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.
Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
- TheTimeLord
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
I've got one in the black too.TheTimeLord wrote: ↑Thu May 05, 2022 10:11 amInteresting, 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 use Quicken and the table show gains/losses in red/black not red/green. )
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.
- TheTimeLord
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
FWIW, all of mine are currently under 2 years in duration. I have been adding on rate spikes.Doc wrote: ↑Thu May 05, 2022 10:32 amI've got one in the black too.TheTimeLord wrote: ↑Thu May 05, 2022 10:11 amInteresting, 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 use Quicken and the table show gains/losses in red/black not red/green. )
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.TheTimeLord wrote: ↑Thu May 05, 2022 11:04 amFWIW, all of mine are currently under 2 years in duration. I have been adding on rate spikes.Doc wrote: ↑Thu May 05, 2022 10:32 amI've got one in the black too.TheTimeLord wrote: ↑Thu May 05, 2022 10:11 amInteresting, 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 use Quicken and the table show gains/losses in red/black not red/green. )
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.
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Is anybody here using ladders of iShares iBonds instead of ladders of individual treasuries?
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
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.
- willthrill81
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.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.
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
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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'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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.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.
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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.
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Thankfully I don't hold BND, just EDV/TIPS ...
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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%).slicendice wrote: ↑Thu May 05, 2022 1:33 pmThankfully I don't hold BND, just EDV/TIPS ...
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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!dbr wrote: ↑Thu May 05, 2022 1:30 pmIn 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.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.
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.
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Over the next 30, hopefully stocks will be carrying the load once again over any sort of bond out there.slicendice wrote: ↑Thu May 05, 2022 2:27 pmOver 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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
If I make a calculation error, #Cruncher probably will let me know.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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'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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Oof.
Well, perhaps a little ways to the bottom yet.
Well, perhaps a little ways to the bottom yet.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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
- TheTimeLord
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Could you share the bond funds and math for this? I am intrigued.abc132 wrote: ↑Thu May 05, 2022 3:39 pmI 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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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'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.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.TheTimeLord wrote: ↑Thu May 05, 2022 3:50 pmCould you share the bond funds and math for this? I am intrigued.abc132 wrote: ↑Thu May 05, 2022 3:39 pmI 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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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'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.
I-Bonds are quite a bit above stocks, around 17% ytd.
- TheTimeLord
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.abc132 wrote: ↑Thu May 05, 2022 4:10 pm30%*10% would be +3%, but I am throwing in individual bonds, which is what gets me to 4% savings by owning bonds this year.TheTimeLord wrote: ↑Thu May 05, 2022 3:50 pmCould you share the bond funds and math for this? I am intrigued.abc132 wrote: ↑Thu May 05, 2022 3:39 pmI 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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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'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.
I-Bonds are quite a bit above stocks, around 17 ytd%.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Why is AGG/BND down more or almost the same as HYG / junk bonds ? Aren't they safer than Junk bonds ?
Thanks!
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
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.
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
My predictions, just because it is fun (I have no idea what will happen):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.
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
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
I say bonds, which was the complaint, and you are substituting bond funds.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 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.
- willthrill81
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Good for you, but most here aren't rebalancing three times in a 30 day period.abc132 wrote: ↑Thu May 05, 2022 5:26 pmI say bonds, which was the complaint, and you are substituting bond funds.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 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)
The Sensible Steward
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Appreciate the responses, last question, in your calculations are you marking your individual treasuries to market?abc132 wrote: ↑Thu May 05, 2022 5:26 pmI say bonds, which was the complaint, and you are substituting bond funds.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 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.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
They are due within a few months, so no.TheTimeLord wrote: ↑Thu May 05, 2022 5:44 pmAppreciate the responses, last question, in your calculations are you marking your individual treasuries to market?abc132 wrote: ↑Thu May 05, 2022 5:26 pmI say bonds, which was the complaint, and you are substituting bond funds.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 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.
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Thanks, appreciate your candor.abc132 wrote: ↑Thu May 05, 2022 6:01 pmThey are due within a few months, so no.TheTimeLord wrote: ↑Thu May 05, 2022 5:44 pmAppreciate the responses, last question, in your calculations are you marking your individual treasuries to market?abc132 wrote: ↑Thu May 05, 2022 5:26 pmI say bonds, which was the complaint, and you are substituting bond funds.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 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.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.willthrill81 wrote: ↑Thu May 05, 2022 5:41 pmGood for you, but most here aren't rebalancing three times in a 30 day period.abc132 wrote: ↑Thu May 05, 2022 5:26 pmI say bonds, which was the complaint, and you are substituting bond funds.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 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)
They do show multiple rebalancing opportunities this year.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
People have been saying on this forum that rates have nowhere to go but up for more than a decade.rockstar wrote: ↑Thu May 05, 2022 3:36 pmWe'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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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.
- willthrill81
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
True, but a broken clock is right twice a day.nps wrote: ↑Thu May 05, 2022 6:29 pmPeople have been saying on this forum that rates have nowhere to go but up for more than a decade.rockstar wrote: ↑Thu May 05, 2022 3:36 pmWe'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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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 boy who cried wolf was eventually right, but the townsfolk were the ones who paid for his mistakes.
The Sensible Steward
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
But for how long was the ten year near zero?nps wrote: ↑Thu May 05, 2022 6:29 pmPeople have been saying on this forum that rates have nowhere to go but up for more than a decade.rockstar wrote: ↑Thu May 05, 2022 3:36 pmWe'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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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.
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?
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
I don't make predictions of bond rates.rockstar wrote: ↑Thu May 05, 2022 7:22 pmBut for how long was the ten year near zero?nps wrote: ↑Thu May 05, 2022 6:29 pmPeople have been saying on this forum that rates have nowhere to go but up for more than a decade.rockstar wrote: ↑Thu May 05, 2022 3:36 pmWe'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.willthrill81 wrote: ↑Thu May 05, 2022 1:14 pmThrough 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.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.
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.
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?
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Nowhere to hide, Vanguard Target Retirement 2025 VTTVX down more than 11% for the year.
Re: Bonds in free fall
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
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.dbr wrote: ↑Thu May 05, 2022 1:30 pmIn 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.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.
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.
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
Vanguard Value ETF (VTV) is only down like 4-5%
Thanks!
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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
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Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
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.
Re: Bonds: What Are They Doing? Are They Doing Things?? Let's Find Out!
I was responding to the comment "there's no place to hide". It's also a commentary on the prevailing sentiment on this forum.Da5id wrote: ↑Fri May 06, 2022 1:14 pmWhy 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.
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