Losses with Total Bond market index fund, suggestions on next steps
Losses with Total Bond market index fund, suggestions on next steps
Hi Folks,
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
- bertilak
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Re: Losses with Total Bond market index fund, suggestions on next steps
I don't think you should go performance chasing. You should be looking at your overall asset allocation (AA). If you've had a big loss in bonds then perhaps you need to buy some more to push your AA back to where it should be.trybogle wrote: ↑Sun Jun 04, 2023 12:32 pm Hi Folks,
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
BUT, this is a chance to do some Tax Loss Harvesting (TLH) you can use the lose to:
- offset any realized gains you have, or expect to have, or
- buy bonds you are more comfortable with. For example, I used this opportunity to switch to short term TIPS.
- adjust your AA if you want to.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet
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Re: Losses with Total Bond market index fund, suggestions on next steps
I would propose that if you sell this fund now and then use the proceeds to purchase the vanguard mega cap growth fund (which you report has done well recently), then you'll be selling low and buying high.
Re: Losses with Total Bond market index fund, suggestions on next steps
Bonds go up and down. Stocks go up and down even more. If your ups and downs in bonds were uncomfortable you should be scared to death to be in stocks. Buying anything based on recent good performance can easily be a big mistake. While it is true that mega caps have soared in the recent few years, within the last 20 years that growth fund has had drawdowns of 50% and nearly 30%, as have other stock funds. This is not a magic bullet. A target date fund is just owning stocks and bonds in one fund, most often that very total bond index fund at some allocation. But, if you like risk you can certainly make choices such as all stocks out to all mega stocks. You pay your money and you take your choice.
You can avoid the ups and downs of a bond fund by going to shorter duration or to zero duration, meaning cash, CDs, some kinds of annuities, in nominal dollars or to I bonds in real dollars, not that doing so necessarily produces a better portfolio outcome over time.
In fact a reasonable portfolio allocation to stocks and bonds held for the long term is fine and ups and downs come with the territory. If you are not investing for the long term, that is a different question. Long term means, for example, the 60 years between earning serious money at age 30 to dying at age 90, or whatever range applies around that -- 20-80 years perhaps at the shortest and longest extremes of long term.
You can avoid the ups and downs of a bond fund by going to shorter duration or to zero duration, meaning cash, CDs, some kinds of annuities, in nominal dollars or to I bonds in real dollars, not that doing so necessarily produces a better portfolio outcome over time.
In fact a reasonable portfolio allocation to stocks and bonds held for the long term is fine and ups and downs come with the territory. If you are not investing for the long term, that is a different question. Long term means, for example, the 60 years between earning serious money at age 30 to dying at age 90, or whatever range applies around that -- 20-80 years perhaps at the shortest and longest extremes of long term.
Last edited by dbr on Sun Jun 04, 2023 12:55 pm, edited 1 time in total.
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Re: Losses with Total Bond market index fund, suggestions on next steps
I mean...if you *really* don't need this allocation for any purpose, then you should get rid of it and invest in something else.trybogle wrote: ↑Sun Jun 04, 2023 12:32 pm Hi Folks,
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
But you should review how you ended up holding an unnecessary allocation to begin with.
Re: Losses with Total Bond market index fund, suggestions on next steps
@trybogle, what other funds that you own have lost money? Surely, there must be some I would think. What are you going to do about them?
Re: Losses with Total Bond market index fund, suggestions on next steps
So what you are saying is that you want to sell low after buying high?trybogle wrote: ↑Sun Jun 04, 2023 12:32 pm Hi Folks,
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
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Re: Losses with Total Bond market index fund, suggestions on next steps
If you are “aligned with the 3-fund approach” then the most you should do is rebalance your holdings to an allocation policy if you have one.
If not, are you regretting not having moved before the fund value dropped and actually market timing?
Or not comfortable with the risk associated with your policy allocation?
Unless you have a bucket approach or other special requirements, all liquid assets including the funds in question are part of your overall portfolio and should probably be managed as such.
If not, are you regretting not having moved before the fund value dropped and actually market timing?
Or not comfortable with the risk associated with your policy allocation?
Unless you have a bucket approach or other special requirements, all liquid assets including the funds in question are part of your overall portfolio and should probably be managed as such.
A strategy that works only in bull markets isn’t much of a strategy. Anyway, four dollars a pound.
Re: Losses with Total Bond market index fund, suggestions on next steps
I am very okay with market gyrations, but wanted to make sure it was okay to leave the fund "as is".
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
Re: Losses with Total Bond market index fund, suggestions on next steps
Unless you have held Total Bond Market Index for less than 5 years, you are not “down” at all. Bonds pay income. Over the long run, that is all that will matter. Total Bond Index is paying more income now than it did over the past few years. That will help you over the long run. In your early 40s, what has happened over the past 5 years is unimportant. You have another 40 or 50 year of investing potentially.
It would be helpful at this stage of life to determine exactly how much you want in equities and how much you want in bonds.
It would be helpful at this stage of life to determine exactly how much you want in equities and how much you want in bonds.
Re: Losses with Total Bond market index fund, suggestions on next steps
Is this in a 401k or IRA?trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm I am very okay with market gyrations, but wanted to make sure it was okay to leave the fund "as is".
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
- ruralavalon
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Re: Losses with Total Bond market index fund, suggestions on next steps
You said "I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) ." What do you mean when you say "dormant funds"? What is the purpose of this investment? Is this in an IRA? Is this in your 401k account?trybogle wrote: ↑Sun Jun 04, 2023 12:32 pm Hi Folks,
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
What other accounts do you have?
Using a target date fund is a good choice for a novice investor.
But it's important to know is the overall picture. What accounts do you have and what investments do you have in each account? What funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios. Do you have debt? If so what types, amounts and interest rates?
Please see Asking Portfolio Questions for information needed and format.
You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Losses with Total Bond market index fund, suggestions on next steps
This is my savings account, 401K is with Fidelity. I realize I need to take a step back and relook at all accounts.the_wiki wrote: ↑Sun Jun 04, 2023 1:22 pmIs this in a 401k or IRA?trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm I am very okay with market gyrations, but wanted to make sure it was okay to leave the fund "as is".
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
Re: Losses with Total Bond market index fund, suggestions on next steps
yes, thanks, will do, i need to have a comprehensive view.ruralavalon wrote: ↑Sun Jun 04, 2023 1:25 pmYou said "I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) ." What do you mean when you say "dormant funds"? What is the purpose of this investment? Is this in an IRA? Is this in your 401k account?trybogle wrote: ↑Sun Jun 04, 2023 12:32 pm Hi Folks,
I had some dormant funds sitting in VBTLX (Total Bond Market Index fund) and I realize I should have paid attention and moved out last year when the interest rates started to creep up.
I am down by about 11% overall (average from last few years)
I dont need the funds for any purpose, I am aligned with the 3-fund approach (using target funds) with my 401K and savings account.
Should I leave the funds in the VBTLX? I am not sure what to expect with the bond market going forward.
I dont have a finance background. Any suggestions would be really appreciated.
I am open to moving this to a target date fund, or Vanguard Mega Cap growth ETF which has done really well for me.
Thanks
What other accounts do you have?
Using a target date fund is a good choice for a novice investor.
But it's important to know is the overall picture. What accounts do you have and what investments do you have in each account? What funds are offered in your employer's 401k plan? Please give fund names, tickers and expense ratios. Do you have debt? If so what types, amounts and interest rates?
Please see Asking Portfolio Questions for information needed and format.
You can simply add this to your original post using the edit button (the pencil icon near the upper right corner of your post), it helps a lot if all of your information is in one place.
By Dormant, i meant I am not actively investing in VBTLX.
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Re: Losses with Total Bond market index fund, suggestions on next steps
We continue to invest in the three fund portfolio. Yes, we are even buying bonds. We also did a little Tax Loss Harvesting (TLH). Overtime, the bond funds will be fine. It’s unfortunate that bonds dropped so much, but we know the cause. Stay the course.
"I started with nothing and I still have most of it left."
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Re: Losses with Total Bond market index fund, suggestions on next steps
It is not OK to leave it as is when you say you don't need the allocation for any purpose and you now realize you've overlooked it. Take action soon.trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm I am very okay with market gyrations, but wanted to make sure it was okay to leave the fund "as is".
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
Re: Losses with Total Bond market index fund, suggestions on next steps
I have been doing a ladder approach with buying notes/bills, but have been recently leveraging the vanguard cash fund that is paying 4.5%.toddthebod wrote: ↑Sun Jun 04, 2023 1:35 pm I'm reminded of my favorite comment of all time on this forum:
I know my original question lacks details to give any reasonable guidance
I need to take a finance 101 class that is bogle aligned.
- goodenyou
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Re: Losses with Total Bond market index fund, suggestions on next steps
You're in Finance 101. It's called Bogleheads.com. If you "don't need the money right now", let the losses be your friend and continue to buy more at a discount. The rebound in your investment, when it happens, will reward you handsomely.trybogle wrote: ↑Sun Jun 04, 2023 1:45 pmI have been doing a ladder approach with buying notes/bills, but have been recently leveraging the vanguard cash fund that is paying 4.5%.toddthebod wrote: ↑Sun Jun 04, 2023 1:35 pm I'm reminded of my favorite comment of all time on this forum:
I know my original question lacks details to give any reasonable guidance
I need to take a finance 101 class that is bogle aligned.
"Staying the Course" is not repeated here for nothing. It is an admonishment that prevents you from making the error of buying high and selling low. Investing takes patience and time. It's not easy.
"Ignorance more frequently begets confidence than does knowledge" |
“At 50, everyone has the face he deserves”
Re: Losses with Total Bond market index fund, suggestions on next steps
You're only allowed a bond allocation if you have a specific purpose for it? Just because the OP hasn't fully thought through the approach doesn't mean they need to take action soon, especially with the fixed income portion of their portfolio.Marseille07 wrote: ↑Sun Jun 04, 2023 1:45 pmIt is not OK to leave it as is when you say you don't need the allocation for any purpose and you now realize you've overlooked it. Take action soon.trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm I am very okay with market gyrations, but wanted to make sure it was okay to leave the fund "as is".
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
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Re: Losses with Total Bond market index fund, suggestions on next steps
I didn't say you're not allowed. What I'm saying is each allocation should be purposeful. Under no circumstances should you be saying "this 10% X allocation here doesn't have any purpose."
Re: Losses with Total Bond market index fund, suggestions on next steps
Rebalance.
The End
The End
Re: Losses with Total Bond market index fund, suggestions on next steps
There's clearly a needed purpose of reducing market movement here, and that should be enough of a purpose.Marseille07 wrote: ↑Sun Jun 04, 2023 2:11 pmI didn't say you're not allowed. What I'm saying is each allocation should be purposeful. Under no circumstances should you be saying "this 10% X allocation here doesn't have any purpose."
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Re: Losses with Total Bond market index fund, suggestions on next steps
Yes.
The overall stock:bond AA of the above is 50:50.trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
Your target date fund (VTTVX) is a fund-of-funds with a 55:45 stock:bond ratio (and it includes VBTLX).
You have a significant tilt to mega cap growth here (it's 50% of the equity allocation indicated).
You've done fine, as long as you were intending to be super aggressive within the equity allocation and balancing that with a moderate stock:bond AA.
What does this mean? You can't hold mutual funds in a savings account. Is it a taxable account? A traditional IRA? A Roth IRA?
So the AA above does not include your 401k... What does your entire portfolio look like? And what type of account is each fund/holding in?
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: Losses with Total Bond market index fund, suggestions on next steps
OP actually said the funds are not needed for any purpose. I interpreted the statement as saying OP does not currently need (to withdraw) the funds for other purposes, and is simply unsure whether or not to change how they are invested. Not a statement that the bond fund definitely has no purpose for them, just uncertainty whether something else might be better. I think leaving it alone would be what I would do.Marseille07 wrote: ↑Sun Jun 04, 2023 2:21 pmThat is a valid purpose, not opposing that at all. The OP said total bond doesn't have any purpose, which is what I pointed out as an issue.
Re: Losses with Total Bond market index fund, suggestions on next steps
thanks, I was implying a taxable account when I said savings account. I will pull together my 401k as well and get a broader guidance.Beensabu wrote: ↑Sun Jun 04, 2023 2:22 pmYes.
The overall stock:bond AA of the above is 50:50.trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
Your target date fund (VTTVX) is a fund-of-funds with a 55:45 stock:bond ratio (and it includes VBTLX).
You have a significant tilt to mega cap growth here (it's 50% of the equity allocation indicated).
You've done fine, as long as you were intending to be super aggressive within the equity allocation and balancing that with a moderate stock:bond AA.
What does this mean? You can't hold mutual funds in a savings account. Is it a taxable account? A traditional IRA? A Roth IRA?
So the AA above does not include your 401k... What does your entire portfolio look like? And what type of account is each fund/holding in?
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Re: Losses with Total Bond market index fund, suggestions on next steps
But the idea is that one would hold bonds to reduce portfolio volatility, whether you're withdrawing or not.rbd789 wrote: ↑Sun Jun 04, 2023 2:30 pm OP actually said the funds are not needed for any purpose. I interpreted the statement as saying OP does not currently need (to withdraw) the funds for other purposes, and is simply unsure whether or not to change how they are invested. Not a statement that the bond fund definitely has no purpose for them, just uncertainty whether something else might be better. I think leaving it alone would be what I would do.
And if you are holding bonds for that purpose, you wouldn't be asking about Vanguard Mega Cap growth ETF.
Re: Losses with Total Bond market index fund, suggestions on next steps
True, I agree. It sounded like OP was looking for "permission" to chase return rather than hold on. I personally would hold on rather than sell the bond fund at a low.Marseille07 wrote: ↑Sun Jun 04, 2023 2:50 pmBut the idea is that one would hold bonds to reduce portfolio volatility, whether you're withdrawing or not.rbd789 wrote: ↑Sun Jun 04, 2023 2:30 pm OP actually said the funds are not needed for any purpose. I interpreted the statement as saying OP does not currently need (to withdraw) the funds for other purposes, and is simply unsure whether or not to change how they are invested. Not a statement that the bond fund definitely has no purpose for them, just uncertainty whether something else might be better. I think leaving it alone would be what I would do.
And if you are holding bonds for that purpose, you wouldn't be asking about Vanguard Mega Cap growth ETF.
Re: Losses with Total Bond market index fund, suggestions on next steps
Your taxable account appears to hold 50% bonds. Please read up on the tax implications of asset LOCATION. Bonds should preferentially be held in your tax deferred accounts (ie, 401k).
It might be possible to sell your “down” bond funds at a loss, and buy efficient stock index funds in your taxable account, then rebalance to your desired stock/bond mix in your tax-deferred account.
Above all else, SIMPLIFY.
It might be possible to sell your “down” bond funds at a loss, and buy efficient stock index funds in your taxable account, then rebalance to your desired stock/bond mix in your tax-deferred account.
Above all else, SIMPLIFY.
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Re: Losses with Total Bond market index fund, suggestions on next steps
Sell those bonds now and lock in losses? I wouldn't do it unless you are trying to offset gains somewhere else.
Re: Losses with Total Bond market index fund, suggestions on next steps
The three fund approach is for all your assets whether in a 401k, brokerage, savings, etc. VBTLX would be part of that bond allocation before and would continue to be now. The only question is whether you are following the plan to rebalance to your designated asset allocation and whether you have assets located most sensibly for tax efficiency. What to expect from the bond market, or from the stock market for that matter, going forward is irrelevant just as whatever the recent past history has been is irrelevant. Otherwise you have a different idea than the idea of a portfolio allocation distributed across broad index funds of US and international stocks and a bond index fund. (Not, as they say, that there is anything wrong with that, but in that case you need to be explicit in your understanding of what your investment plan idea is.)
Re: Losses with Total Bond market index fund, suggestions on next steps
Your portfolio is about 50% bonds and 40% large cap growth. What is your target allocation?trybogle wrote: ↑Sun Jun 04, 2023 1:13 pm I am very okay with market gyrations, but wanted to make sure it was okay to leave the fund "as is".
I am not looking to cash out anytime soon (early 40s).
Below is my AA, i know i am bond heavy, I would like to transition to equities.
VBTLX 10%
VWITX (intermediate term tax exempt) 20%
VTTVX (2025 target fund) 45%
MGK (Mega Cap growth). 25% --> I have been contributing monthly to this fund since 2021 while the rest are in hold pattern.
I haven't done a good job with this.
Why are you concerned with the fund that only comprises 1/5 of your bond allocation?
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Re: Losses with Total Bond market index fund, suggestions on next steps
The thing you are not understanding is that all other market participants saw the same (past) movement in interest rates last year that you saw and listened to the same talking heads to which you listened at the time, and this "information" was fully reflected in the prevailing bond prices and interest rates. Did you know something that others did not know?
The only reasonable question you should be asking yourself (now) is do you want to hold a diversified basket of bonds? If you do not want to do that now - but you did want to do that when rates (both nominal and real) were much lower - I would respectfully suggest you need a better understanding of bonds.
Best regards, -Op |
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