60/40: They're coming for you

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Marseille07
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Re: 60/40: They're coming for you

Post by Marseille07 »

Wanderingwheelz wrote: Mon Jul 04, 2022 4:34 pm What makes bonds so special that they need to be reshuffled while stocks on the other hand apparently do not?

IIRC you don’t own any bonds at all, so why do you even care?
I now think people should just stay the course on both sides; it's probably too late to make changes anyway.

"Care" is loaded here; my personal AA doesn't care, but I care about the topic itself.
Last edited by Marseille07 on Mon Jul 04, 2022 6:07 pm, edited 1 time in total.
HeavyChevy
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Re: 60/40: They're coming for you

Post by HeavyChevy »

HeavyChevy wrote: Mon Jul 04, 2022 4:38 pm
sycamore wrote: Mon Jul 04, 2022 4:27 pm
HeavyChevy wrote: Mon Jul 04, 2022 4:07 pm As long as I can remember, Wellington's ~65% stock has been large cap value. Not even close to the 60% large cap blend (growth dominated) total market in recent years. Just sayin'.
FWIW, morningstar has rated VWELX stock allocation as Large Blend for 2020 - 2022. Vanguard or Lipper may rate the fund using different criteria.

Source: https://www.morningstar.com/funds/xnas/vwelx/portfolio, click on the Stock Style button and change it from Map to Historical.
Vanguard lists it as large value, not blend. From their site:

Investment strategy
The fund invests 60% to 70% of its assets in dividend-paying, and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies. In choosing these companies, the advisor seeks those that appear to be undervalued but to have prospects for improvement. These stocks are commonly referred to as value stocks. The remaining 30% to 40% of fund assets are invested mainly in investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, as well as mortgage-backed securities.

Don't know why Morningstar would disagree with their stated strategy and portfolio.
Wellington P/E and price to Book are only modestly lower than S&P500 and they do hold Apple, Alphabet, and Meta in their top 10 holdings. Microsoft is considered value by many. Admittedly some greyness here.
"It's not the best move, but it is a move." - GMHikaru
Jeepergeo
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Re: 60/40: They're coming for you

Post by Jeepergeo »

Expro wrote: Fri Jul 01, 2022 4:01 pm We Bogleheads should try our hands at writing a few Headlines - technically correct but agendized in some way.

I'm not clever enough to take a stab but I'd be interested to see what others might manage.
Breaking News! Bogleheads are Questioning the 60:40 Portfolio!

Agendized because there is nothing wrong with questioning a strategy as a way to see if the strategy still stands strong. A good strategy can stand up to questioning and often becomes stronger as a result if the scrutiny.
technovelist
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Re: 60/40: They're coming for you

Post by technovelist »

Independent George wrote: Mon Jul 04, 2022 4:32 pm
technovelist wrote: Sat Jul 02, 2022 9:46 pm
Expro wrote: Fri Jul 01, 2022 4:01 pm We Bogleheads should try our hands at writing a few Headlines - technically correct but agendized in some way.

I'm not clever enough to take a stab but I'd be interested to see what others might manage.
50% of all investors underperform the market! And 50% of all people make the median income or less!
Isn't it significantly higher than 50% underperforming the market due to behavioral errors? I don't remember the exact stat, but I think you're actually underselling the panic/clickbait potential.
Good point. You can tell I'm not expert at this. :happy
In theory, theory and practice are identical. In practice, they often differ.
MaxDOL
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Re: 60/40: They're coming for you

Post by MaxDOL »

If you only count on the first half of the year then it is indeed the worse performance of 50/50 (US Equity/10 Year US Treasury) since 1932 mainly because both equity and treasury are tanking.
But most people are not invest only half a year...

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smectym
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Re: 60/40: They're coming for you

Post by smectym »

Marseille07 wrote: Fri Jul 01, 2022 3:13 pm
Da5id wrote: Fri Jul 01, 2022 3:01 pm Yep. What is the proper response to the situation? "Run in circles, scream and shout"? Rethink your allocation at what is probably a very bad time to do so based on the fear that these articles encourage?
One should absolutely rethink their allocation, not on the stock side but the bond side.
That’s what I did several months back. Left stocks alone; shortened bond duration. Whether either decision was correct, very much remains to be seen.
Marseille07
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Re: 60/40: They're coming for you

Post by Marseille07 »

smectym wrote: Mon Jul 04, 2022 10:16 pm That’s what I did several months back. Left stocks alone; shortened bond duration. Whether either decision was correct, very much remains to be seen.
I don't hold bonds, but the more I look at them the more I feel people should just stay the course. Now, whether BND is appropriate or something shorter would be appropriate is a different question.
SnowBog
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Re: 60/40: They're coming for you

Post by SnowBog »

Marseille07 wrote: Mon Jul 04, 2022 10:25 pm
smectym wrote: Mon Jul 04, 2022 10:16 pm That’s what I did several months back. Left stocks alone; shortened bond duration. Whether either decision was correct, very much remains to be seen.
I don't hold bonds, but the more I look at them the more I feel people should just stay the course. Now, whether BND is appropriate or something shorter would be appropriate is a different question.
I'd be curious for what you see when you "look"...

What I've seen is a few years ago the louder camp had the view that rates would and could continue to fall, that going into negative rate territory was on the horizon... The other camp had the view that rates had to come up sometime... But most people laughed off ideas of I Bonds and TIPS. (I was buying them then - as they were part of my plan.)

When rates started going up, I Bonds and TIPS started becoming super popular - with threads upon threads discussing them (before being merged).

Throughout both periods, a small group basically yawned said "I've seen this before..." And I'm butchering the statistic, but I want to say there's one about people falsely predicting which way interest rates were moving is far, far, far more common that most people expect.

With that in mind, I'm of the view "there's nothing to see here". The markets are doing what they've done before, and will do again. I've set my AA, plotted my course, and the rest is the noise of the day that's trying to veer me off course. My job is to try to tune it out, and keep the ship sailing in the direction I plotted. In other words, "stay the course"...

So if you have insights I'm missing, I'm always eager to learn!
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Electron
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Re: 60/40: They're coming for you

Post by Electron »

Barron's currently has an article online entitled "Yields Are Above 8%. It’s Time to Get Excited About Income Investing".

"In the bond market, yields in many cases have doubled, to around 8%, after one of the sharpest selloffs in history. This enhances the diversifying power of bonds in equity-heavy portfolios, and should revive interest in the traditional 60/40 mix of stocks and bonds."
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Marseille07
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Re: 60/40: They're coming for you

Post by Marseille07 »

SnowBog wrote: Mon Jul 04, 2022 11:33 pm I'd be curious for what you see when you "look"...

What I've seen is a few years ago the louder camp had the view that rates would and could continue to fall, that going into negative rate territory was on the horizon... The other camp had the view that rates had to come up sometime... But most people laughed off ideas of I Bonds and TIPS. (I was buying them then - as they were part of my plan.)

When rates started going up, I Bonds and TIPS started becoming super popular - with threads upon threads discussing them (before being merged).

Throughout both periods, a small group basically yawned said "I've seen this before..." And I'm butchering the statistic, but I want to say there's one about people falsely predicting which way interest rates were moving is far, far, far more common that most people expect.

With that in mind, I'm of the view "there's nothing to see here". The markets are doing what they've done before, and will do again. I've set my AA, plotted my course, and the rest is the noise of the day that's trying to veer me off course. My job is to try to tune it out, and keep the ship sailing in the direction I plotted. In other words, "stay the course"...

So if you have insights I'm missing, I'm always eager to learn!
I didn't mean anything super analytical or groundbreaking, just seeing that as the yields rise, the NAV goes down but will eventually recover via the higher coupon rate. When the yields fall, the opposite happens.

I think one takeaway though is that BND's duration might be too long. "Safe assets" going -11% isn't kosher in my opinion.
Last edited by Marseille07 on Tue Jul 05, 2022 10:35 am, edited 1 time in total.
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HanSolo
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Re: 60/40: They're coming for you

Post by HanSolo »

McQ wrote: Fri Jul 01, 2022 1:39 pm Back in May I read a report in Barron’s that the 60/40 balanced mix was on track for its worst year ever. The comment seemed silly from multiple angles:
Barron's article (11/4/2021, Steve Garmhausen): "The 60/40 Portfolio Is Dead. Here's How Advisors Are Replacing it."

Barron's article (6/17/2022, Randall W. Forsyth): "The 60/40 Stock and Bond Strategy's Time Has Come Again"
Ride on, 60/40, ride on.
Indeed. The more things change, the more they stay the same.
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