arcticpineapplecorp. wrote: ↑Thu Jun 08, 2023 7:23 am... it is total return that matters, not the individual components in and of themselves. If you don't like an individual component because it underperforms for a time and you throw it out of your portfolio, what exactly do you have left?
I wouldn't "throw out" a portfolio component just because occasionally it hiccups. But if it had essentially one job - and spectacularly failed in that job, then yes, it's time to reevaluate its role, and why it's being held. If intermediate-term bonds had a solid history of doing well, and then just once stumbled... hey, why be harsh? But if their role was to be stable - at the cost of returning much less than stocks year after year - yet here they were, doing WORSE than stocks - uh, doesn't that put the whole concept into question?
Consider this analogy. Suppose that one owns a Corvette and a Corolla. The Corvette is fast, delightful to drive, but also gets mediocre gas mileage and is costly to maintain. The Corolla is boring, performs poorly, but is reliable and economical to run. It isn't there for racing or bragging or pleasure-drives. It's just yeoman transportation. It's there to keep overall costs down, and to preserve the Corvette. Well, suppose that the Corolla becomes temperamental... in the shop often, with high repair bills... gas mileage drops to 10 mpg... some mornings it won't even start. Why then even own the Corolla? Might as well get rid of it, and daily-drive the Corvette.
And I'm sorry, but I expect decent results from ALL of the components of my portfolio,
with respect to their respective roles. If for some reason I invest in a speculative high-flier stock, some great scheme that's going to break-out and remake the world, but this fantastic stock of mine only chugs along, matching the S&P 500... then it's not meeting its intended purpose. I'm going to hold it to a higher standard, than I do, my equity index funds. So indeed the performance of individual components matters, as individuals, and not just as the aggregate.