Set It and Forget It, or ……

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Diaperman1
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Set It and Forget It, or ……

Post by Diaperman1 »

I am a recent convert to the Boglehead 3-fund portfolio philosophy. I moved the entire 23 securities portfolio from EJ to Vanguard and one week ago completed the transition to the VTSAX/VTIAX/VBTLX portfolio in an allocation suited to my age and risk tolerance.

While I am not pleased with the Total Bond performance over the past week, I am not inclined to change anything as I made this transition under the belief that it was to be a simple and consistent way to “buy the haystack, not search for the needle.”

Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me. We are 79 and 76, do not wish to loose our money, but withdraw from this only for major purchase, travel, etc. Not part of our monthly living budget.

Is there some solid basis for the suggestions I read, or do I rigidly hold to the “stay the course” program?
Marseille07
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Re: Set It and Forget It, or ……

Post by Marseille07 »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am I am a recent convert to the Boglehead 3-fund portfolio philosophy. I moved the entire 23 securities portfolio from EJ to Vanguard and one week ago completed the transition to the VTSAX/VTIAX/VBTLX portfolio in an allocation suited to my age and risk tolerance.

While I am not pleased with the Total Bond performance over the past week, I am not inclined to change anything as I made this transition under the belief that it was to be a simple and consistent way to “buy the haystack, not search for the needle.”

Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me. We are 79 and 76, do not wish to loose our money, but withdraw from this only for major purchase, travel, etc. Not part of our monthly living budget.

Is there some solid basis for the suggestions I read, or do I rigidly hold to the “stay the course” program?
It is whatever you want to do.

Obviously you question set Total Bond and forget, so you either start fiddling constantly or find a different combination of bonds you can set and forget.
Tamalak
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Re: Set It and Forget It, or ……

Post by Tamalak »

Investing in Total Bond, settlement MM fund, ladder CD’s, sufficiently diverse individual bonds, short term fund, and treasuries are all fine approaches and they are all consistent with the boglehead philosophy of buy and hold. Your reasons for investing decisions should be nothing like "I didn't like how this performed last week", however. If you don't have solid and well-understood (by you) reasons for any of the above list, VBTLX is the "standard" and well balanced choice for the lower-risk side of your portfolio.
delamer
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Re: Set It and Forget It, or ……

Post by delamer »

What you are hearing might be honest differences among Bogleheads as to the best way to invest the fixed income portion of your portfolio.

I’m an advocate for not using Total Bond, but sticking with cash equivalents and/or medium-term Treasury securities.

But, as Tamalak says above, the most important thing is to not make changes based on how Total Bond performed last week vs. a Treasury fund.

So yes, Set It and Forget It.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Apathizer
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Re: Set It and Forget It, or ……

Post by Apathizer »

Meh, one week doesn't mean much even for something less risky like total bond. If you don't need the money within a year or so BND is fine, though I prefer BNDW for global diversification.
ROTH: 50% AVGE, 10% DFAX, 40% BNDW. Taxable: 50% BNDW, 40% AVGE, 10% DFAX.
Marseille07
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Re: Set It and Forget It, or ……

Post by Marseille07 »

rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

Marseille07 wrote: Fri Mar 31, 2023 11:38 am
rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
They probably have losses already in total bond if they bought in when rates were close to zero.
Tamalak
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Re: Set It and Forget It, or ……

Post by Tamalak »

rockstar wrote: Fri Mar 31, 2023 11:50 am
Marseille07 wrote: Fri Mar 31, 2023 11:38 am
rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
They probably have losses already in total bond if they bought in when rates were close to zero.
He moved them a week ago, and is unhappy with the performance of Total Bond.. I can only imagine how he'd feel if he'd moved them a year ago!
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

Tamalak wrote: Fri Mar 31, 2023 11:53 am
rockstar wrote: Fri Mar 31, 2023 11:50 am
Marseille07 wrote: Fri Mar 31, 2023 11:38 am
rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
They probably have losses already in total bond if they bought in when rates were close to zero.
He moved them a week ago, and is unhappy with the performance of Total Bond.. I can only imagine how he'd feel if he'd moved them a year ago!
I personally keep my bonds short. I’ll take risk on the equity side. If rates go back below my mortgage rate after taxes, I’ll increase my equity portfolio while keeping enough short term bonds for emergencies. Almost there with I Bonds. I don’t want to lose money on the bond side. That’s a personal thing for me.
secondopinion
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Re: Set It and Forget It, or ……

Post by secondopinion »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me...
Some of the recommendations are inconsistent, but many are just missing the details.
  • I am not aware of many people holding a lot of money in a money market fund until recently. I am aware of some that have indeed used money market funds even during zero yield, but I do not think most would have.
  • Laddering is not a new concept, but it is one with missing details. I do ladder my direct CDs because this is how one can obtain some liquidity of funds on non-marketable securities. For treasuries, the liquidity is not as large of concern since they can be sold easily (especially if held in a fund/ETF). With respect to preserving principal and cutting all fees, there can be merit of buying treasuries and CDs individually; but it is more work (and quite a bit of work for what has been saved) and sometimes may work against you in terms of liquidity. With corporate bonds, I would not recommend buying them individually since the minimum to properly diversify and get desirable trade execution is high (and the liquidity can be poor).
  • Short-term fixed income is not a bad choice (myself, I hold a lot in the 1-5 year maturity range) if some but not a lot of duration risk is acceptable.
The only one I can endorse for you is a shorter-term fixed income fund if not total bond. In your 70s, I would not want to complicate it with individual bonds; but I would not hold cash equivalents in high amounts either. You are still at the point of life where BND can make sense, but you are reaching a point where the duration risk probably needs to decrease; it will be contingent on a few factors.
Last edited by secondopinion on Fri Mar 31, 2023 12:21 pm, edited 1 time in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
secondopinion
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Re: Set It and Forget It, or ……

Post by secondopinion »

Marseille07 wrote: Fri Mar 31, 2023 11:38 am
rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
Shorter-term bonds are probably a good idea, but I would not keep them that short.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Topic Author
Diaperman1
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Re: Set It and Forget It, or ……

Post by Diaperman1 »

secondopinion wrote: Fri Mar 31, 2023 12:14 pm
Diaperman1 wrote: Fri Mar 31, 2023 10:25 am Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me...
Some of the recommendations are inconsistent, but many are just missing the details.
  • I am not aware of many people holding a lot of money in a money market fund until recently. I am aware of some that have indeed used money market funds even during zero yield, but I do not think most would have.
  • Laddering is not a new concept, but it is one with missing details. I do ladder my direct CDs because this is how one can obtain some liquidity of funds on non-marketable securities. For treasuries, the liquidity is not as large of concern since they can be sold easily (especially if held in a fund/ETF). With respect to preserving principal and cutting all fees, there can be merit of buying treasuries and CDs individually; but it is more work (and quite a bit of work for what has been saved) and sometimes may work against you in terms of liquidity. With corporate bonds, I would not recommend buying them individually since the minimum to properly diversify and get desirable trade execution is high (and the liquidity can be poor).
  • Short-term fixed income is not a bad choice (myself, I hold a lot in the 1-5 year maturity range) if some but not a lot of duration risk is acceptable.
The only one I can endorse for you is a shorter-term fixed income fund if not total bond. In your 70s, I would not want to complicate it with individual bonds; but I would not hold cash equivalents in high amounts either. You are still at the point of life where BND can make sense, but you are reaching a point where the duration risk probably needs to decrease; it will be contingent on a few factors.
Good reply!
Please clarify what is meant by “direct CD’s”

Is that something different than buying brokered CD’s through my Vanguard account?
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martincmartin
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Re: Set It and Forget It, or ……

Post by martincmartin »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am I am a recent convert to the Boglehead 3-fund portfolio philosophy. I moved the entire 23 securities portfolio from EJ to Vanguard and one week ago completed the transition to the VTSAX/VTIAX/VBTLX portfolio in an allocation suited to my age and risk tolerance.
Congratulations! What convinced you? This is important to understand, as it seems like you're already wavering.
While I am not pleased with the Total Bond performance over the past week, I am not inclined to change anything as I made this transition under the belief that it was to be a simple and consistent way to “buy the haystack, not search for the needle.”
It sounds like you've realized that trying to pick winners is a fool's errand. What convinced you of that.?
Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).
Emphasis added. Doing things based on market conditions is called market timing. Look up market timing and why it's a bad idea. tl;dr: the prices of MM funds, CDs, individual bonds, short term funds, Treasures, and everything else, are all bought and sold at auction and already reflect all available information.

For example, if the MM fund were a better deal than the bond fund, then more people would sell the bond fund and buy the MM fund. By supply and demand, that means the price of the bond fund would go down and the MM fund would go up. You bought the bond fund a week or two ago, right? So by that logic, you already bought it at a discount. Congratulations! You bought low, the first half of buy low and sell high!

More to the point, if you're tempted to sell the bond fund now and buy the MM fund: the person selling you the MM fund has the same information about the "crazy market", and has set their sale price appropriately.

This is called the efficient market hypothesis. Basically, when you buy something, the person selling it to you has the same public information you have, and has already incorporated that into their decision on what price to sell at.
These suggestions do not seem consistent with the Boglehead premise and terribly confuse me.
tl;dr: financial news, like all news, succeeds by reporting whatever sells the most. What sells the most is feeding people's insecurities and biases, not telling the truth. If it bleeds, it leads. In financial news, that's "OMG you need to change your allocation RIGHT NOW!!!"

One "immune system" for this is reading Bill Bernstein's The Intelligent Asset Allocator. There are others too.
We are 79 and 76, do not wish to loose our money,
If you have money in the stock market, you will lose money. 100% guaranteed, for some of the years you invest. Perhaps multiple years in a row. A decade from now, your stocks may be lower, in real terms, than they are now. There are many historical periods where that's true in the US, as well as other companies. If you can't stomach that, perhaps you should be 100% bonds.

Do you know the phrase "if you've won the game, stop playing?" That may be most appropriate for you. Basically, if you have enough money, put it all in bonds. Say a liability matching portfolio, namely a TIPS ladder.
but withdraw from this only for major purchase, travel, etc. Not part of our monthly living budget.

Is there some solid basis for the suggestions I read, or do I rigidly hold to the “stay the course” program?
If, after one week, you're worried about your investments and looking for reassurance and other information, then perhaps your risk tolerance is lower than you thought. Just put everything in short term treasuries. If the stock market does well, it means less travel than a stock/bond mix. But if it does poorly, it means more. And more importantly, it won't lose money, or at least very little.
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arcticpineapplecorp.
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Re: Set It and Forget It, or ……

Post by arcticpineapplecorp. »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am I am a recent convert to the Boglehead 3-fund portfolio philosophy. I moved the entire 23 securities portfolio from EJ to Vanguard and one week ago completed the transition to the VTSAX/VTIAX/VBTLX portfolio in an allocation suited to my age and risk tolerance.

While I am not pleased with the Total Bond performance over the past week, I am not inclined to change anything as I made this transition under the belief that it was to be a simple and consistent way to “buy the haystack, not search for the needle.”

Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me. We are 79 and 76, do not wish to loose our money, but withdraw from this only for major purchase, travel, etc. Not part of our monthly living budget.

Is there some solid basis for the suggestions I read, or do I rigidly hold to the “stay the course” program?
1. so the price for vbtlx was $9.66 at the beginning of the week, then dropped to $9.65 then went back up to $9.66 (Source) (be sure to change the dates rather than use the default)

what do you mean not pleased with the Total Bond performance over the past week?

what did you expect it to do over the span of 1 week?

you're ok with stocks that can lose several percentage points in one day but not bonds that fall a hundredth of one percent over a week and then recover?

2. what do you mean "in this crazy market"? Isn't the market usually volatile? it doesn't just go up. If it did, we'd get lousy returns not good returns because you get paid for uncertainty, not certainty.

3. whatever money you need in the short term for travel, major purchase, etc. you should keep safe and in a short term instrument. Total bond has an average duration of 6.5 years. So if you need money sooner than that, you should have that in money market or CDs, or shorter term bonds, etc.
Last edited by arcticpineapplecorp. on Fri Mar 31, 2023 12:45 pm, edited 1 time in total.
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secondopinion
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Re: Set It and Forget It, or ……

Post by secondopinion »

Diaperman1 wrote: Fri Mar 31, 2023 12:27 pm
secondopinion wrote: Fri Mar 31, 2023 12:14 pm
Diaperman1 wrote: Fri Mar 31, 2023 10:25 am Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me...
Some of the recommendations are inconsistent, but many are just missing the details.
  • I am not aware of many people holding a lot of money in a money market fund until recently. I am aware of some that have indeed used money market funds even during zero yield, but I do not think most would have.
  • Laddering is not a new concept, but it is one with missing details. I do ladder my direct CDs because this is how one can obtain some liquidity of funds on non-marketable securities. For treasuries, the liquidity is not as large of concern since they can be sold easily (especially if held in a fund/ETF). With respect to preserving principal and cutting all fees, there can be merit of buying treasuries and CDs individually; but it is more work (and quite a bit of work for what has been saved) and sometimes may work against you in terms of liquidity. With corporate bonds, I would not recommend buying them individually since the minimum to properly diversify and get desirable trade execution is high (and the liquidity can be poor).
  • Short-term fixed income is not a bad choice (myself, I hold a lot in the 1-5 year maturity range) if some but not a lot of duration risk is acceptable.
The only one I can endorse for you is a shorter-term fixed income fund if not total bond. In your 70s, I would not want to complicate it with individual bonds; but I would not hold cash equivalents in high amounts either. You are still at the point of life where BND can make sense, but you are reaching a point where the duration risk probably needs to decrease; it will be contingent on a few factors.
Good reply!
Please clarify what is meant by “direct CD’s”

Is that something different than buying brokered CD’s through my Vanguard account?
Correct. Directly bought CDs are not sellable on the market; they have to be bought/withdrawn from the bank/credit union themselves (usually with penalty unless it is at maturity). Because the penalty can be meaningful, it is easier to ladder the CDs to diminish the potential impact for accessing some of the money.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

secondopinion wrote: Fri Mar 31, 2023 12:19 pm
Marseille07 wrote: Fri Mar 31, 2023 11:38 am
rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
Shorter-term bonds are probably a good idea, but I would not keep them that short.
If the OP wants to withdraw at a week’s notice, the shorter the better.
Marseille07
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Re: Set It and Forget It, or ……

Post by Marseille07 »

secondopinion wrote: Fri Mar 31, 2023 12:19 pm Shorter-term bonds are probably a good idea, but I would not keep them that short.
Even something like VGSH can take 5 years to recover. They'd be 85 at that point. If I were them, I would simply hold CD, MMF or HYSA.
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Taylor Larimore
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Re: Set It and Forget It, or ……

Post by Taylor Larimore »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am I am a recent convert to the Boglehead 3-fund portfolio philosophy. I moved the entire 23 securities portfolio from EJ to Vanguard and one week ago completed the transition to the VTSAX/VTIAX/VBTLX portfolio in an allocation suited to my age and risk tolerance.

While I am not pleased with the Total Bond performance over the past week, I am not inclined to change anything as I made this transition under the belief that it was to be a simple and consistent way to “buy the haystack, not search for the needle.”

Yet, if I question the set it/forget it style in this crazy market, some tell me to dump the Total Bond and: park it in the settlement MM fund, ladder CD’s, buy individual bonds, buy short term fund, buy only treasuries ( and ladder).

These suggestions do not seem consistent with the Boglehead premise and terribly confuse me. We are 79 and 76, do not wish to loose our money, but withdraw from this only for major purchase, travel, etc. Not part of our monthly living budget.

Is there some solid basis for the suggestions I read, or do I rigidly hold to the “stay the course” program?
Diaperman1:

I would not worry about Total Bond Market in your new Three-Fund Portfolio. The fact that TBM is suffering its worst annual decline now, makes it more likely to enjoy an above average return later. You can see this in Total Bond's historical returns:

Past rate of inflation (CPU) and annual fund returns in The Three-Fund Portfolio:

YEAR--INFLATION--BOND INDEX--S&P 500 INDEX------MSCI EAFE INDEX
1976-------4.9%--------15.6%------------23.8%--------------------3.6%
1977-------6.7-----------3.0-------------(-7.2)-------------------17.5
1978-------9.0-----------1.4---------------6.6--------------------33.1
1979------13.3-----------1.9--------------18.4-------------------10.9 (Highest Annual Inflation Rate)
1980------12.5-----------2.7--------------32.4-------------------25.4
1981-------8.9-----------6.3-------------(-4.9)------------------(-2.5)
1982-------3.8----------32.6--------------21.6------------------(-0.3) (Highest Bond Index Return)
1983-------3.8-----------8.4--------------22.6-------------------24.8
1984-------3.9----------15.2---------------6.3--------------------3.5
1985-------3.8----------22.1--------------31.7-------------------51.4
1986-------1.1----------15.2--------------18.7-------------------65.8 (Highest Stock Return)
1987-------4.4-----------2.8----------------5.2-------------------24.6
1988-------4.4-----------7.9---------------16.6-------------------27.8
1989-------4.6----------14.5---------------31.7------------------11.4
1990-------6.1-----------8.9---------------(-3.1)---------------(-22.8)
1991-------3.1----------16.0---------------30.5------------------12.4
1992-------2.9-----------7.4-----------------7.6----------------(-11.9)
1993-------2.7-----------9.7----------------10.1------------------32.6
1994-------2.7---------(-2.9)----------------1.3--------------------7.6
1995-------2.5----------18.5---------------37.6-------------------11.8 (Highest S&P Index Return)
1996-------3.3-----------3.6----------------23.0--------------------7.2
1997-------1.7-----------9.7----------------33.4--------------------2.6
1998-------1.6-----------8.7----------------28.6-------------------19.1
1999-------2.7---------(-0.8)---------------21.0-------------------28.3
2000-------3.4----------11.6---------------(-9.1)----------------(-15.8)
2001-------1.6-----------8.4--------------(-11.9)----------------(-19.8)
2002-------2.4----------10.3-------------(-22.1)----------------(-15.3)
2003-------1.9-----------4.1----------------28.7-------------------40.4
2004-------3.3-----------4.3----------------10.9-------------------20.9
2005-------3.4-----------2.4-----------------4.9-------------------15.8
2006-------2.5-----------4.3----------------15.8------------------26.8
2007-------4.1-----------7.0-----------------5.5------------------11.6
2008-------0.1-----------5.2--------------(-37.0)---------------(-43.1) (Lowest U.S. and International Stock Returns)
2009-------2.7-----------5.9----------------26.5------------------32.5
2010-------1.5-----------6.5----------------15.1-------------------8.2
2011-------3.0-----------7.7-----------------2.1----------------(-11.7)
2012-------1.7-----------4.3----------------16.0------------------17.9
2013-------1.5---------(-2.0)---------------32.4------------------23.3
2014-------1.6-----------6.0----------------13.7-----------------(-4.5)
2015-------0.7-----------0.5-----------------1.4-----------------(-0.4)
2016-------2.1-----------2.6----------------12.0-------------------1.5
2017-------2.1-----------3.5----------------21.8------------------25.6
2018-------2.5---------(-0.1)--------------(-4.4)---------------(-13.4)
2019-------2.3-----------8.7----------------31.5------------------22.7
2020-------1.4-----------7.7----------------18.4------------------11.3
2021-------7.0---------(-1.7)---------------25.7-------------------8.6
2022-------6.5--------(-13.2)-------------(-19.4)--------------(-16.0) (Lowest Bond Index Return)

Sources: Vanguard, U.S. Labor Department (CPI-U), Standard & Poors, Bloomberg Barclays Aggregate Bond Index, and DFTurner

Past performance does not forecast future performance.

Stay the course.

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "There may be better investment strategies than owning just three broad-based index funds but the number of strategies that are worse is infinite."
"Simplicity is the master key to financial success." -- Jack Bogle
secondopinion
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Re: Set It and Forget It, or ……

Post by secondopinion »

Marseille07 wrote: Fri Mar 31, 2023 1:08 pm
secondopinion wrote: Fri Mar 31, 2023 12:19 pm Shorter-term bonds are probably a good idea, but I would not keep them that short.
Even something like VGSH can take 5 years to recover. They'd be 85 at that point. If I were them, I would simply hold CD, MMF or HYSA.
Not both of them will be that age after five years; and it is likely that they will still be living then.

VGSH is at an average duration of about two years because it only holds up to three years maturity, if I remember right. And what kind of drop can actually happen that is meaningful? If a 5% loss or so is going to ruin their plans, why are they holding stocks? If VGSH is going to be too risky, then there is a far larger problem that exists.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Marseille07
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Re: Set It and Forget It, or ……

Post by Marseille07 »

secondopinion wrote: Fri Mar 31, 2023 1:34 pm Not both of them will be that age after five years; and it is likely that they will still be living then.

VGSH is at an average duration of about two years because it only holds up to three years maturity, if I remember right. And what kind of drop can actually happen that is meaningful? If a 5% loss or so is going to ruin their plans, why are they holding stocks? If VGSH is going to be too risky, then there is a far larger problem that exists.
We aren't talking about equities. We're talking about fixed income and why you hold them, irrespective of why you hold equities.

I think it's nonsensical to bark at T-Bills, which are one year or less, then argue that VGSH is much better. The truth is that they aren't all that different as both are generally considered fairly short-term.
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Jon Luskin
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Re: Set It and Forget It, or ……

Post by Jon Luskin »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am
While I am not pleased with the Total Bond performance over the past week . . .
With the Bogleheads® approach, successful investing is long-term investing. If you're looking to measure your results in terms of weeks, you're going to be very disappointed.

You may wish to spend more time learning about investing 101 - including the Bogleheads® approach. That can help you determine if this strategy is something you think you can stick with.

Here's a great introductory book:

https://www.amazon.com/Little-Book-Comm ... 0470102101
When there are multiple solutions to a problem, choose the simplest one. ~Jack Bogle
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

Jon Luskin wrote: Fri Mar 31, 2023 3:34 pm
Diaperman1 wrote: Fri Mar 31, 2023 10:25 am
While I am not pleased with the Total Bond performance over the past week . . .
With the Bogleheads® approach, successful investing is long-term investing. If you're looking to measure your results in terms of weeks, you're going to be very disappointed.

You may wish to spend more time learning about investing 101 - including the Bogleheads® approach. That can help you determine if this strategy is something you think you can stick with.

Here's a great introductory book:

https://www.amazon.com/Little-Book-Comm ... 0470102101
Great book.

The OP is a couple in their mid to late 70s. I don’t think they have a long term horizon unless they have remarkable genetics.

This is overlooked here a lot. Not everyone asking questions has a long term horizon. This is more of a yearly cash management exercise for this couple.
Tigermoose
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Re: Set It and Forget It, or ……

Post by Tigermoose »

You should construct your portfolio based on the function of each asset to the overall purpose of your portfolio. Assets perform differently in different economic situations. If you hold onto your total bond fund it will recover some of the capital lost through interest yield gains over time. So the short term loss of a declining bond fund price should be mitigated over time with the increased yield. I see bond funds as more of a "ballast" to a portfolio that provides some steadiness for your portfolio while equities and other more risky assets are there to generate higher returns. The bonds are there for ballast during the difficult times like the last 2 years, however bonds also have dropped in price which is abnormal. However, the bond funds should recover over time as previously stated.
Institutions matter
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Re: Set It and Forget It, or ……

Post by livesoft »

Diaperman1 wrote: Fri Mar 31, 2023 10:25 am ...
While I am not pleased with the Total Bond performance over the past week,
...
Total Bond is UP for the week, isn't it?
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Diaperman1
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Re: Set It and Forget It, or ……

Post by Diaperman1 »

rockstar wrote: Fri Mar 31, 2023 3:38 pm
Jon Luskin wrote: Fri Mar 31, 2023 3:34 pm
Diaperman1 wrote: Fri Mar 31, 2023 10:25 am
While I am not pleased with the Total Bond performance over the past week . . .
With the Bogleheads® approach, successful investing is long-term investing. If you're looking to measure your results in terms of weeks, you're going to be very disappointed.

You may wish to spend more time learning about investing 101 - including the Bogleheads® approach. That can help you determine if this strategy is something you think you can stick with.

Here's a great introductory book:

https://www.amazon.com/Little-Book-Comm ... 0470102101
Great book.

The OP is a couple in their mid to late 70s. I don’t think they have a long term horizon unless they have remarkable genetics.

This is overlooked here a lot. Not everyone asking questions has a long term horizon. This is more of a yearly cash management exercise for this couple.
Thank you.
That is exactly our situation. Our “long term” is called life expectancy.
You are correct in that very few here seem to even notice age, etc. We are not in an accumulation stage.

Our objective is to make what we have last as long as we do. I want to reduce downside risk as there is not time to recover.

The younger wife life expectancy is slightly over 12 years. That would translate into 15 years max, perhaps. So that is the target. We have a paid for home that could spin off a pretty good pile of money if it came to that, but still seems prudent to me to preserve what we have and use it for our pleasures.
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

Diaperman1 wrote: Fri Mar 31, 2023 4:10 pm
rockstar wrote: Fri Mar 31, 2023 3:38 pm
Jon Luskin wrote: Fri Mar 31, 2023 3:34 pm
Diaperman1 wrote: Fri Mar 31, 2023 10:25 am
While I am not pleased with the Total Bond performance over the past week . . .
With the Bogleheads® approach, successful investing is long-term investing. If you're looking to measure your results in terms of weeks, you're going to be very disappointed.

You may wish to spend more time learning about investing 101 - including the Bogleheads® approach. That can help you determine if this strategy is something you think you can stick with.

Here's a great introductory book:

https://www.amazon.com/Little-Book-Comm ... 0470102101
Great book.

The OP is a couple in their mid to late 70s. I don’t think they have a long term horizon unless they have remarkable genetics.

This is overlooked here a lot. Not everyone asking questions has a long term horizon. This is more of a yearly cash management exercise for this couple.
Thank you.
That is exactly our situation. Our “long term” is called life expectancy.
You are correct in that very few here seem to even notice age, etc. We are not in an accumulation stage.

Our objective is to make what we have last as long as we do. I want to reduce downside risk as there is not time to recover.

The younger wife life expectancy is slightly over 12 years. That would translate into 15 years max, perhaps. So that is the target. We have a paid for home that could spin off a pretty good pile of money if it came to that, but still seems prudent to me to preserve what we have and use it for our pleasures.
This might be helpful for you.

https://www.whitecoatinvestor.com/how-t ... -the-game/
delamer
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Re: Set It and Forget It, or ……

Post by delamer »

Diaperman1 wrote: Fri Mar 31, 2023 4:10 pm
rockstar wrote: Fri Mar 31, 2023 3:38 pm
Jon Luskin wrote: Fri Mar 31, 2023 3:34 pm
Diaperman1 wrote: Fri Mar 31, 2023 10:25 am
While I am not pleased with the Total Bond performance over the past week . . .
With the Bogleheads® approach, successful investing is long-term investing. If you're looking to measure your results in terms of weeks, you're going to be very disappointed.

You may wish to spend more time learning about investing 101 - including the Bogleheads® approach. That can help you determine if this strategy is something you think you can stick with.

Here's a great introductory book:

https://www.amazon.com/Little-Book-Comm ... 0470102101
Great book.

The OP is a couple in their mid to late 70s. I don’t think they have a long term horizon unless they have remarkable genetics.

This is overlooked here a lot. Not everyone asking questions has a long term horizon. This is more of a yearly cash management exercise for this couple.
Thank you.
That is exactly our situation. Our “long term” is called life expectancy.
You are correct in that very few here seem to even notice age, etc. We are not in an accumulation stage.

Our objective is to make what we have last as long as we do. I want to reduce downside risk as there is not time to recover.

The younger wife life expectancy is slightly over 12 years. That would translate into 15 years max, perhaps. So that is the target. We have a paid for home that could spin off a pretty good pile of money if it came to that, but still seems prudent to me to preserve what we have and use it for our pleasures.
In your original post, you made it sound like the issue was your confusion about which investments to include in your bonds/cash allocation. And you said you only draw from your portfolio for major purchases.

Now, you are talking about concerns about long-term risks and the need to make the portfolio last for your life spans. Which is more of a portfolio overview question.

If it’s purely a “pleasures” portfolio, then put it all in TIPS and divide by 15. That’s how much you can spend a year.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Marseille07
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Re: Set It and Forget It, or ……

Post by Marseille07 »

Diaperman1 wrote: Fri Mar 31, 2023 4:10 pm Thank you.
That is exactly our situation. Our “long term” is called life expectancy.
You are correct in that very few here seem to even notice age, etc. We are not in an accumulation stage.

Our objective is to make what we have last as long as we do. I want to reduce downside risk as there is not time to recover.

The younger wife life expectancy is slightly over 12 years. That would translate into 15 years max, perhaps. So that is the target. We have a paid for home that could spin off a pretty good pile of money if it came to that, but still seems prudent to me to preserve what we have and use it for our pleasures.
I noted your age and informed rockstar.

I think you should figure out if 3-funder makes sense. If your current annual expenses continue, do you have enough to last 15 years, 20, 25 years?

If the answer is yes, and portfolio preservation is your goal, then I would recommend something like 50/50 where 50% in fixed income is kept very short term (money-market, CD, HYSA) etc etc.
rockstar
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Re: Set It and Forget It, or ……

Post by rockstar »

Marseille07 wrote: Fri Mar 31, 2023 6:20 pm
Diaperman1 wrote: Fri Mar 31, 2023 4:10 pm Thank you.
That is exactly our situation. Our “long term” is called life expectancy.
You are correct in that very few here seem to even notice age, etc. We are not in an accumulation stage.

Our objective is to make what we have last as long as we do. I want to reduce downside risk as there is not time to recover.

The younger wife life expectancy is slightly over 12 years. That would translate into 15 years max, perhaps. So that is the target. We have a paid for home that could spin off a pretty good pile of money if it came to that, but still seems prudent to me to preserve what we have and use it for our pleasures.
I noted your age and informed rockstar.

I think you should figure out if 3-funder makes sense. If your current annual expenses continue, do you have enough to last 15 years, 20, 25 years?

If the answer is yes, and portfolio preservation is your goal, then I would recommend something like 50/50 where 50% in fixed income is kept very short term (money-market, CD, HYSA) etc etc.
This should probably be moved to another part of this forum, where they could provide more detailed information about their situation and get much better answers.
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retireIn2020
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Re: Set It and Forget It, or ……

Post by retireIn2020 »

rockstar wrote: Fri Mar 31, 2023 12:09 pm
Tamalak wrote: Fri Mar 31, 2023 11:53 am
rockstar wrote: Fri Mar 31, 2023 11:50 am
Marseille07 wrote: Fri Mar 31, 2023 11:38 am
rockstar wrote: Fri Mar 31, 2023 11:20 am Total bond makes sense for a lot of people during the accumulation phase.

The idea of individual bonds works best for liability matching as you’re not taking any interest rate risk. I don’t think this is super complex. Buy an individual bond with a maturity date that matches when you need the money. This eliminates the risk of losing your principal. With total bond you always have the risk of losing your principal when you withdraw. It makes sense to start to build a ladder a couple of years before retirement.
Well, given they're 79 and 76, do they really need to liability-match anything? Total Bond can take 13 years to recover, and individual ITTs can take 7 years. Both scenarios could be too long for them. I would recommend keeping them much shorter, such as T-Bills.
They probably have losses already in total bond if they bought in when rates were close to zero.
He moved them a week ago, and is unhappy with the performance of Total Bond.. I can only imagine how he'd feel if he'd moved them a year ago!
I personally keep my bonds short. I’ll take risk on the equity side. If rates go back below my mortgage rate after taxes, I’ll increase my equity portfolio while keeping enough short term bonds for emergencies. Almost there with I Bonds. I don’t want to lose money on the bond side. That’s a personal thing for me.
Taking risk on the equity side is the single most important thing I learned prior to retirement. That thought process absolutely helped me the last couple years since retiring in mid 2020.
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Florida Orange
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Re: Set It and Forget It, or ……

Post by Florida Orange »

These are the times that try men's souls. Set it and forget it is easy to say but can be hard to do under trying circumstances. You say your asset allocation is appropriate for your age and risk tolerance. In that case my advice is don't just do something, stand there.
gotoparks
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Re: Set It and Forget It, or ……

Post by gotoparks »

One week timeframe is nothing. I think the total bond fund is fine, but I have read people use intermediate treasury funds because they don't want corporate bonds. There is a lot of different point of views on Bogleheads but people can do things differently and get to the same place.
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