X is any real number.
When is 0% bonds appropriate?
Re: When is 0% bonds appropriate?
I've decided it's time to change our AA to 20% bonds as we approach 40yo.
Problem is that I want to do it only in a retirement account. So my plan has been to change all 401k contributions to 100% bonds going forward, which will amount to about 25% of our overall monthly investment (all taxable accounts are stocks only).
My wife's 401k offers great vanguard equity funds with their usual low expense ratios, but for some reason the bond funds (including Vanguard total bond) has an expense ratio of 0.55%. No better option. So for now we're still nearly 0% bond until I can bring myself to swallow this.
Problem is that I want to do it only in a retirement account. So my plan has been to change all 401k contributions to 100% bonds going forward, which will amount to about 25% of our overall monthly investment (all taxable accounts are stocks only).
My wife's 401k offers great vanguard equity funds with their usual low expense ratios, but for some reason the bond funds (including Vanguard total bond) has an expense ratio of 0.55%. No better option. So for now we're still nearly 0% bond until I can bring myself to swallow this.
Re: When is 0% bonds appropriate?
When you’re young.
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Re: When is 0% bonds appropriate?
Thanks for including the importance of global diversification and especially for the reference to the Beatles' "Taxman"!seajay wrote: ↑Sun Jun 27, 2021 6:10 amHmm! Subjectively.
Start of 1929 retirement date and a 50/50 US/UK stock blend for a US investor supported a 5.65% SWR. At 4% SWR yes their portfolio dipped down to being nearly 50% down after a few years (end of 1931) but then recovered former levels a couple of years later (in inflation adjusted terms at the end of 1933 they had 94% of the inflation adjusted start date portfolio value after the 4% SWR withdrawals up to that time, so 90% after drawing the next years income/spending at the start of the year). At the end of 30 years their portfolio was 2.65 times higher in inflation adjusted terms than at the start date (4.32 times higher in nominal terms). For clarity, the UK stock index upon which that was measured back in the 1930's was based on the 30 largest cap stocks each year, proportioned according to their cap weighting (cap weighted index of 30 largest stocks)
Through historic reasons (Empire days and English primary legal language) the UK is a financial, accounting and law hub for many others, centralised expertise that many other small (and large) areas/countries utilise over that of setting up their own domestic versions. The main UK stock index is more a global stock type holding (around 75% of its earnings are sourced from foreign business activities). Indeed look at prior studies of global stocks and both World and UK have historically tended to compare relatively closely. Could be considered as a indicator of a historic World exc. US. So combined with US 50/50 and perhaps indicative of a 'World' stock holding/index.
At times when the UK has stressed so holding US stock has helped UK investors, similarly when the US stressed (1929 for instance) holding UK helped US investors. Diversification. At times leaders can be what many might consider to be idiots, for instance in the 1960's UK Labour (similar to US Democrats) opted to apply very high taxation rates that resulted in the flight of capital (Rolling Stones etc. objected to earning just 2p on the Pound and self tax exiled into France; Beatles were singing 'Taxman' (read the lyrics)), as part of that in one year a retrospective tax rate that summed to over 130% was applied (1968) - crazy ideas. Both stocks and bonds can be adversely affected.
In the UK there are a number of Investment Trusts, stocks whose primary business is investing in stocks/bonds/whatever. Collectively for instance they make up around 50 out of the 250 UK mid cap stock index and individually they invest in all sorts of manners, very broadly and globally etc. Somewhat like active ETF's/funds, although some are relatively passive and strive to track things such as a world stock index. The oldest of which dates back to 1866. Whilst they are individual stocks, a mixed bag of those can form a diverse portfolio where some might have been selected to be active/reactive, others passive, some aggressive, some protective ...etc. Things can all become muddied - holding all stocks that might internally hold bonds or gold or whatever. Berkshire Hathaway manages cash reserves for instance, at times BRK might hold 10% or less cash, at other times it might be nearer 40% cash. Some stocks can be more bond like, some bonds can be more stock like. Bonds in the sense of Treasury bonds is lending to someone who can print money, change taxation, revise interest rates, change the rules, not a particularly attractive proposition. Yes the majors like to project that they never default on their debts, but have done so albeit indirectly/partially through the likes of taxation policies or whatever method or combination of methods. Buffett isn't a fan of bonds, prefers T-Bills instead and shifts the risk over to the stock side (90/10 stock/T-Bills). Others might prefer to shift some of stock risk over to the bond side (Larry Portfolio of 30 stock/70 bonds). Yet others might prefer all stock perhaps with some of the stock holdings having bond like diversification benefits.
"Well, she was just seventeen, You Know What I Mean, and the way she looked... was way beyond compare."
Re: When is 0% bonds appropriate?
I'm not sure if that proves the importance of global diversification or the importance of having a good chunk of money invested in the the most important economy in the world at the time.You Know What I Mean wrote: ↑Mon Jul 05, 2021 10:28 amThanks for including the importance of global diversification and especially for the reference to the Beatles' "Taxman"!seajay wrote: ↑Sun Jun 27, 2021 6:10 amHmm! Subjectively.
Start of 1929 retirement date and a 50/50 US/UK stock blend for a US investor supported a 5.65% SWR. At 4% SWR yes their portfolio dipped down to being nearly 50% down after a few years (end of 1931) but then recovered former levels a couple of years later (in inflation adjusted terms at the end of 1933 they had 94% of the inflation adjusted start date portfolio value after the 4% SWR withdrawals up to that time, so 90% after drawing the next years income/spending at the start of the year). At the end of 30 years their portfolio was 2.65 times higher in inflation adjusted terms than at the start date (4.32 times higher in nominal terms). For clarity, the UK stock index upon which that was measured back in the 1930's was based on the 30 largest cap stocks each year, proportioned according to their cap weighting (cap weighted index of 30 largest stocks)
Through historic reasons (Empire days and English primary legal language) the UK is a financial, accounting and law hub for many others, centralised expertise that many other small (and large) areas/countries utilise over that of setting up their own domestic versions. The main UK stock index is more a global stock type holding (around 75% of its earnings are sourced from foreign business activities). Indeed look at prior studies of global stocks and both World and UK have historically tended to compare relatively closely. Could be considered as a indicator of a historic World exc. US. So combined with US 50/50 and perhaps indicative of a 'World' stock holding/index.
At times when the UK has stressed so holding US stock has helped UK investors, similarly when the US stressed (1929 for instance) holding UK helped US investors. Diversification. At times leaders can be what many might consider to be idiots, for instance in the 1960's UK Labour (similar to US Democrats) opted to apply very high taxation rates that resulted in the flight of capital (Rolling Stones etc. objected to earning just 2p on the Pound and self tax exiled into France; Beatles were singing 'Taxman' (read the lyrics)), as part of that in one year a retrospective tax rate that summed to over 130% was applied (1968) - crazy ideas. Both stocks and bonds can be adversely affected.
In the UK there are a number of Investment Trusts, stocks whose primary business is investing in stocks/bonds/whatever. Collectively for instance they make up around 50 out of the 250 UK mid cap stock index and individually they invest in all sorts of manners, very broadly and globally etc. Somewhat like active ETF's/funds, although some are relatively passive and strive to track things such as a world stock index. The oldest of which dates back to 1866. Whilst they are individual stocks, a mixed bag of those can form a diverse portfolio where some might have been selected to be active/reactive, others passive, some aggressive, some protective ...etc. Things can all become muddied - holding all stocks that might internally hold bonds or gold or whatever. Berkshire Hathaway manages cash reserves for instance, at times BRK might hold 10% or less cash, at other times it might be nearer 40% cash. Some stocks can be more bond like, some bonds can be more stock like. Bonds in the sense of Treasury bonds is lending to someone who can print money, change taxation, revise interest rates, change the rules, not a particularly attractive proposition. Yes the majors like to project that they never default on their debts, but have done so albeit indirectly/partially through the likes of taxation policies or whatever method or combination of methods. Buffett isn't a fan of bonds, prefers T-Bills instead and shifts the risk over to the stock side (90/10 stock/T-Bills). Others might prefer to shift some of stock risk over to the bond side (Larry Portfolio of 30 stock/70 bonds). Yet others might prefer all stock perhaps with some of the stock holdings having bond like diversification benefits.
U.S. was coming on strong, but in 1929, Britain was still the largest empire on Earth (sun never sets) and London was still the financial capital of the world, right?
Just like Japan investors would have been better off to be 50/50 Japan/U.S. in 1989, since we were the #1 big dogs in the world economy at the time.
Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Just "ex-US" doesn't appeal to me that much (although I do have 20% of my stock portfolio in Vanguard International Index)
Last edited by HomerJ on Mon Jul 05, 2021 12:11 pm, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: When is 0% bonds appropriate?
Still doesn't (British overseas territories). A close (8 minute) call in June however. https://bernews.com/2015/05/sun-never-s ... rritories/
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Re: When is 0% bonds appropriate?
I would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
Re: When is 0% bonds appropriate?
No, China is absolutely not the right place to diversify, in my opinion. It is large, yes. But there is no rule of law or rights for American investors in China stocks.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 12:37 pmI would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
It would INCREASE your risk to have 50% of your money in dictator-run China as an American investor.
And it's also just not about being large... London was financial center of the world, and then New York.... Hong Kong once had a chance to be the next financial capital of the world, but China has destroyed any chance of that.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Re: When is 0% bonds appropriate?
So again I don't really believe in your original framing of the question (which limited you to a two-country portfolio, your own country and "the most important economy in the world at the time"). But that's how you framed it, so I answered that question as asked.HomerJ wrote: ↑Mon Jul 05, 2021 12:50 pmNo, China is absolutely not the right place to diversify, in my opinion. It is large, yes. But there is no rule of law or rights for American investors in China stocks.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 12:37 pmI would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
It would INCREASE your risk to have 50% of your money in dictator-run China as an American investor.
And it's also just not about being large... London was financial center of the world, and then New York.... Hong Kong once had a chance to be the next financial capital of the world, but China has destroyed any chance of that.
However, just some actual information on where property rights stand in China. I mentioned the International Property Rights Index, and contra what some people seem to think, China is not in fact pegged at the bottom. It is 49 out of 129.
Which still isn't great, but it has also been increasing over time--more in absolute terms than relative ranking, but that is because many countries are in an upward trend. What will it look like in 15-20 more years? Who knows? But by the time we know for sure, it may be too late for investors to get the really good returns.
Indeed, when it comes to risks for investors, the question would be whether that is being accounted for in terms of prices/expected-returns. And I believe China does have much lower valuation measures, so probably!
So if we assume a model in which there are only two countries, the US and China, very likely you could invest in both in a helpful way in the diversification sense. And to the extent you wanted to de-risk, you could reduce total stock exposure in favor of no-to-low risk assets.
However, this gets us back to why this is probably not a good approach (pick just your own country and then "the most important economy in the world at the time"). If there is uncompensated idiosyncratic risk associated with individual countries, then there might well be a risk problem with a two-country portfolio so concentrated in China.
Of course on the same logic, there could be a risk problem with concentrating a lot in the United States . . . .
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Re: When is 0% bonds appropriate?
By the way, I wonder what British advocates of only or mostly investing in Britain had to say about investing in the United States during that period from around 1820 to 1950 when the United States's economy was rising in relative prominence? Of course some Brits enthusiastically invested in the United States, but I would guess there were other Brits espousing British exceptionalism. And I wonder if they described the poor rule of law in the American West, noted the Civil War, and so on, as reasons not to invest in such a risky country as the United States.HomerJ wrote: ↑Mon Jul 05, 2021 12:50 pmNo, China is absolutely not the right place to diversify, in my opinion. It is large, yes. But there is no rule of law or rights for American investors in China stocks.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 12:37 pmI would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
It would INCREASE your risk to have 50% of your money in dictator-run China as an American investor.
And it's also just not about being large... London was financial center of the world, and then New York.... Hong Kong once had a chance to be the next financial capital of the world, but China has destroyed any chance of that.
Of course we U.S. persons in 2021 now know that fortune would overall favor us in that 1820 to 1950 run up. But I wonder what a person in China might think in 2100, after a similar 130 year period, should it occur?
They might even see the 100 and some year period in which the economy of the U.S. was large than the economy of China as a mere bump in the road . . . .
Re: When is 0% bonds appropriate?
Well said.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 2:27 pmBy the way, I wonder what British advocates of only or mostly investing in Britain had to say about investing in the United States during that period from around 1820 to 1950 when the United States's economy was rising in relative prominence? Of course some Brits enthusiastically invested in the United States, but I would guess there were other Brits espousing British exceptionalism. And I wonder if they described the poor rule of law in the American West, noted the Civil War, and so on, as reasons not to invest in such a risky country as the United States.HomerJ wrote: ↑Mon Jul 05, 2021 12:50 pmNo, China is absolutely not the right place to diversify, in my opinion. It is large, yes. But there is no rule of law or rights for American investors in China stocks.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 12:37 pmI would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
It would INCREASE your risk to have 50% of your money in dictator-run China as an American investor.
And it's also just not about being large... London was financial center of the world, and then New York.... Hong Kong once had a chance to be the next financial capital of the world, but China has destroyed any chance of that.
Of course we U.S. persons in 2021 now know that fortune would overall favor us in that 1820 to 1950 run up. But I wonder what a person in China might think in 2100, after a similar 130 year period, should it occur?
They might even see the 100 and some year period in which the economy of the U.S. was large than the economy of China as a mere bump in the road . . . .
Re: When is 0% bonds appropriate?
I think you guys might want to check out what's happening in Hong Kong right now.
Sure, it's possible that in 2100, China economy may be fully dominant over the world, but you better hope not for the sake of your grandkids.
(of course, a British investor could have said the same thing about the slave-owning U.S. in 1850, but I fear there is no revolution coming in China anytime soon - but I could be wrong).
Another side factor to consider is that China has some serious demographic issues with their population aging out. Not a lot of immigrants into China either, unlike the U.S. in 1820-1950 timeframe you guys referenced.
Sure, it's possible that in 2100, China economy may be fully dominant over the world, but you better hope not for the sake of your grandkids.
(of course, a British investor could have said the same thing about the slave-owning U.S. in 1850, but I fear there is no revolution coming in China anytime soon - but I could be wrong).
Another side factor to consider is that China has some serious demographic issues with their population aging out. Not a lot of immigrants into China either, unlike the U.S. in 1820-1950 timeframe you guys referenced.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: When is 0% bonds appropriate?
I think it is a very myopic view to expect a totalitarian country run by a single party to be a significant investment option globally. Creditors rights and corporate governance are not very high on their priority list. Plus, as a country running a current account surplus, the last thing they need is foreign savings.
It is indeed a fairly popular misconception: Ray Dalio, no less, advocates for Chinese bonds, but I view this as kowtowing to the CCP hoping to secure privileged market access to Bridgewater.
It is in fact unsurprising: As Lenin famously said: "Capitalists will sell us the rope we will hang them with". Nothing new here, it just takes some knowledge of history. But this is in short supply.
It is indeed a fairly popular misconception: Ray Dalio, no less, advocates for Chinese bonds, but I view this as kowtowing to the CCP hoping to secure privileged market access to Bridgewater.
It is in fact unsurprising: As Lenin famously said: "Capitalists will sell us the rope we will hang them with". Nothing new here, it just takes some knowledge of history. But this is in short supply.
Better lucky than smart.
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Re: When is 0% bonds appropriate?
So it seems to me you are making quite a few assumptions about what China will be like in 80 years in this sentiment. At that time horizon, that is basically science fiction.
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Re: When is 0% bonds appropriate?
Amen.taojaxx wrote: ↑Mon Jul 05, 2021 7:10 pm I think it is a very myopic view to expect a totalitarian country run by a single party to be a significant investment option globally. Creditors rights and corporate governance are not very high on their priority list. Plus, as a country running a current account surplus, the last thing they need is foreign savings.
It is indeed a fairly popular misconception: Ray Dalio, no less, advocates for Chinese bonds, but I view this as kowtowing to the CCP hoping to secure privileged market access to Bridgewater.
It is in fact unsurprising: As Lenin famously said: "Capitalists will sell us the rope we will hang them with". Nothing new here, it just takes some knowledge of history. But this is in short supply.
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Re: When is 0% bonds appropriate?
This is a really big deal. They can't get young people to even have babies either... reminds me of 1990s Japan...
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Re: When is 0% bonds appropriate?
I think the obvious difference is rule of law. We have it. They don't. If you have no property rights, if whatever you've built can be taken away because you offending the dictator, there's no rule of law, no transparency, no way to invest intelligently and predict what choice is best. I think you might get lucky investing in totalitarian regimes but for me the risk far outweighs the benefit.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 2:27 pmBy the way, I wonder what British advocates of only or mostly investing in Britain had to say about investing in the United States during that period from around 1820 to 1950 when the United States's economy was rising in relative prominence? Of course some Brits enthusiastically invested in the United States, but I would guess there were other Brits espousing British exceptionalism. And I wonder if they described the poor rule of law in the American West, noted the Civil War, and so on, as reasons not to invest in such a risky country as the United States.HomerJ wrote: ↑Mon Jul 05, 2021 12:50 pmNo, China is absolutely not the right place to diversify, in my opinion. It is large, yes. But there is no rule of law or rights for American investors in China stocks.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 12:37 pmI would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
It would INCREASE your risk to have 50% of your money in dictator-run China as an American investor.
And it's also just not about being large... London was financial center of the world, and then New York.... Hong Kong once had a chance to be the next financial capital of the world, but China has destroyed any chance of that.
Of course we U.S. persons in 2021 now know that fortune would overall favor us in that 1820 to 1950 run up. But I wonder what a person in China might think in 2100, after a similar 130 year period, should it occur?
They might even see the 100 and some year period in which the economy of the U.S. was large than the economy of China as a mere bump in the road . . . .
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Re: When is 0% bonds appropriate?
Of course the U.S. is also facing demographics issues:anon_investor wrote: ↑Mon Jul 05, 2021 11:28 pmThis is a really big deal. They can't get young people to even have babies either... reminds me of 1990s Japan...
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
Last edited by NiceUnparticularMan on Tue Jul 06, 2021 7:31 am, edited 1 time in total.
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Re: When is 0% bonds appropriate?
I would suggest things like the rule of law and property rights are not binaries, they are continuums. I would also suggest they are variables, over which there can be discernable trends.Shalom Aleichem wrote: ↑Mon Jul 05, 2021 11:29 pmI think the obvious difference is rule of law. We have it. They don't. If you have no property rights, if whatever you've built can be taken away because you offending the dictator, there's no rule of law, no transparency, no way to invest intelligently and predict what choice is best. I think you might get lucky investing in totalitarian regimes but for me the risk far outweighs the benefit.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 2:27 pmBy the way, I wonder what British advocates of only or mostly investing in Britain had to say about investing in the United States during that period from around 1820 to 1950 when the United States's economy was rising in relative prominence? Of course some Brits enthusiastically invested in the United States, but I would guess there were other Brits espousing British exceptionalism. And I wonder if they described the poor rule of law in the American West, noted the Civil War, and so on, as reasons not to invest in such a risky country as the United States.HomerJ wrote: ↑Mon Jul 05, 2021 12:50 pmNo, China is absolutely not the right place to diversify, in my opinion. It is large, yes. But there is no rule of law or rights for American investors in China stocks.NiceUnparticularMan wrote: ↑Mon Jul 05, 2021 12:37 pmI would think China is the obvious answer. Already #1 in PPP terms, and most are projecting them to become #1 in nominal terms too within 10 years or so.HomerJ wrote: ↑Mon Jul 05, 2021 11:41 am Seems like most people in other countries today should be globally diversified with the U.S. playing a large part in their portfolios... but I'm not sure who is the big player that we U.S. investors should be diversified in today to achieve "diversification".
Of course I don't think this is necessarily the right way to do this. But I think if you were going to be on the next country to match our relative run from around 1820 to 1950, it would be China from around 1972 (randomly picking Nixon's visit) to ???
It would INCREASE your risk to have 50% of your money in dictator-run China as an American investor.
And it's also just not about being large... London was financial center of the world, and then New York.... Hong Kong once had a chance to be the next financial capital of the world, but China has destroyed any chance of that.
Of course we U.S. persons in 2021 now know that fortune would overall favor us in that 1820 to 1950 run up. But I wonder what a person in China might think in 2100, after a similar 130 year period, should it occur?
They might even see the 100 and some year period in which the economy of the U.S. was large than the economy of China as a mere bump in the road . . . .
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Re: When is 0% bonds appropriate?
Sure, but the US has immigration, which is near non-existent in China (and Japan for that matter).NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 amOf course the U.S. is also facing demographics issues:anon_investor wrote: ↑Mon Jul 05, 2021 11:28 pmThis is a really big deal. They can't get young people to even have babies either... reminds me of 1990s Japan...
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
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Re: When is 0% bonds appropriate?
That graph of course accounts for immigration.anon_investor wrote: ↑Tue Jul 06, 2021 7:34 amSure, but the US has immigration, which is near non-existent in China (and Japan for that matter).NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 am Of course the U.S. is also facing demographics issues:
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
Our native-born population has long had below a replacement fertility rate, so we have long relied on net international migration plus the children born to immigrants for working age population growth.
However, in recent years the net migration rate has been declining. On top of that, the fertility rate among immigrants has also been declining, and now it is also below the replacement fertility rate (this is related to the fact the fertility rates of their countries of origin have also dropped dramatically in recent years). At the same time, the fertility rate among the native-born population in the U.S. has also continued to decline.
So as that graph is showing, at current rates, net migration and the children of immigrants are no longer enough to sustain working age population growth in the United States. Of course this may change, but as for now, the sorts of demographic issues we used to claim did not apply to the United States are beginning to show up here as well. And of course the trends could accelerate from here, rather than reversing.
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Re: When is 0% bonds appropriate?
I'm in my 40's and 95%+ of my portfolio is equities. Given the paltry bond yields I do not plan on changing that unless they increase significantly or I hit 50. Bonds/equities are out of sync and I have made my bet on equities.
Many here overly defend bonds, particularly at relatively young ages, and cast aside vast gains in their portfolio accordingly. I do not need my money any time soon and can withstand a massive bear market. I also confirmed that last March by not panicking. I was okay losing a ton of money on paper, so have every confidence I will be when it happens again.
Many here overly defend bonds, particularly at relatively young ages, and cast aside vast gains in their portfolio accordingly. I do not need my money any time soon and can withstand a massive bear market. I also confirmed that last March by not panicking. I was okay losing a ton of money on paper, so have every confidence I will be when it happens again.
Username is not serious :)
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Re: When is 0% bonds appropriate?
It probably be even worse in China with their negligible immigration.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 9:54 amThat graph of course accounts for immigration.anon_investor wrote: ↑Tue Jul 06, 2021 7:34 amSure, but the US has immigration, which is near non-existent in China (and Japan for that matter).NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 am Of course the U.S. is also facing demographics issues:
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
Our native-born population has long had below a replacement fertility rate, so we have long relied on net international migration plus the children born to immigrants for working age population growth.
However, in recent years the net migration rate has been declining. On top of that, the fertility rate among immigrants has also been declining, and now it is also below the replacement fertility rate (this is related to the fact the fertility rates of their countries of origin have also dropped dramatically in recent years). At the same time, the fertility rate among the native-born population in the U.S. has also continued to decline.
So as that graph is showing, at current rates, net migration and the children of immigrants are no longer enough to sustain working age population growth in the United States. Of course this may change, but as for now, the sorts of demographic issues we used to claim did not apply to the United States are beginning to show up here as well. And of course the trends could accelerate from here, rather than reversing.
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Re: When is 0% bonds appropriate?
It might well be, and I know people have estimated their working age population has also peaked.anon_investor wrote: ↑Tue Jul 06, 2021 10:52 amIt probably be even worse in China with their negligible immigration.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 9:54 amThat graph of course accounts for immigration.anon_investor wrote: ↑Tue Jul 06, 2021 7:34 amSure, but the US has immigration, which is near non-existent in China (and Japan for that matter).NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 am Of course the U.S. is also facing demographics issues:
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
Our native-born population has long had below a replacement fertility rate, so we have long relied on net international migration plus the children born to immigrants for working age population growth.
However, in recent years the net migration rate has been declining. On top of that, the fertility rate among immigrants has also been declining, and now it is also below the replacement fertility rate (this is related to the fact the fertility rates of their countries of origin have also dropped dramatically in recent years). At the same time, the fertility rate among the native-born population in the U.S. has also continued to decline.
So as that graph is showing, at current rates, net migration and the children of immigrants are no longer enough to sustain working age population growth in the United States. Of course this may change, but as for now, the sorts of demographic issues we used to claim did not apply to the United States are beginning to show up here as well. And of course the trends could accelerate from here, rather than reversing.
But part of what this data is showing is since the working age population benefits of immigration are decreasing for a given net migration rate (due to the declining fertility rate of immigrants), and native-born fertility rates are also declining, we'd need net migration rates to trend higher and higher to maintain the same level of relative advantage. Instead they are currently trending lower.
Which might change for a while, but at certain point the whole world just isn't going to be producing enough working age people. And so while increased immigration can buy some time, it probably can't be a permanent advantage.
So increasingly, the question is going to shift to how to best manage a country with these sorts of demographic trends. And again we'll see how that sorts out.
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Re: When is 0% bonds appropriate?
That is obviously when the robots take over!NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 11:42 amIt might well be, and I know people have estimated their working age population has also peaked.anon_investor wrote: ↑Tue Jul 06, 2021 10:52 amIt probably be even worse in China with their negligible immigration.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 9:54 amThat graph of course accounts for immigration.anon_investor wrote: ↑Tue Jul 06, 2021 7:34 amSure, but the US has immigration, which is near non-existent in China (and Japan for that matter).NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 am Of course the U.S. is also facing demographics issues:
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
Our native-born population has long had below a replacement fertility rate, so we have long relied on net international migration plus the children born to immigrants for working age population growth.
However, in recent years the net migration rate has been declining. On top of that, the fertility rate among immigrants has also been declining, and now it is also below the replacement fertility rate (this is related to the fact the fertility rates of their countries of origin have also dropped dramatically in recent years). At the same time, the fertility rate among the native-born population in the U.S. has also continued to decline.
So as that graph is showing, at current rates, net migration and the children of immigrants are no longer enough to sustain working age population growth in the United States. Of course this may change, but as for now, the sorts of demographic issues we used to claim did not apply to the United States are beginning to show up here as well. And of course the trends could accelerate from here, rather than reversing.
But part of what this data is showing is since the working age population benefits of immigration are decreasing for a given net migration rate (due to the declining fertility rate of immigrants), and native-born fertility rates are also declining, we'd need net migration rates to trend higher and higher to maintain the same level of relative advantage. Instead they are currently trending lower.
Which might change for a while, but at certain point the whole world just isn't going to be producing enough working age people. And so while increased immigration can buy some time, it probably can't be a permanent advantage.
So increasingly, the question is going to shift to how to best manage a country with these sorts of demographic trends. And again we'll see how that sorts out.
Re: When is 0% bonds appropriate?
Traditional thinking has 0% bonds appropriate right after death.
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Re: When is 0% bonds appropriate?
Perhaps, but not during the investment cycle.
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Re: When is 0% bonds appropriate?
Really? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
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Re: When is 0% bonds appropriate?
I'm hoping for the replicators from Star Trek.anon_investor wrote: ↑Tue Jul 06, 2021 1:47 pmThat is obviously when the robots take over!NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 11:42 amIt might well be, and I know people have estimated their working age population has also peaked.anon_investor wrote: ↑Tue Jul 06, 2021 10:52 amIt probably be even worse in China with their negligible immigration.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 9:54 amThat graph of course accounts for immigration.anon_investor wrote: ↑Tue Jul 06, 2021 7:34 am
Sure, but the US has immigration, which is near non-existent in China (and Japan for that matter).
Our native-born population has long had below a replacement fertility rate, so we have long relied on net international migration plus the children born to immigrants for working age population growth.
However, in recent years the net migration rate has been declining. On top of that, the fertility rate among immigrants has also been declining, and now it is also below the replacement fertility rate (this is related to the fact the fertility rates of their countries of origin have also dropped dramatically in recent years). At the same time, the fertility rate among the native-born population in the U.S. has also continued to decline.
So as that graph is showing, at current rates, net migration and the children of immigrants are no longer enough to sustain working age population growth in the United States. Of course this may change, but as for now, the sorts of demographic issues we used to claim did not apply to the United States are beginning to show up here as well. And of course the trends could accelerate from here, rather than reversing.
But part of what this data is showing is since the working age population benefits of immigration are decreasing for a given net migration rate (due to the declining fertility rate of immigrants), and native-born fertility rates are also declining, we'd need net migration rates to trend higher and higher to maintain the same level of relative advantage. Instead they are currently trending lower.
Which might change for a while, but at certain point the whole world just isn't going to be producing enough working age people. And so while increased immigration can buy some time, it probably can't be a permanent advantage.
So increasingly, the question is going to shift to how to best manage a country with these sorts of demographic trends. And again we'll see how that sorts out.
Not so much the Terminator scenario . . . .
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Re: When is 0% bonds appropriate?
Well the use for a transporter is no longer necessary, since we have Zoom...NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 2:32 pmI'm hoping for the replicators from Star Trek.anon_investor wrote: ↑Tue Jul 06, 2021 1:47 pmThat is obviously when the robots take over!NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 11:42 amIt might well be, and I know people have estimated their working age population has also peaked.anon_investor wrote: ↑Tue Jul 06, 2021 10:52 amIt probably be even worse in China with their negligible immigration.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 9:54 am
That graph of course accounts for immigration.
Our native-born population has long had below a replacement fertility rate, so we have long relied on net international migration plus the children born to immigrants for working age population growth.
However, in recent years the net migration rate has been declining. On top of that, the fertility rate among immigrants has also been declining, and now it is also below the replacement fertility rate (this is related to the fact the fertility rates of their countries of origin have also dropped dramatically in recent years). At the same time, the fertility rate among the native-born population in the U.S. has also continued to decline.
So as that graph is showing, at current rates, net migration and the children of immigrants are no longer enough to sustain working age population growth in the United States. Of course this may change, but as for now, the sorts of demographic issues we used to claim did not apply to the United States are beginning to show up here as well. And of course the trends could accelerate from here, rather than reversing.
But part of what this data is showing is since the working age population benefits of immigration are decreasing for a given net migration rate (due to the declining fertility rate of immigrants), and native-born fertility rates are also declining, we'd need net migration rates to trend higher and higher to maintain the same level of relative advantage. Instead they are currently trending lower.
Which might change for a while, but at certain point the whole world just isn't going to be producing enough working age people. And so while increased immigration can buy some time, it probably can't be a permanent advantage.
So increasingly, the question is going to shift to how to best manage a country with these sorts of demographic trends. And again we'll see how that sorts out.
Not so much the Terminator scenario . . . .
Re: When is 0% bonds appropriate?
I guess that means you think a new born is an investor taking actions on their own behalf? or, are you really referring to the new born's parents or other adult family members just putting some money in the new born's name??anon_investor wrote: ↑Tue Jul 06, 2021 2:25 pmReally? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
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Re: When is 0% bonds appropriate?
An adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.midareff wrote: ↑Tue Jul 06, 2021 3:28 pmI guess that means you think a new born is an investor taking actions on their own behalf? or, are you really referring to the new born's parents or other adult family members just putting some money in the new born's name??anon_investor wrote: ↑Tue Jul 06, 2021 2:25 pmReally? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
Re: When is 0% bonds appropriate?
If we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pmAn adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.midareff wrote: ↑Tue Jul 06, 2021 3:28 pmI guess that means you think a new born is an investor taking actions on their own behalf? or, are you really referring to the new born's parents or other adult family members just putting some money in the new born's name??anon_investor wrote: ↑Tue Jul 06, 2021 2:25 pmReally? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
The difference is the US has robust immigration and immigrants tend to be mostly working age persons. Now the US might need to compete harder for a finite pool of skilled immigrants and there might be some questions on if the US can rise to that challenge. China on the other hand had near zero immigrants and not really attractive to skilled labor for ... well a whole host of reasons.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 amOf course the U.S. is also facing demographics issues:anon_investor wrote: ↑Mon Jul 05, 2021 11:28 pmThis is a really big deal. They can't get young people to even have babies either... reminds me of 1990s Japan...
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
Re: When is 0% bonds appropriate?
It seems that if X is a guaranteed number and lines up perfectly with when SS is available, it could be mathematically reasonable to consider SS as a bond. However, as others have pointed out, bonds might be needed prior to when one is eligible for SS. Up until the past 2 weeks, I was 0% bonds because I'm in my accumulation stage, shooting for ER, and anticipate interest rates will soon rise. However, I was uncomfortable with my impression that equities are overvalued and potentially due for a correction, but didn't know where else to stick my money. After reading some of Nisiprius's recent posts that broke down the long term impact of an interest rate rise on a bond investment, I learned that interest rates predominantly hurt bonds only in the short-term, which convinced me that interest rate forecasts are irrelevant with my time horizon. I'm now 8% Bonds / 2% Cash.
So to me, it seems unwise to treat SS as bonds when you're a long ways from collecting. When you're collecting, I suppose one could treat SS as a persistent bond with lifetime coupon payments, but that seems roundabout. As others have said, treating them as a means to reduce your funding need is the only way that makes sense to me and applies in both the accumulation stage (as it relates to your target FI amount) and during the spend-down phase (as it relates to withdrawal needs).
So to me, it seems unwise to treat SS as bonds when you're a long ways from collecting. When you're collecting, I suppose one could treat SS as a persistent bond with lifetime coupon payments, but that seems roundabout. As others have said, treating them as a means to reduce your funding need is the only way that makes sense to me and applies in both the accumulation stage (as it relates to your target FI amount) and during the spend-down phase (as it relates to withdrawal needs).
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Re: When is 0% bonds appropriate?
When you can accept the risk
"Anyone who claims to understand quantum theory is either lying or crazy" -- Richard Feynman
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Re: When is 0% bonds appropriate?
Right, in theory you can always just assume higher and higher rates of net migration of working age people to compensate for lower and lower fertility rates.Statistical wrote: ↑Tue Jul 06, 2021 3:49 pmThe difference is the US has robust immigration and immigrants tend to be mostly working age persons. Now the US might need to compete harder for a finite pool of skilled immigrants and there might be some questions on if the US can rise to that challenge. China on the other hand had near zero immigrants and not really attractive to skilled labor for ... well a whole host of reasons.NiceUnparticularMan wrote: ↑Tue Jul 06, 2021 7:23 amOf course the U.S. is also facing demographics issues:anon_investor wrote: ↑Mon Jul 05, 2021 11:28 pmThis is a really big deal. They can't get young people to even have babies either... reminds me of 1990s Japan...
https://fred.stlouisfed.org/series/LFWA64TTUSM647S
In coming decades, the world as a whole is going to have to figure out how to sustain and grow prosperity without growing labor forces. Sufficient labor productivity growth might do it, and it will be interesting to see which countries manage that best.
In practice, actually being able to achieve higher and higher rates of net migration in a world with declining fertility rates almost everywhere, lots of catch up economic growth, and so on might be quite the trick.
So, while it is definitely true being a relatively attractive destination for international migrants is a potential advantage when it comes to slowing down these demographic trends, the actual practical scale of that advantage may be declining.
Edit: Just adding: in 2021, the CIA Factbook has the U.S. net migration at 3.03/1000, China at -0.43, so a net of 3.46/1000.
Back in 2017, it was U.S. 3.90, China -0.40, so a net of 4.30/1000.
Back in 2010, it was U.S. 4.25, China -0.34, so net of 4.59/1000.
Basically, China is drifting downward, meaning further into negative territory, but the U.S. has been trending down faster. Again, none of this is necessarily written in stone, but it just illustrates how this advantage can get whittled down over time.
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Re: When is 0% bonds appropriate?
At what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pmIf we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pmAn adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.midareff wrote: ↑Tue Jul 06, 2021 3:28 pmI guess that means you think a new born is an investor taking actions on their own behalf? or, are you really referring to the new born's parents or other adult family members just putting some money in the new born's name??anon_investor wrote: ↑Tue Jul 06, 2021 2:25 pmReally? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
Problem is that who knows when you'll really need the money. I do agree 15-20 years seems about right. Probably 15.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pmIf we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pmAn adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.midareff wrote: ↑Tue Jul 06, 2021 3:28 pmI guess that means you think a new born is an investor taking actions on their own behalf? or, are you really referring to the new born's parents or other adult family members just putting some money in the new born's name??anon_investor wrote: ↑Tue Jul 06, 2021 2:25 pm
Really? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
Re: When is 0% bonds appropriate?
Perhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pmIf we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pmAn adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.midareff wrote: ↑Tue Jul 06, 2021 3:28 pmI guess that means you think a new born is an investor taking actions on their own behalf? or, are you really referring to the new born's parents or other adult family members just putting some money in the new born's name??anon_investor wrote: ↑Tue Jul 06, 2021 2:25 pm
Really? I would think a new born should be 100% equities, since they should have a sufficiently long investment time horizon.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
Personally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.midareff wrote: ↑Tue Jul 06, 2021 6:00 pmPerhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pmIf we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pmAn adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
Re: When is 0% bonds appropriate?
Without knowing more about you those numbers are meaningless. .. and you know that.anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pmPersonally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.midareff wrote: ↑Tue Jul 06, 2021 6:00 pmPerhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pmIf we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pm
An adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
So what % of bonds would you advocate for someone for example who has the traditional 6mo emergency fund and in the accumulation phase?midareff wrote: ↑Tue Jul 06, 2021 6:41 pmWithout knowing more about you those numbers are meaningless. .. and you know that.anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pmPersonally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.midareff wrote: ↑Tue Jul 06, 2021 6:00 pmPerhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pm
If we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
Have you considered 95/5 or 93/7?anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pmPersonally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.midareff wrote: ↑Tue Jul 06, 2021 6:00 pmPerhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pmIf we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.anon_investor wrote: ↑Tue Jul 06, 2021 3:37 pm
An adult has opened a UTMA account for this hypothetical new born. I think a 100% equity allocation would be appropriate in this case.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
10-30% seems reasonable to me. 10% for early career and 30% closer to retirement.anon_investor wrote: ↑Tue Jul 06, 2021 6:49 pmSo what % of bonds would you advocate for someone for example who has the traditional 6mo emergency fund and in the accumulation phase?midareff wrote: ↑Tue Jul 06, 2021 6:41 pmWithout knowing more about you those numbers are meaningless. .. and you know that.anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pmPersonally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.midareff wrote: ↑Tue Jul 06, 2021 6:00 pmPerhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pm
At what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.
Then the premise of the emergency fund becomes flawed.
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Re: When is 0% bonds appropriate?
No only 94.5/5.5.Triple digit golfer wrote: ↑Tue Jul 06, 2021 7:56 pmHave you considered 95/5 or 93/7?anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pmPersonally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.midareff wrote: ↑Tue Jul 06, 2021 6:00 pmPerhaps, although not a number Benjamin Graham would find comforting. Personally, during the accumulation cycle I'd prefer to have something in "safe" money should a severe correction present post capitulation opportunities, but to each their own.anon_investor wrote: ↑Tue Jul 06, 2021 5:23 pmAt what number for X is 0% bonds okay? I would say 20 for sure. Maybe even 15.midareff wrote: ↑Tue Jul 06, 2021 3:42 pm
If we refer to the original OP; "If you know you're not going to need your money for X number of years, or you won't retire for X number of years, then it's OK to have 0% bonds in your portfolio.
What is X ?"
Then I think you will see we have veered away from the intent of the original post.
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Re: When is 0% bonds appropriate?
So what is the retirement AA? 60/40?Triple digit golfer wrote: ↑Tue Jul 06, 2021 7:57 pm10-30% seems reasonable to me. 10% for early career and 30% closer to retirement.anon_investor wrote: ↑Tue Jul 06, 2021 6:49 pmSo what % of bonds would you advocate for someone for example who has the traditional 6mo emergency fund and in the accumulation phase?midareff wrote: ↑Tue Jul 06, 2021 6:41 pmWithout knowing more about you those numbers are meaningless. .. and you know that.anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pmPersonally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.
Then the premise of the emergency fund becomes flawed.
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Re: When is 0% bonds appropriate?
I think that's what I'll do.anon_investor wrote: ↑Tue Jul 06, 2021 8:06 pmSo what is the retirement AA? 60/40?Triple digit golfer wrote: ↑Tue Jul 06, 2021 7:57 pm10-30% seems reasonable to me. 10% for early career and 30% closer to retirement.anon_investor wrote: ↑Tue Jul 06, 2021 6:49 pmSo what % of bonds would you advocate for someone for example who has the traditional 6mo emergency fund and in the accumulation phase?midareff wrote: ↑Tue Jul 06, 2021 6:41 pmWithout knowing more about you those numbers are meaningless. .. and you know that.anon_investor wrote: ↑Tue Jul 06, 2021 6:06 pm
Personally, I am of the well stocked emergency fund and the rest equities camp. If you factor my EF into my AA I am about 94/6.
Then the premise of the emergency fund becomes flawed.
I've been 80/20 from the beginning. I'm thinking once I hit about 20 years of expenses, switching to 60/40. It depends on how much longer I can/will/am willing to work, where we are in life, age, and so on.
Generally speaking I just can't see myself staying at 80/20 with almost enough to retire. Taking a 40% cut at 25 years of expenses is 10 years worth. That's nothing to sneeze at. A 30% cut would be 7.5 years, still sucks but I guess a little easier to tolerate. That "savings" of 2.5 years may not seem like a big deal, but when it's $200k or so, it is a lot of money. At that point in life, preservation is important. In a Great Depression type scenario and/or a long time to get back up, the difference sure would make me thankful.
Anyway, that's how my brain works.