflation. If inflation meets market expectations, these should perform similar to other bonds. My best guess is that TIPS are more volatile than nominal bonds, I noticed my TIPS funds were down 8-9% in 2013 but had enjoyed a nice run-up in the prior years. Since I launched my career in 1983, I have noticed that it now takes $2.50 to $3.00 to buy what $1 bought then. I believe that inflation and not volatility is the biggest enemy of the investor. I have constructed my portfolio accordingly.
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Re: "Why Bother With Bonds" -- A Gem

Post by asif408 »

Ganacel wrote:Would this book be helpful for someone who wants to learn about all the different types of bonds and bond funds, as well as rules of thumb for choosing one versus another in various situations? I feel like I've picked up some of that info over the past few months from reading this website and various books, but I'm still kind of fuzzy on questions like whether to choose I-bonds versus VG's intermediate tax exempt bond fund if I were going to hold bonds in a taxable account, for example. And I still don't have a very good feel for the role of TIPS in a portfolio.

If anyone wants to recommend a different book on bonds that goes through all of this stuff the way that Rick Ferri's ETF book explains everything you could possibly ever want to know about ETFs, I'd really appreciate the rec.
Ganacel,

I would suggest "The Bond Book" by Annette Thau and "The Only Guide to a Winning Bond Strategy You'll Ever Need" by Larry Swedroe. I found both to be instrumental in my understanding of bonds. The first book is longer and provides a thorough understanding of the bond market, though some of it is probably beyond what you would need to know (I consider it a great reference book). Larry's book is similar but it is shorter and a bit less detailed. I found Larry's book to be more practical in that it is a bit easier read and he gives suggestions and recommendations for investing in bonds.
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Re: "Why Bother With Bonds" -- A Gem

Post by JupiterJones »

Love this one: "There are currently a lot of people that think rates are so low that there is nowhere to move but up. They have thought this for six years now."

This one too: "The noise comes from people who have something to sell."
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Re: "Why Bother With Bonds" -- A Gem

Post by Artsdoctor »

Ganacel,

TIPS are peculiar investments so your uncertainty surrounding them isn't unusual. There are several moving parts with individual TIPS. If you buy $10,000 at a TIPS auction and the coupon is 1%, you would think that your bonds would pay $100 a year in interest. Not so. If "inflation" is averaging 3%, your $10,000 of principal becomes $10,150 at six month when the first interest payment is received and $10,300 at the end of that first year (the numbers are rounded for illustration). Furthermore, your first interest payment is going to be $50.75 and the second interest payment is going to be $51.50. This is very different from a nominal treasury bond that you might buy with a 4% coupon; your two interest payments that year will be $200 and $200, but your bond will still be $10,000 at the end of the year (forget about the market value for the time-being but just assume everything remains at par).

TIPS don't just protect you against unexpected inflation, they deliver a certain amount of money at their maturity date. If I want to have $10,000 of purchasing power in 10 years and anticipate spending it then for living expenses, it's pretty easy to plan for that. This is not so important during accumulation years, but in retirement, it's awfully nice to have a stream of income which is in real dollars (adjusted for inflation).

"Why Bother With Bonds" is a rhetorical question. Unless you have a foundation of unlimited resources, I can't imagine approaching retirement which a 100% stock portfolio!
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Re: "Why Bother With Bonds" -- A Gem

Post by staythecourse »

Never heard of the author or his book, but must say I agree with nearly all of his points. I love how he hammers home the importance of saving. The only quibble is that bogleheads forum is not "arguably" the best, but is simply the BEST!! :D

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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Re: "Why Bother With Bonds" -- A Gem

Post by JupiterJones »

staythecourse wrote: The only quibble is that bogleheads forum is not "arguably" the best, but is simply the BEST!! :D
Must've been a typo. He probably meant to write that the Bogleheads forum "has the best arguments." :P
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Re: "Why Bother With Bonds" -- A Gem

Post by Leeraar »

I'm going to quibble with this one:
"Your allocation between stocks and bonds is your most important investment decision."
I think your amount (rate) of saving is more important.

L.
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Re: "Why Bother With Bonds" -- A Gem

Post by cfs »

From the desk of el Señor Fig

Thanks Taylor for the excerpts, I have said this before in a different way--"The pros and cons of international bonds seem to cancel each other. So when in doubt, choose simplicity. Stick with U.S. bonds." As far as bond funds, I let my balanced fund managers do the bonds jury-rigging.
~ Member of the Active Retired Force since 2014 ~
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Re: "Why Bother With Bonds" -- A Gem

Post by Rick Ferri »

Do you realize that stocks can lose in one day what bonds might lose in a year?
Great quote! I never thought about it like that.

Rick Ferri
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
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Re: "Why Bother With Bonds" -- A Gem

Post by staythecourse »

JupiterJones wrote:
staythecourse wrote: The only quibble is that bogleheads forum is not "arguably" the best, but is simply the BEST!! :D
Must've been a typo. He probably meant to write that the Bogleheads forum "has the best arguments." :P
There would be no argument about that!! :D
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle
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Re: "Why Bother With Bonds" -- A Gem

Post by Index Fan »

"There are currently a lot of people that think rates are so low that there is nowhere to move but up. They have thought this for six years now."

If there ever is a sticky quotes thread, this belongs on it!
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Bonds

Post by Taylor Larimore »

Would this book be helpful for someone who wants to learn about all the different types of bonds and bond funds, as well as rules of thumb for choosing one versus another in various situations?
Ganacel:

In my opinion, ANY good quality, low-cost, diversified short- or intermediate-term bond fund will do the job of providing safety and income in a portfolio.

High income taxpayers, who have filled their tax-advantaged accounts with taxable bonds, should use tax-exempt bond funds in taxable accounts.

Bonds are VERY competitive. I know this from having been a director in an agency that issues bonds. Any increase in expected return nearly always means higher expected risk. There is no "free lunch."

Bonds are very complex. You will never know everything about bonds and bond funds as this IRS article makes clear: Understanding Bond Documents

Keep it simple (go back to my first sentence).

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Why Bother With Bonds" -- A Gem

Post by oragne lovre »

Taylor Larimore wrote:Bogleheads:

Rick Van Ness is a successful private investor and retired executive who provides investor education using online videos, short books, and workshops. Rick has an MBA in Finance and is a valuable contributor to our forum and our wiki. Below are excerpts from his latest book, Why Bother With Bonds:
"Dedication:
To John C. Bogle, champion of ordinary investors, who points out the common sense amid all teh noise and confusion. You helped me see the difference between investing and speculating, and the genius in common sense.

To all Bogleheads. I learn from each of you. And more than anything, you've been excellent role models--generously sharing your wisdom, often anonymously."
____________________________________________________________________________________

"While education can be expensive, ignorance is generally far more costly, especially in the investment world." (From the Forward by Larry Swedroe)

"Bonds are a key ingredient in all good investment portfolios, and the part that assures great investor behavior."

"Bonds are simple interest-only loans."

"Although the stock market often commands more media attention, the bond market is bigger."

"Your allocation between stocks and bonds is your most important investment decision."

"Do you realize that stocks can lose in one day what bonds might lose in a year?"

"Saving part of every paycheck is your most important habit.

"Financial success starts with living below your means."

The Bogleheads site is arguably the internet's best discussion board and wiki for personal investing advice."

"People that don't develop a plan and commit to it are the ones most likely to make costly investment mistakes."

"For young investors, savings rate is more important than all the other investing advice we talk about.

"Here's a good rule of thumb: Stocks could lose 50% or more of their value in any year."

"You can get into trouble by chasing after high-yield bonds from companies with low credit ratings."

"Choose a fund of high-quality bonds that will add stability to your investment portfolio when the stock market plummets."

"A useful rule of thumb is that everyone should own between 20% and 80% bonds."

"Your overall ratio of stocks to bonds is the primary lever that controls volatility"

"U.S. Treasury bond returns have almost no correlation with stock returns--adding valuable stability to an investment portfolio."

"A money market fund is an ideal place to park your money temporarily."

"A bond price (not yield) always changes in the opposite direction as interest rates."

"Bond markets are extremely efficient (no free lunch)"

"Using past returns for bond funds is particularly dangerous and usually misleading."

"In addition to default risk, junk bonds tend to go south when the stock market tanks, exactly the wrong time!"

"Bond ladders are a collection of individual bonds; a self-managed fund."

"Should you own individual bonds or a bond fund? For most of us, a bond fund is the easy answer."

"Nearly all the risk from owning bonds is driven by two factors: the time to maturity and the credit quality of the issuer."

"The 30-day SEC Yield is the best way to compare bond funds."

"Never forget: With higher yield comes higher risk."

"Total return is ultimately what we care about--and we want this to be larger than inflation."

"The duration of a bond, or bond fund, is a measure of its price sensitivity to interest rate changes."

"There are currently a lot of people that think rates are so low that there is nowhere to move but up. They have thought this for six years now."

"Hold short or intermediate-term high-quality bonds based on when you need the money--avoid speculating on future interest rate changes."

"TIPS are special bonds where the principal adjusts with the consumer price index; TIPS investors win if inflation is higher than expected."

"Nominal interest rates are not inflation adjusted. Real interest rates have inflation subtracted out from them."

"If you are not choosing a Treasuries fund, or a total bond market fund, then you need to look a little closer about what you are investing in."

"Treasury instruments with a maturity of two to ten years are called notes; and maturities beyond ten years are called bonds."

"It is better to take risks in the stock market and use (high-quality) bonds to anchor the portfolio."

"It is tempting to think that deciding which fund to own will betermine your success, but it is very minor compared to your big decisions."

"Retirement is so costly it should be a primary focus for everybody. Any plan is better than no plan."

"There are significant advantages to begin saving for retirement as early as possible."

"Wave warning flags at yourself if you own investments earning less than your auto loan or credit card interest."

"A 4% draw from your investments can usually cover inflation-adjusted expenses for 30 years. Much more sophisticated models don't add more certainty."

"Each of us individually, must determine how much risk to take and how that translates to stocks and bonds."

"Key point: Treat your entire portfolio as a whole (including spouse)."

"Avoid judging yourself as having more ability or willingness to take stock market risk than you actually have, and then do a panic sell to get out of a plunging stock market."

"Caution: There are no guarantees that by choosing higher risk you'll achieve a higher return."

"Focusing on the long-term is far superior to focusing on the short term. It is a lesson too few investors have learned." (Bogle quote)

"Bear in mind that investing isn't science. Returns, correlations, and standard deviations vary over different time periods. Don't get bogged down in this or other investing models. Keep it simple."

"Choose a balance of stocks and bonds according to your unique circumstances--your investment objectives, your time horizon, your level of comfort with risk, and your financial resources. Then stick to your plan!"

John C. Bogle suggests a good starting point is to consider owning 'your age in bonds'."

"The loser's game is to be dazzled by the excitement and the chance to win big by hiring the right fund manager, actively trading stocks, and choosing the next winning mutual funds."

"Don't try to time the market. Buy what you need now. As hard as it is to time the stock market, it's even harder to time the bond market. Avoid speculating in interest rates."

"The pros and cons of international bonds seem to cancel each other. So when in doubt, choose simplicity. Stick with U.S. bonds."

"Use index funds for liquidity, low cost and diversification."

"If your transactions are long-term and infrequent, then you can consider an ETF fund if you don't have good low-cost mutual fund choices."

"If you are willing to put in the time and effort, you can actively mine long-term CDs with above-market yields and attractive withdrawal penalties."

"Start early to build a tax-advantaged account so that you'll have room to hold bonds there when you'll need it."

"Roth IRAs and Roth 401k's are ideal for young adults because you can withdraw the principal contributed without a penalty if you need to, making it an Emergency Fund."

"Investing doesn't require high IQ; It requires discipline."

"Start early. Keep it simple. Stick with your plan. And live life fully."

"Owning individual stocks is accepting additional risk that is uncompensated by the stock market."

"If your 401k only has poor fund choices, use it to get the company match, then use an IRA of your own. Later, roll your bad 401k to a self-managed IRA after you leave the company."

"You get to keep what you don't have to pay in fees."

"It is difficult for investors to let wisdom in and keep the noise out. The noise comes from people who have something to sell."

"The same base instincts that drive people to lottery tickets also drive them to buy books about how to beat the market."

"Develop radar for recognizing conflicts of interest. Go ahead and ask how they get compensated for selling you particular products."

"Go read about active investing. The vast weight of evidence is against this . Identify all your costs. Ultimately passive investing with index funds prevails. It's because of the lower cost."

"A total U.S. market index fund contains thousands of stocks/bonds weighted to their market capitalization."

"Cheapness uses price as a bottom line; frugality uses value as a bottom line."

"The marginal enjoyment from the bigger car, the bigger boat, the newest gadgets, has diminishing return. It keeps you from saving and investing adequately to eventually achieve financial freedom."

"The Bogleheads' forum is a wonderful resources. Ask any and all questions. This forum is loaded with some pretty astute individuals with no motive other than to help others succeed financially. It's one of the gems of the internet."
Thank you, Rick!

More Investment Gems

Best wishes.
Taylor
Many thanks for another gem post from Taylor.
The finest, albeit the most difficult, of all human achievements is being reasonable.
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Re: "Why Bother With Bonds" -- A Gem

Post by scone »

"The pros and cons of international bonds seem to cancel each other. So when in doubt, choose simplicity. Stick with U.S. bonds."

This is likely very true, if you are American, and plan to live only in America. For "foreigners," dual citizens, ex-pats, Americans married to non-Americans, and Americans with foreign relatives, the picture is more complicated. I'd love to see more info on this situation, but it's hard to come by here in the U.S.A.
"My bond allocation is the amount of money that I cannot afford to lose." -- Taylor Larimore
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Re: "Why Bother With Bonds" -- A Gem

Post by abuss368 »

Hi Taylor,

Thank you the post. I too would have liked to see international bonds discussed a little more.

At the end of the day, any low cost and high quality bond fund will do the job of providing safety and income.

Best.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: "Why Bother With Bonds" -- A Gem

Post by Ganacel »

asif408 wrote:I would suggest "The Bond Book" by Annette Thau and "The Only Guide to a Winning Bond Strategy You'll Ever Need" by Larry Swedroe. I found both to be instrumental in my understanding of bonds. The first book is longer and provides a thorough understanding of the bond market, though some of it is probably beyond what you would need to know (I consider it a great reference book). Larry's book is similar but it is shorter and a bit less detailed. I found Larry's book to be more practical in that it is a bit easier read and he gives suggestions and recommendations for investing in bonds.
Thanks, I'm adding them to my reading list.
Artsdoctor wrote:Ganacel,

TIPS are peculiar investments so your uncertainty surrounding them isn't unusual. There are several moving parts with individual TIPS. If you buy $10,000 at a TIPS auction and the coupon is 1%, you would think that your bonds would pay $100 a year in interest. Not so. If "inflation" is averaging 3%, your $10,000 of principal becomes $10,150 at six month when the first interest payment is received and $10,300 at the end of that first year (the numbers are rounded for illustration). Furthermore, your first interest payment is going to be $50.75 and the second interest payment is going to be $51.50. This is very different from a nominal treasury bond that you might buy with a 4% coupon; your two interest payments that year will be $200 and $200, but your bond will still be $10,000 at the end of the year (forget about the market value for the time-being but just assume everything remains at par).

TIPS don't just protect you against unexpected inflation, they deliver a certain amount of money at their maturity date. If I want to have $10,000 of purchasing power in 10 years and anticipate spending it then for living expenses, it's pretty easy to plan for that. This is not so important during accumulation years, but in retirement, it's awfully nice to have a stream of income which is in real dollars (adjusted for inflation).

"Why Bother With Bonds" is a rhetorical question. Unless you have a foundation of unlimited resources, I can't imagine approaching retirement which a 100% stock portfolio!
Thanks. It sounds like I don't really need to worry about TIPS right now, so I'm not going to. I'm definitely still accumulating at this phase. Agree that there's no way I'd want to have a 100% stock portfolio. I'm just waiting to accumulate enough in my accounts that I can start upping my % bonds per my IPS. :)
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Re: "Why Bother With Bonds" -- A Gem

Post by munemaker »

There is a lot of wisdom in that original post.
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Re: "Why Bother With Bonds" -- A Gem

Post by rick53403 »

Hello Taylor, Thank you for posting about this book, "Why Bother with Bonds". I went to the authors website and filled out an entry for a free book raffle and just received an email that I won a copy of the book.

PS. Missed you at the Bogleheads conference this year. Hope that you are doing well.

Rick53403
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Re: "Why Bother With Bonds" -- A Gem

Post by Taylor Larimore »

Rick:

I'm doing well, thank you.

Congratulations for winning the bond book! It is a quick read and full of sound advice.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Why Bother With Bonds" -- A Gem

Post by bschultheis »

Taylor Larimore wrote:Bogleheads:

Rick Van Ness is a successful private investor and retired executive who provides investor education using online videos, short books, and workshops. Rick has an MBA in Finance and is a valuable contributor to our forum and our wiki. Below are excerpts from his latest book, Why Bother With Bonds:
Taylor
Hi Taylor, thanks for highlighting Rick's work.

Rick lives in God's Country (the Puget Sound area of Washington state) and I had the pleasure of connecting with him about 6-7 years ago in a Coffeehouse (where else?) where we discussed at length our efforts at introducing to folks the simple wisdom of financial management found on this forum and at the Coffeehouse Investor.

In all my connections I have never met someone who has put in more "selfless" time and energy in helping educate folks on some basic investing principles. He is an amazing human being, as those who have met him at past Boglehead conferences can attest.

Rick, thanks for all you do in helping investors focus on what is really important in life.

Bill Schultheis
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Re: "Why Bother With Bonds" -- A Gem

Post by abuss368 »

Hi Taylor,

I am looking for a good bond book to read. How would you compare "The Bond Book" to "Why Bother With Bonds" or any other bond books?

Best.
John C. Bogle: “Simplicity is the master key to financial success."
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Taylor Larimore
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Best bond book?

Post by Taylor Larimore »

abuss368 wrote:Hi Taylor,

I am looking for a good bond book to read. How would you compare "The Bond Book" to "Why Bother With Bonds" or any other bond books?

Best.
Abuss:

The more I learn about bonds the more I realize I don't know--and the less I need to know.

In my opinion, ANY low-cost, good quality, diversified, short- or intermediate-term bond fund will do the job of providing safety and income in a portfolio.

You can "compare" excerpts from Larry Swedroe's, The Only Guide to a Winning Bond Strategy with Rick Van Ness's, Why Bother with Bonds in my Gem Collection.

In my opinion, Annette Theau's, The Bond Book, is more technical and all-encompassing -- and less useful for Boglehead investors.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: "Why Bother With Bonds" -- A Gem

Post by asif408 »

Taylor Larimore wrote:
abuss368 wrote:Hi Taylor,

I am looking for a good bond book to read. How would you compare "The Bond Book" to "Why Bother With Bonds" or any other bond books?

Best.
Abuss:

The more I learn about bonds the more I realize I don't know--and the less I need to know.

In my opinion, ANY low-cost, good quality, diversified, short- or intermediate-term bond fund will do the job of providing safety and income in a portfolio.

You can "compare" excerpts from Larry Swedroe's, The Only Guide to a Winning Bond Strategy with Rick Van Ness's, Why Bother with Bonds in my Gem Collection.

In my opinion, Annette Theau's, The Bond Book, is more technical and all-encompassing -- and less useful for Boglehead investors.

Best wishes.
Taylor
Abuss:

I would agree with Taylor, having read both the Bond Book and Larry's bond book. I like The Bond Book, but it really hasn't changed my current approach to bond investing, which is simply holding a Total Bond Fund with a small amount of I-bonds. If you are planning on buying individual bonds of different types (corporates, munis, etc.) or want to know more how the bond market operates it goes into great detail. But for practical purposes I think Larry's book is most useful to Bogleheads and strikes a better balance between technical and practical information relative to bonds. Though I don't think you could go wrong with either book.
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Re: "Why Bother With Bonds" -- A Gem

Post by Ganacel »

I have started reading The Only Guide. Happy to post more thoughts when I finish, but so far I can say that it's very readable and seems to cover all the major topics.
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Re: "Why Bother With Bonds" -- A Gem

Post by abuss368 »

Hi Taylor,

Thank you for the post and the comparison of the various Bond books.

Best.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: "Why Bother With Bonds" -- A Gem

Post by Random Walker »

I think a small allocation to bonds is good even for the young aggressive investor. Just a 10% allocation will have a significant effect on portfolio efficiency and probably more importantly instill disciplined behavior in the investor. Way easier to stick with a plan when one has bonds to use for rebalancing.

Dave
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Re: "Why Bother With Bonds" -- A Gem

Post by BillyG »

Taylor Larimore wrote:Bogleheads:

Rick Van Ness is a successful private investor and retired executive who provides investor education using online videos, short books, and workshops. Rick has an MBA in Finance and is a valuable contributor to our forum and our wiki. Below are excerpts from his latest book, Why Bother With Bonds:
I bought the book on your recommendation and read it this week on some long plane flights. It's an excellent book, plain and clear, with good charts and very Bogleheadian. He does a good job by asking the enticing question "Why Bother With Bonds" as he leads the reader into an excellent discussion of asset allocation.

You are correct, Why Bother With Bonds is a Gem. Thank you for recommending it. I sent a note to the Wiki folks to add the book to Rick's other book on the Bogleheads reading list.

Billy
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Re: "Why Bother With Bonds" -- A Gem

Post by tj »

Random Walker wrote:I think a small allocation to bonds is good even for the young aggressive investor. Just a 10% allocation will have a significant effect on portfolio efficiency and probably more importantly instill disciplined behavior in the investor. Way easier to stick with a plan when one has bonds to use for rebalancing.

Dave
Is 10% really going to make much of a difference? Its hard to believe that it would be 'significant'. I personally just keep a bigger cash cushion and only invest $$$ in stock index funds that I know I won't touch for several years. Maybe that's not the optimal strategy, but it seems to work for me. I will certainly be adding bonds later in life, especially in the withdrawal phase rather than accumulation phase.
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Re: "Why Bother With Bonds" -- A Gem

Post by huskerdoc2035 »

I was lucky enough to win a free copy of his book from his website. I had never invested in bonds because I'm young and I never really understood them. Overall this is an easy read and really makes sense. I am glad I took the time to read it and think that anyone who is just beginning to start investing or doesn't really understand bonds should take the time to read this book.

Thanks Rick!
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Re: "Why Bother With Bonds" -- A Gem

Post by Munir »

A good bond book for beginners.
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Re: "Why Bother With Bonds" -- A Gem

Post by seeshells »

I'd thought this book's similarity to "The Coffeehouse investor", in both its style and implementation of presentation, but focused on bonds was great read, (IMO) a must read !
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Re: "Why Bother With Bonds" -- A Gem

Post by oldzey »

Munir wrote:A good bond book for beginners.
+1

A great addition to my Kindle library. :D
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Re: "Why Bother With Bonds" -- A Gem

Post by prudent »

Just finished reading this book authored by shipmate Stickman. I am impressed not only by the amount of important info packed into a small book but also by his ability to communicate concepts in terms and diagrams that a novice can comprehend. That takes talent. And although it's probably not even noticed by most people, I always appreciate a comprehensive index which this book has.
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