Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by TheTimeLord »

willthrill81 wrote: Thu May 05, 2022 10:05 am BND dropping to a new low today.
Interesting, a couple recently purchased rungs in my bond later have turned green today. Not that it matters since I will be holding until maturity barring an unexpected collapse in rates.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
User avatar
Doc
Posts: 10607
Joined: Sat Feb 24, 2007 12:10 pm
Location: Two left turns from Larry

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by Doc »

TheTimeLord wrote: Thu May 05, 2022 10:11 am
willthrill81 wrote: Thu May 05, 2022 10:05 am BND dropping to a new low today.
Interesting, a couple recently purchased rungs in my bond later have turned green today. Not that it matters since I will be holding until maturity barring an unexpected collapse in rates.
I've got one in the black too.

(I use Quicken and the table show gains/losses in red/black not red/green. :D )
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by TheTimeLord »

Doc wrote: Thu May 05, 2022 10:32 am
TheTimeLord wrote: Thu May 05, 2022 10:11 am
willthrill81 wrote: Thu May 05, 2022 10:05 am BND dropping to a new low today.
Interesting, a couple recently purchased rungs in my bond later have turned green today. Not that it matters since I will be holding until maturity barring an unexpected collapse in rates.
I've got one in the black too.

(I use Quicken and the table show gains/losses in red/black not red/green. :D )
FWIW, all of mine are currently under 2 years in duration. I have been adding on rate spikes.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
User avatar
Doc
Posts: 10607
Joined: Sat Feb 24, 2007 12:10 pm
Location: Two left turns from Larry

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by Doc »

TheTimeLord wrote: Thu May 05, 2022 11:04 am
Doc wrote: Thu May 05, 2022 10:32 am
TheTimeLord wrote: Thu May 05, 2022 10:11 am
willthrill81 wrote: Thu May 05, 2022 10:05 am BND dropping to a new low today.
Interesting, a couple recently purchased rungs in my bond later have turned green today. Not that it matters since I will be holding until maturity barring an unexpected collapse in rates.
I've got one in the black too.

(I use Quicken and the table show gains/losses in red/black not red/green. :D )
FWIW, all of mine are currently under 2 years in duration. I have been adding on rate spikes.
If you are addressing only Treasuries mine are all under 2 years also. Corps are similar to a 1-10 index but divided into short and intermediate for efficient tax placement.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
UpperNwGuy
Posts: 9479
Joined: Sun Oct 08, 2017 7:16 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by UpperNwGuy »

Is anybody here using ladders of iShares iBonds instead of ladders of individual treasuries?
Carol88888
Posts: 711
Joined: Wed Jan 24, 2018 1:24 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by Carol88888 »

I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by willthrill81 »

Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
The Sensible Steward
User avatar
LilyFleur
Posts: 3499
Joined: Fri Mar 02, 2018 9:36 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by LilyFleur »

willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
I moved half of my total bond market fund into the stable value fund in my 401k in 2020. I wish I had moved all of it. I'm not the only one here who has moved funds into the stable value fund. I'm not comfortable with locking in a higher loss to move the rest of the total bond market allocation at this time.

I'm almost thinking I'd rather have equity index funds at a higher allocation with the stable value fund for fixed income. Currently I'm 60% stock index funds/19% bond index fund/21% stable value fund.

This is one reason why I will never completely move my savings from the 401k to an IRA. IRAs do not have stable value funds.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by dbr »

Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
In the long term bonds are lower returning and less volatile than stocks. This means one can set up a portfolio with some range of trade-off between low risk and low return and high risk and high return. One does this to best match the range of possible results to what one wants to do. None of this means that either stocks or bonds can't take large excursions on infrequent intervals. Current 10% losses in bonds are large for bonds. For stocks the equivalent would be declines of 50% or more, which can happen. It certainly does not mean that bonds must go up when stocks go down or can't also go down when stocks go down. On average movements in stocks and bonds are roughly uncorrelated. That can mean that sometimes they move in the same direction and sometimes they don't. Rebalancing is not for the purpose of buying stocks when stocks are down. It is for the purpose of managing the risk selection by keeping the proportion between stocks and bonds at a selected point. Right now rebalancing is not needed.

Ballast is a concept that is useful when analyzing the buoyant stability of ships but has nothing to do with investing. I guess those metaphors get bandied about because for some it is a more intuitive way to grasp a concept than to actually look at numbers and do math.

Investing only in stocks or only in bonds could be reasonable for anyone in particular depending on how that matches what they want to do. It is also true that the long term prospects for investing can change over secular (meaning slow) time frames. That is why we have bull and bear markets in investing. Interest rates and inflation in the US have recently experienced forty year time period of increasing interest rates from 1940 to 1980 and falling interest rates from 1980 to 2020. Nothing that is going on in the current few years is any notice at all of what might occur over the next 40 or 80 years.

Investing is a long game. If a person is working on a time line of less than ten years they should probably not own either stocks or bonds other than short bonds, T bills, CDs, etc. and not stocks at all.
rebellovw
Posts: 1748
Joined: Tue Aug 16, 2016 4:30 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by rebellovw »

willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.

I picked TBM because of bogleheads - I joined back in 2016 - read the wiki's etc - and I've done very well. Yes BND is down - and now I have to change my plans - but I have time. Not to mention there are not many options in the 401Ks that I deal with - BND is the only low cost option for fixed assets.

I'm not going to stop buying TBM since after all - it is crazy low.

I'm staying the course. Im not happy about it - but it is what it is.
slicendice
Posts: 564
Joined: Tue Sep 22, 2020 12:08 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by slicendice »

willthrill81 wrote: Thu May 05, 2022 10:05 am BND dropping to a new low today.
Thankfully I don't hold BND, just EDV/TIPS :happy ...

I am somewhat serious. I expect the periodic trashing of EDV (still a ways to go before it surpasses its low).

I think I would be a little queasy if I subscribed to the "bonds are for safety"/"better to own the haystack" approach to bonds and had all my bonds in BND.
DS03
Posts: 131
Joined: Mon May 28, 2018 11:04 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by DS03 »

slicendice wrote: Thu May 05, 2022 1:33 pm
willthrill81 wrote: Thu May 05, 2022 10:05 am BND dropping to a new low today.
Thankfully I don't hold BND, just EDV/TIPS :happy ...

I am somewhat serious. I expect the periodic trashing of EDV (still a ways to go before it surpasses its low).

I think I would be a little queasy if I subscribed to the "bonds are for safety"/"better to own the haystack" approach to bonds and had all my bonds in BND.
I'm guessing BND will hold up better than your combination of EDV/TIPS if this continues. EDV down 3.9% just on the day (BND -1%).
User avatar
LilyFleur
Posts: 3499
Joined: Fri Mar 02, 2018 9:36 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by LilyFleur »

dbr wrote: Thu May 05, 2022 1:30 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
In the long term bonds are lower returning and less volatile than stocks. This means one can set up a portfolio with some range of trade-off between low risk and low return and high risk and high return. One does this to best match the range of possible results to what one wants to do. None of this means that either stocks or bonds can't take large excursions on infrequent intervals. Current 10% losses in bonds are large for bonds. For stocks the equivalent would be declines of 50% or more, which can happen. It certainly does not mean that bonds must go up when stocks go down or can't also go down when stocks go down. On average movements in stocks and bonds are roughly uncorrelated. That can mean that sometimes they move in the same direction and sometimes they don't. Rebalancing is not for the purpose of buying stocks when stocks are down. It is for the purpose of managing the risk selection by keeping the proportion between stocks and bonds at a selected point. Right now rebalancing is not needed.

Ballast is a concept that is useful when analyzing the buoyant stability of ships but has nothing to do with investing. I guess those metaphors get bandied about because for some it is a more intuitive way to grasp a concept than to actually look at numbers and do math.

Investing only in stocks or only in bonds could be reasonable for anyone in particular depending on how that matches what they want to do. It is also true that the long term prospects for investing can change over secular (meaning slow) time frames. That is why we have bull and bear markets in investing. Interest rates and inflation in the US have recently experienced forty year time period of increasing interest rates from 1940 to 1980 and falling interest rates from 1980 to 2020. Nothing that is going on in the current few years is any notice at all of what might occur over the next 40 or 80 years.

Investing is a long game. If a person is working on a time line of less than ten years they should probably not own either stocks or bonds other than short bonds, T bills, CDs, etc. and not stocks at all.
You do realize there are a lot of older people on this forum? If you could provide a crystal ball so we know if we have ten more years or not, that would be great! :mrgreen:
slicendice
Posts: 564
Joined: Tue Sep 22, 2020 12:08 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by slicendice »

DS03 wrote: Thu May 05, 2022 1:55 pm I'm guessing BND will hold up better than your combination of EDV/TIPS if this continues. EDV down 3.9% just on the day (BND -1%).
Over the next 5 years... almost certainly. Over the next 30, I doubt it.

It is actually not the daily price movements that are concerning with nominal bonds right now.
It's the likely second year of double digit negative real returns that are the bitter pill.
DS03
Posts: 131
Joined: Mon May 28, 2018 11:04 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by DS03 »

slicendice wrote: Thu May 05, 2022 2:27 pm
DS03 wrote: Thu May 05, 2022 1:55 pm I'm guessing BND will hold up better than your combination of EDV/TIPS if this continues. EDV down 3.9% just on the day (BND -1%).
Over the next 5 years... almost certainly. Over the next 30, I doubt it.

It is actually not the daily price movements that are concerning with nominal bonds right now.
It's the likely second year of double digit negative real returns that are the bitter pill.
Over the next 30, hopefully stocks will be carrying the load once again over any sort of bond out there. :happy
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by dbr »

LilyFleur wrote: Thu May 05, 2022 2:02 pm
You do realize there are a lot of older people on this forum? If you could provide a crystal ball so we know if we have ten more years or not, that would be great! :mrgreen:
I have been alive for almost all of that 1940-2020 time line I referenced. I am a pre baby-boomer having been born in wartime.

I won't claim to have changed America, but here is the book on that generation: http://northwestprimetime.com/news/2015 ... 0historian.
Last edited by dbr on Thu May 05, 2022 3:17 pm, edited 1 time in total.
ALinLI
Posts: 172
Joined: Thu Jun 02, 2011 9:04 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by ALinLI »

So if fast forward 5 to 6 years total bond is yielding 4 to 5% and inflation is back at 2 to 3 %. Bingo am getting real yield of 2% not terrible
User avatar
Kevin M
Posts: 15788
Joined: Mon Jun 29, 2009 3:24 pm
Contact:

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by Kevin M »

Image

Note that BND recovered some from it's low today of -1.4% to end at -1.0%.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by rockstar »

willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
We've discussed this throughout the pandemic. Bonds make the most sense when rates are dropping. When you're near zero, you can really only go up.
abc132
Posts: 2435
Joined: Thu Oct 18, 2018 1:11 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by abc132 »

willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
I rebalanced in February and netted +10% over stocks. Bonds have saved more than 4% to my net worth this year despite being less than 30% of my portfolio, and in spite of your claims about rebalancing being impossible.

I'm not sure what lesson you think you are are teaching, but I expect further benefit from bonds if the market decreases further. I am happy to own them, and happy to sell them if stocks further decline.
Topic Author
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by 000 »

Oof. :oops:

Well, perhaps a little ways to the bottom yet. :shock:
ALinLI
Posts: 172
Joined: Thu Jun 02, 2011 9:04 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by ALinLI »

I don't try to time the bond market and bond funds are behaving as advertised they have short term volatility due to interest rate risk and no guarantee of negative correlation to equities. I will not be selling most of my bond funds for another 10 years. I will take the higher yield thank u very much especially if inflation is checked soon
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by TheTimeLord »

abc132 wrote: Thu May 05, 2022 3:39 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
I rebalanced in February and netted +10% over stocks. Bonds have saved more than 4% to my net worth this year despite being less than 30% of my portfolio, and in spite of your claims about rebalancing being impossible.

I'm not sure what lesson you think you are are teaching, but I expect further benefit from bonds if the market decreases further. I am happy to own them, and happy to sell them if stocks further decline.
Could you share the bond funds and math for this? I am intrigued.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
abc132
Posts: 2435
Joined: Thu Oct 18, 2018 1:11 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by abc132 »

TheTimeLord wrote: Thu May 05, 2022 3:50 pm
abc132 wrote: Thu May 05, 2022 3:39 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
I rebalanced in February and netted +10% over stocks. Bonds have saved more than 4% to my net worth this year despite being less than 30% of my portfolio, and in spite of your claims about rebalancing being impossible.

I'm not sure what lesson you think you are are teaching, but I expect further benefit from bonds if the market decreases further. I am happy to own them, and happy to sell them if stocks further decline.
Could you share the bond funds and math for this? I am intrigued.
30%*10% would be +3%, but I am throwing in individual bonds, which is what gets me to 4% savings by owning bonds this year.

I-Bonds are quite a bit above stocks, around 17% ytd.
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by TheTimeLord »

abc132 wrote: Thu May 05, 2022 4:10 pm
TheTimeLord wrote: Thu May 05, 2022 3:50 pm
abc132 wrote: Thu May 05, 2022 3:39 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
I rebalanced in February and netted +10% over stocks. Bonds have saved more than 4% to my net worth this year despite being less than 30% of my portfolio, and in spite of your claims about rebalancing being impossible.

I'm not sure what lesson you think you are are teaching, but I expect further benefit from bonds if the market decreases further. I am happy to own them, and happy to sell them if stocks further decline.
Could you share the bond funds and math for this? I am intrigued.
30%*10% would be +3%, but I am throwing in individual bonds, which is what gets me to 4% savings by owning bonds this year.

I-Bonds are quite a bit above stocks, around 17 ytd%.
You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
manuvns
Posts: 1465
Joined: Wed Jan 02, 2008 1:30 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by manuvns »

Why is AGG/BND down more or almost the same as HYG / junk bonds ? Aren't they safer than Junk bonds ?
Thanks!
User avatar
mrspock
Posts: 2158
Joined: Tue Feb 13, 2018 1:49 am
Location: Vulcan

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by mrspock »

Bond + interest rate predictions... because they are fun:

1. The period we find ourselves in, will be the "compressed" version of the 1970s, they will write about this in textbooks in the future, and compare/contrast this era to the (Paul) Volcker era.

2. Bonds will go through the same drop, but just much quicker, as the speed of information is so much quicker today, and data analysis tools so much more powerful (for everyone).

3. Everyone will get their answer to the question: How are we going to pay for all of this debt? Answer: Bond holders financed it all via inflation (caused by monetization policies). Sure they will be "made whole" in nominal terms per their average duration, but in real terms... it will take a lonnnnng time for them to ever see their money again.

4. Everyone will get their answer to "What happens when you print trillions of dollars year after year after year." Answer: Inflation.

Open question:
1. Why aren't bond holders demanding higher interest rates?

Discuss.
AZAttorney11
Posts: 895
Joined: Wed Jan 21, 2015 11:12 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by AZAttorney11 »

mrspock wrote: Thu May 05, 2022 5:05 pm Open question:
1. Why aren't bond holders demanding higher interest rates?

Discuss.
I'd say bond holders are absolutely demanding higher interest rates based on bond prices and yields over the past few months.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by dbr »

manuvns wrote: Thu May 05, 2022 4:59 pm Why is AGG/BND down more or almost the same as HYG / junk bonds ? Aren't they safer than Junk bonds ?
The duration of HYG is actually a little less than the duration of AGG or BND. Hence HYG may be at a little less term risk than AGG. Current bond fund NAV losses are a result of term risk when interest rates increase.

The SD of annual returns from 2008 was 11% vs 4%. A factor regression for the two shows that the term loading was .30 vs .32 but the credit risk loading was .83 vs .13. So HYG is more risky due to credit risk but not due to term risk.

It is not meaningful to apply the word "safe" to investments without being specific as to what one is talking about.
Topic Author
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by 000 »

mrspock wrote: Thu May 05, 2022 5:05 pm Open question:
1. Why aren't bond holders demanding higher interest rates?

Discuss.
Because deflation is still a very real risk here, possibly due to a policy error.

You mention the 70s which were bad for bonds overall, but there was a recessionary period contained within the 70s where one would have been happy to be in bonds.

You have to survive to succeed.
HootingSloth
Posts: 1050
Joined: Mon Jan 28, 2019 2:38 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by HootingSloth »

mrspock wrote: Thu May 05, 2022 5:05 pm Bond + interest rate predictions... because they are fun:

1. The period we find ourselves in, will be the "compressed" version of the 1970s, they will write about this in textbooks in the future, and compare/contrast this era to the (Paul) Volcker era.

2. Bonds will go through the same drop, but just much quicker, as the speed of information is so much quicker today, and data analysis tools so much more powerful (for everyone).

3. Everyone will get their answer to the question: How are we going to pay for all of this debt? Answer: Bond holders financed it all via inflation (caused by monetization policies). Sure they will be "made whole" in nominal terms per their average duration, but in real terms... it will take a lonnnnng time for them to ever see their money again.

4. Everyone will get their answer to "What happens when you print trillions of dollars year after year after year." Answer: Inflation.

Open question:
1. Why aren't bond holders demanding higher interest rates?

Discuss.
My predictions, just because it is fun (I have no idea what will happen):

1. No one will much remember this more than a few years from now, but it will be an obscure trivia answer when people look at maximum drawdowns of nominal bonds, and the HFEA folks will get further crushed until most capitulate. Bogleheads will refer to that thread, and the strategy's demise, forever and ever in much the same way as the market timer thread.

2. The debt will mostly just continue to rise and rise and rise, but a bit will be paid by some inflation, a bit will be paid by some slightly-lame deficit reduction, and it all will be diluted somewhat by continued growth.

3. Inflation will end up being kinda sorta transitoryish after all and not as bad as everyone is currently fearing.

4. No matter what happens, people will say that the Fed would have done so much better if they had just done the obvious thing that the speaker was saying to do all along.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
Topic Author
000
Posts: 8211
Joined: Thu Jul 23, 2020 12:04 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by 000 »

manuvns wrote: Thu May 05, 2022 4:59 pm Why is AGG/BND down more or almost the same as HYG / junk bonds ? Aren't they safer than Junk bonds ?
You know what they say about bond investing: duration, duration, duration. :mrgreen:
abc132
Posts: 2435
Joined: Thu Oct 18, 2018 1:11 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by abc132 »

TheTimeLord wrote: Thu May 05, 2022 4:17 pm You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
I say bonds, which was the complaint, and you are substituting bond funds.

I will note that even my bond funds produced great rebalancing points that I took advantage of earlier in the year:

A) Rebalancing Bond Funds
1/25 VBIMX (-1.44%) sold for a +5.76% gain relative to owning VFSAX (-7.19% on 1/25)
1/27 VBIMX (-1.78%) sold for a +6.84% gain relative to owning VFSAX (-8.62% on 1/27)
2/23 VFITX (-2.31%) sold for a +6.15% gain relative to owning VFSAX (-8.46% on 2/23)

B) Bonds that are not funds, relative to stocks
I - Bonds: +18%
EE- Bonds: +15%
Individual Treasuries +15%

Bonds funds have provided rebalancing opportunities, and individual bonds have provided even better rebalancing opportunities.

Getting to +4% ytd from bonds requires 20% of the former and 80% of the latter for a 30% bond portfolio.
(0.20*(6%) + 0.8*(15%))*0.30 = +3.96% for the portfolio

*Note: This were my trades, but I benefitted additionally from rebalancing into things that are up YTD from their purchase, which is offset by a small amount of bond funds that are still remaining in my portfolio.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by willthrill81 »

abc132 wrote: Thu May 05, 2022 5:26 pm
TheTimeLord wrote: Thu May 05, 2022 4:17 pm You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
I say bonds, which was the complaint, and you are substituting bond funds.

I will note that even my bond funds produced great rebalancing points that I took advantage of earlier in the year:

A) Rebalancing Bond Funds
1/25 VBIMX (-1.44%) sold for a +5.76% gain relative to owning VFSAX (-7.19% on 1/25)
1/27 VBIMX (-1.78%) sold for a +6.84% gain relative to owning VFSAX (-8.62% on 1/27)
2/23 VFITX (-2.31%) sold for a +6.15% gain relative to owning VFSAX (-8.46% on 2/23)
Good for you, but most here aren't rebalancing three times in a 30 day period.
The Sensible Steward
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by TheTimeLord »

abc132 wrote: Thu May 05, 2022 5:26 pm
TheTimeLord wrote: Thu May 05, 2022 4:17 pm You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
I say bonds, which was the complaint, and you are substituting bond funds.

I will note that even my bond funds produced great rebalancing points that I took advantage of earlier in the year:

A) Rebalancing Bond Funds
1/25 VBIMX (-1.44%) sold for a +5.76% gain relative to owning VFSAX (-7.19% on 1/25)
1/27 VBIMX (-1.78%) sold for a +6.84% gain relative to owning VFSAX (-8.62% on 1/27)
2/23 VFITX (-2.31%) sold for a +6.15% gain relative to owning VFSAX (-8.46% on 2/23)

B) Bonds that are not funds, relative to stocks
I - Bonds: +18%
EE- Bonds: +15%
Individual Treasuries +15%

Bonds funds have provided rebalancing opportunities, and individual bonds have provided even better rebalancing opportunities.

Getting to +4% ytd from bonds requires 20% of the former and 80% of the latter for a 30% bond portfolio.
(0.20*(6%) + 0.8*(15%))*0.30 = +3.96% for the portfolio

*Note: This were my trades, but I benefitted additionally from rebalancing into things that are up YTD from their purchase, which is offset by a small amount of bond funds that are still remaining in my portfolio.
Appreciate the responses, last question, in your calculations are you marking your individual treasuries to market?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
abc132
Posts: 2435
Joined: Thu Oct 18, 2018 1:11 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by abc132 »

TheTimeLord wrote: Thu May 05, 2022 5:44 pm
abc132 wrote: Thu May 05, 2022 5:26 pm
TheTimeLord wrote: Thu May 05, 2022 4:17 pm You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
I say bonds, which was the complaint, and you are substituting bond funds.

I will note that even my bond funds produced great rebalancing points that I took advantage of earlier in the year:

A) Rebalancing Bond Funds
1/25 VBIMX (-1.44%) sold for a +5.76% gain relative to owning VFSAX (-7.19% on 1/25)
1/27 VBIMX (-1.78%) sold for a +6.84% gain relative to owning VFSAX (-8.62% on 1/27)
2/23 VFITX (-2.31%) sold for a +6.15% gain relative to owning VFSAX (-8.46% on 2/23)

B) Bonds that are not funds, relative to stocks
I - Bonds: +18%
EE- Bonds: +15%
Individual Treasuries +15%

Bonds funds have provided rebalancing opportunities, and individual bonds have provided even better rebalancing opportunities.

Getting to +4% ytd from bonds requires 20% of the former and 80% of the latter for a 30% bond portfolio.
(0.20*(6%) + 0.8*(15%))*0.30 = +3.96% for the portfolio

*Note: This were my trades, but I benefitted additionally from rebalancing into things that are up YTD from their purchase, which is offset by a small amount of bond funds that are still remaining in my portfolio.
Appreciate the responses, last question, in your calculations are you marking your individual treasuries to market?
They are due within a few months, so no.
User avatar
TheTimeLord
Posts: 12130
Joined: Fri Jul 26, 2013 2:05 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by TheTimeLord »

abc132 wrote: Thu May 05, 2022 6:01 pm
TheTimeLord wrote: Thu May 05, 2022 5:44 pm
abc132 wrote: Thu May 05, 2022 5:26 pm
TheTimeLord wrote: Thu May 05, 2022 4:17 pm You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
I say bonds, which was the complaint, and you are substituting bond funds.

I will note that even my bond funds produced great rebalancing points that I took advantage of earlier in the year:

A) Rebalancing Bond Funds
1/25 VBIMX (-1.44%) sold for a +5.76% gain relative to owning VFSAX (-7.19% on 1/25)
1/27 VBIMX (-1.78%) sold for a +6.84% gain relative to owning VFSAX (-8.62% on 1/27)
2/23 VFITX (-2.31%) sold for a +6.15% gain relative to owning VFSAX (-8.46% on 2/23)

B) Bonds that are not funds, relative to stocks
I - Bonds: +18%
EE- Bonds: +15%
Individual Treasuries +15%

Bonds funds have provided rebalancing opportunities, and individual bonds have provided even better rebalancing opportunities.

Getting to +4% ytd from bonds requires 20% of the former and 80% of the latter for a 30% bond portfolio.
(0.20*(6%) + 0.8*(15%))*0.30 = +3.96% for the portfolio

*Note: This were my trades, but I benefitted additionally from rebalancing into things that are up YTD from their purchase, which is offset by a small amount of bond funds that are still remaining in my portfolio.
Appreciate the responses, last question, in your calculations are you marking your individual treasuries to market?
They are due within a few months, so no.
Thanks, appreciate your candor.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]
abc132
Posts: 2435
Joined: Thu Oct 18, 2018 1:11 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by abc132 »

willthrill81 wrote: Thu May 05, 2022 5:41 pm
abc132 wrote: Thu May 05, 2022 5:26 pm
TheTimeLord wrote: Thu May 05, 2022 4:17 pm You have to explain this because I am not following unless you are saying your bond funds outperformed equities by 10% which leads to what bonds funds you are using. Sorry for being dense.
I say bonds, which was the complaint, and you are substituting bond funds.

I will note that even my bond funds produced great rebalancing points that I took advantage of earlier in the year:

A) Rebalancing Bond Funds
1/25 VBIMX (-1.44%) sold for a +5.76% gain relative to owning VFSAX (-7.19% on 1/25)
1/27 VBIMX (-1.78%) sold for a +6.84% gain relative to owning VFSAX (-8.62% on 1/27)
2/23 VFITX (-2.31%) sold for a +6.15% gain relative to owning VFSAX (-8.46% on 2/23)
Good for you, but most here aren't rebalancing three times in a 30 day period.
If people have multiple accounts, I don't see why they wouldn't rebalance amongst multiple accounts. The number of trades is also irrelevant, as these are not cumulative gains.

They do show multiple rebalancing opportunities this year.
User avatar
nps
Posts: 1633
Joined: Thu Dec 04, 2014 9:18 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by nps »

rockstar wrote: Thu May 05, 2022 3:36 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
We've discussed this throughout the pandemic. Bonds make the most sense when rates are dropping. When you're near zero, you can really only go up.
People have been saying on this forum that rates have nowhere to go but up for more than a decade.
User avatar
willthrill81
Posts: 32250
Joined: Thu Jan 26, 2017 2:17 pm
Location: USA
Contact:

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by willthrill81 »

nps wrote: Thu May 05, 2022 6:29 pm
rockstar wrote: Thu May 05, 2022 3:36 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
We've discussed this throughout the pandemic. Bonds make the most sense when rates are dropping. When you're near zero, you can really only go up.
People have been saying on this forum that rates have nowhere to go but up for more than a decade.
True, but a broken clock is right twice a day.

The boy who cried wolf was eventually right, but the townsfolk were the ones who paid for his mistakes.
The Sensible Steward
rockstar
Posts: 6326
Joined: Mon Feb 03, 2020 5:51 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by rockstar »

nps wrote: Thu May 05, 2022 6:29 pm
rockstar wrote: Thu May 05, 2022 3:36 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
We've discussed this throughout the pandemic. Bonds make the most sense when rates are dropping. When you're near zero, you can really only go up.
People have been saying on this forum that rates have nowhere to go but up for more than a decade.
But for how long was the ten year near zero?

https://fred.stlouisfed.org/series/DGS10

2020 is the closest it got. How much farther down did you expect it to go after it went less than 1%? And what did you expect to happen when the Fed started to raise rates and unwind its balance sheet?
User avatar
nps
Posts: 1633
Joined: Thu Dec 04, 2014 9:18 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by nps »

rockstar wrote: Thu May 05, 2022 7:22 pm
nps wrote: Thu May 05, 2022 6:29 pm
rockstar wrote: Thu May 05, 2022 3:36 pm
willthrill81 wrote: Thu May 05, 2022 1:14 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
Through yesterday at least, BND had nearly identical YTD returns to the S&P 500. So you're correct that no rebalancing is possible in such a situation.

Too many for too long thought that bonds would continue to have similar returns to what they had from 1981-2012, despite the math clearly saying otherwise. They ignored that bonds returned -1.6% from 1941-1981 or else believed that such an event couldn't or at least wouldn't happen again. They repeated the mantra 'bonds are safe'. And here we are. From 2020 through last month, TBM returned -6.5% real, and the inflation-adjusted losses aren't even close to being staunched yet.
We've discussed this throughout the pandemic. Bonds make the most sense when rates are dropping. When you're near zero, you can really only go up.
People have been saying on this forum that rates have nowhere to go but up for more than a decade.
But for how long was the ten year near zero?

https://fred.stlouisfed.org/series/DGS10

2020 is the closest it got. How much farther down did you expect it to go after it went less than 1%? And what did you expect to happen when the Fed started to raise rates and unwind its balance sheet?
I don't make predictions of bond rates.
mtmingus
Posts: 679
Joined: Sun Jan 07, 2018 3:15 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by mtmingus »

Nowhere to hide, Vanguard Target Retirement 2025 VTTVX down more than 11% for the year.
User avatar
jason2459
Posts: 1208
Joined: Wed May 06, 2020 7:59 pm

Re: Bonds in free fall

Post by jason2459 »

nisiprius wrote: Tue Feb 16, 2021 6:53 pm You find this alarming?

Source

Image
That nope.


This has become interesting though if you look at that source again now.
"In the short run, the stock market is a voting machine; in the long run, it is a weighing machine" ~Benjamin Graham
Carol88888
Posts: 711
Joined: Wed Jan 24, 2018 1:24 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by Carol88888 »

dbr wrote: Thu May 05, 2022 1:30 pm
Carol88888 wrote: Thu May 05, 2022 1:09 pm I don't understand the bond argument at all in this environment. At one point this year VWELX - Wellington Fund was down slightly more than VOO - S&P despite having 35% in bonds.

So much for the "ballast" argument.

And how can you use bonds to rebalance back into stocks when bonds are down 10%? If you sell you just lock in a loss.

It seems to me that sometimes Bogleheads are just too doctrine to about things to alter their views. But then again, I could be missing something since I am totally a stock person.
In the long term bonds are lower returning and less volatile than stocks. This means one can set up a portfolio with some range of trade-off between low risk and low return and high risk and high return. One does this to best match the range of possible results to what one wants to do. None of this means that either stocks or bonds can't take large excursions on infrequent intervals. Current 10% losses in bonds are large for bonds. For stocks the equivalent would be declines of 50% or more, which can happen. It certainly does not mean that bonds must go up when stocks go down or can't also go down when stocks go down. On average movements in stocks and bonds are roughly uncorrelated. That can mean that sometimes they move in the same direction and sometimes they don't. Rebalancing is not for the purpose of buying stocks when stocks are down. It is for the purpose of managing the risk selection by keeping the proportion between stocks and bonds at a selected point. Right now rebalancing is not needed.

Ballast is a concept that is useful when analyzing the buoyant stability of ships but has nothing to do with investing. I guess those metaphors get bandied about because for some it is a more intuitive way to grasp a concept than to actually look at numbers and do math.

Investing only in stocks or only in bonds could be reasonable for anyone in particular depending on how that matches what they want to do. It is also true that the long term prospects for investing can change over secular (meaning slow) time frames. That is why we have bull and bear markets in investing. Interest rates and inflation in the US have recently experienced forty year time period of increasing interest rates from 1940 to 1980 and falling interest rates from 1980 to 2020. Nothing that is going on in the current few years is any notice at all of what might occur over the next 40 or 80 years.

Investing is a long game. If a person is working on a time line of less than ten years they should probably not own either stocks or bonds other than short bonds, T bills, CDs, etc. and not stocks at all.
Thank you for the full response. It was helpful. I do understand the point about a time frame of less than 10 years not being significant.

But knowing myself, the only reason I would want to own bonds in first place would be so that I would have a source of dry powder to use to buy stocks during a sell off like what we are having now. I truly am not interested in rebalancing to mitigate my risk because I see that as a good way of mitigating my future gains. Like I said, I am an equity person. I believe in markets. I believe that they go up over time and that the risks that markets entail is simply the price of admission to get the good gains.
manuvns
Posts: 1465
Joined: Wed Jan 02, 2008 1:30 pm

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by manuvns »

mtmingus wrote: Thu May 05, 2022 9:09 pm Nowhere to hide, Vanguard Target Retirement 2025 VTTVX down more than 11% for the year.
Vanguard Value ETF (VTV) is only down like 4-5%
Thanks!
NoRegret
Posts: 505
Joined: Sat Dec 16, 2017 1:00 am
Location: California

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by NoRegret »

manuvns wrote: Fri May 06, 2022 10:25 am
mtmingus wrote: Thu May 05, 2022 9:09 pm Nowhere to hide, Vanguard Target Retirement 2025 VTTVX down more than 11% for the year.
Vanguard Value ETF (VTV) is only down like 4-5%
SPYD and HDV are both up for the year - large cap high dividend ETFs with ER of 7/8 bps.

/s And I was told dividends are a scam and that I don't understand that they're not free.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
User avatar
nisiprius
Advisory Board
Posts: 52215
Joined: Thu Jul 26, 2007 9:33 am
Location: The terrestrial, globular, planetary hunk of matter, flattened at the poles, is my abode.--O. Henry

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by nisiprius »

I love the new title of this thread...
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Da5id
Posts: 5066
Joined: Fri Feb 26, 2016 7:20 am

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by Da5id »

NoRegret wrote: Fri May 06, 2022 12:58 pm
manuvns wrote: Fri May 06, 2022 10:25 am
mtmingus wrote: Thu May 05, 2022 9:09 pm Nowhere to hide, Vanguard Target Retirement 2025 VTTVX down more than 11% for the year.
Vanguard Value ETF (VTV) is only down like 4-5%
SPYD and HDV are both up for the year - large cap high dividend ETFs with ER of 7/8 bps.

/s And I was told dividends are a scam and that I don't understand that they're not free.
Why is any of this related to bonds though?

And in any case, dividends are fine. Just not magical. Looking at https://www.portfoliovisualizer.com/bac ... ion3_3=100 the two funds you cited have done worse than VTI since inception of HDV (yeah, single short period, but then you are talking about this years results in May as if they mean something). SPYD in particular has been more volatile and had much bigger drawdowns over that period. Did worse in the 2020 mini-crash. SCHD may have been a better example if you were looking for one.

Dividend stocks aren't bonds or replacements for bonds, so still a bit mystified as to how they are related to this thread.
NoRegret
Posts: 505
Joined: Sat Dec 16, 2017 1:00 am
Location: California

Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!

Post by NoRegret »

Da5id wrote: Fri May 06, 2022 1:14 pm
NoRegret wrote: Fri May 06, 2022 12:58 pm
manuvns wrote: Fri May 06, 2022 10:25 am
mtmingus wrote: Thu May 05, 2022 9:09 pm Nowhere to hide, Vanguard Target Retirement 2025 VTTVX down more than 11% for the year.
Vanguard Value ETF (VTV) is only down like 4-5%
SPYD and HDV are both up for the year - large cap high dividend ETFs with ER of 7/8 bps.

/s And I was told dividends are a scam and that I don't understand that they're not free.
Why is any of this related to bonds though?

And in any case, dividends are fine. Just not magical. Looking at https://www.portfoliovisualizer.com/bac ... ion3_3=100 the two funds you cited have done worse than VTI since inception of HDV (yeah, single short period, but then you are talking about this years results in May as if they mean something). SPYD in particular has been more volatile and had much bigger drawdowns over that period. Did worse in the 2020 mini-crash. SCHD may have been a better example if you were looking for one.

Dividend stocks aren't bonds or replacements for bonds, so still a bit mystified as to how they are related to this thread.
I was responding to the comment "there's no place to hide". It's also a commentary on the prevailing sentiment on this forum.

As far as for bonds, I don't know how high rates will go in the short term but I'm willing to bet they'll be lower a year from now so I'll DCA over time.
Market timer targeting long term cycles -- aiming for several key decisions per asset class per decade
Post Reply