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Old 12-10-2014, 04:17 AM   #21
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this year those long treasurey bonds with those tiny yields are up 23% .

i am a big believer in staying dynamic with my portfolio nudging it to fit the big picture like steering a big ship to keep it on course.

i never believed in buying one mix and sitting static forever. there are assets to own and not own at different times of the business cycle.


how you put your portfiolio together will depend on what you want out of it. is it bullet-proofing? is it gains? is it low volatility?

how you structure will depend on those questions.

short term bonds and intermediate bonds do not have enough ooomph to offset a big drop in stocks. you would want long term bonds to fly fighter cover.

yesterday the market fell 200 points at one point , the long treasury soared 1.75%.

in 2008-2009 when stocks fell 45% the long bond was up 45%.


but flying fighter cover comes at a price and with those long bonds you need gold or commodities as an inflation hedge like the permanent portfolio.

but if bullet proofing is not your goal than long bonds are not for you.

you need to define what it is you want your portfolio to do for you first.
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Old 12-10-2014, 05:58 AM   #22
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i am a big believer in staying dynamic with my portfolio nudging it to fit the big picture like steering a big ship to keep it on course.

i never believed in buying one mix and sitting static forever. there are assets to own and not own at different times of the business cycle.
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Old 12-10-2014, 05:26 PM   #23
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but the more i fine tune things to the world around me the more money i have. my opinion is going forward a static portfolio of stocks and bonds will be very different from the past when a 40 year bull market in bonds made that possible.
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Old 12-10-2014, 06:31 PM   #24
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but the more i fine tune things to the world around me the more money i have. my opinion is going forward a static portfolio of stocks and bonds will be very different from the past when a 40 year bull market in bonds made that possible.
"The four most dangerous words in investing are: 'this time it's different.'"

Sir John Templeton

As much as I don't like Ray Dalio's strategy I am even less in favour of ad hoc timing . But that may work for some lucky or very smart people.
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Old 12-11-2014, 02:24 AM   #25
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the slight shiftiung of allocations over time to different types of funds has worked well and will work just fine regardless.

my investing plan has never been to sit stagnant with the same asset classes and funds forever.

actually the only thing that repeats itself over and over is historians. life alters things just different enough each time to make things just different enough that something else would have played out more effectively,.

remember the first iraq invasion ,stocks plunged on the news. second iraq invasion stocks soared on the news .

no one can guess what these events will be but the one thing events lead to is longer term trends that can be adjusted slightly for.

you do not need a crystal ball to know that at some point bond rates will be going higher , perhaps eventually reaching their historical mean of 6-7%.


do you really want to sit stagnant in bonds forever . remember it took 40 years to get to this point , you may never see rates cycle around again in your lifetime.

you could choose to invest the same way you did when rates were falling and sit forever in the same assets year in an year out. but i think that wouldn't be the best way going forward.

i know my own portfolio of dynamically adjusted funds is about 450k ahead of just an s&p500 fund or total market fund.

that is documented in the newsletter i have been following for more than 25 years. in fact the newsletter they merged with had an even better track record . so dynamically adjusting funds to fit the bigger picture has worked well.

going forward with bonds on such iffy ground i see adjusting dynamically even more important.

there will be far better choices for bond fund money to be moved to when rates and inflation pick up.

for the bond portion a swap to floating rate funds , reit income funds ,TIPS , even some commodity funds would be far better choicesr than sitting with a conventional bond fund watching it fall.


convential portfolios that are set and forget tend to plan around only low rates and good times. they perform poorly if we have extended downturns.

usually they do not carry enough weight like the permanent portfolio would to undo the other scenerios that can play out besides good times.

we have basically 4 major ones

recession

depression

prosperity

inflation


like tires an all season tire really is not all season ,it is geared around the better weather. basically it handles no season really well.


but global changes may make the weather very different so you may want to own a few different types of tires to switch to depending on that weather and put them on when that season is here..
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Old 12-11-2014, 07:11 AM   #26
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I am 54 and have been FI for many years and manage my own finances. I do not even own mutual funds and only own individual stocks and individual bonds which I analyze and buy. Approximately 30% of my investable assets are in muni bonds. Of them approximately 25% have 13-17 year durations. I do not go past 17 years but over the past 7 years my muni bonds have done well. And I always know that if I hold to maturity I get my full principal back (borrowing a rare default).

In this environment it has been hard rolling over maturing 5-6% tax free bonds to 2030 durations with a 3.5-3.8% tax free yield. However, I continue to do so. You do not need to follow anyone's advice to the letter, but nobody knows where interest rates are going. Virtually every pundit has gotten it wrong. For the past 5 years how many times have we heard "interest rates are about to rise......" I have no doubt that they will but the real question is when. To me it makes sense to obtain these yields (3.5-4.0% tax free) for a portion of my portfolio even if rates do rise. When they do I will rollover other maturing bonds. Just my opinion and sharing what I do.
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Old 12-11-2014, 08:33 AM   #27
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I am 54 and have been FI for many years and manage my own finances. I do not even own mutual funds and only own individual stocks and individual bonds which I analyze and buy. Approximately 30% of my investable assets are in muni bonds. Of them approximately 25% have 13-17 year durations. I do not go past 17 years but over the past 7 years my muni bonds have done well. And I always know that if I hold to maturity I get my full principal back (borrowing a rare default).

In this environment it has been hard rolling over maturing 5-6% tax free bonds to 2030 durations with a 3.5-3.8% tax free yield. However, I continue to do so. You do not need to follow anyone's advice to the letter, but nobody knows where interest rates are going. Virtually every pundit has gotten it wrong. For the past 5 years how many times have we heard "interest rates are about to rise......" I have no doubt that they will but the real question is when. To me it makes sense to obtain these yields (3.5-4.0% tax free) for a portion of my portfolio even if rates do rise. When they do I will rollover other maturing bonds. Just my opinion and sharing what I do.
That is interesting.

Where do you buy individual Municipal Bonds? Do you recommend any web site/book for people who want to learn more?
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Old 12-11-2014, 02:39 PM   #28
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For many years I bought them using the Fidelity online bond trading platform. I recently switched to Schwab which also has a platform. I did so because of a dispute with Fidelity. However, Fidelity's platform is better and easier to use.

My job is in the finance industry so I am familiar with the concepts. I suspect that there are many books covering the trading of muni-bonds. Have been trading stocks and bonds for my own account for many years. With regard to bonds, I normally hold them until maturity and I create ladders like people do with CDs.

It is important that you diversify across maturities, issuing state and credit ratings. I happen to live in a state with relatively low state income taxes (4.1%) so I buy muni bonds from any state. They are not taxable on the federal level (unless they are expressly subject to the AMT) but are taxable on the state level if issued by a state other than where I reside. If issued by your home state no tax on the federal or state level (unless expressly subject to AMT). The higher tax bracket you are in, the greater the benefit of muni-bonds. Because state income tax is so high in NY and California, residents in those states normally buy munis from their home state which are tax-free on all levels. Not a big issue for me.

I own no Treasury Bonds because the yield on Munis has been so much greater. I am willing to take the greater risk which I perceive to be slight. Having said that I am still staying away from Puerto Rico bonds and student loan bonds (out of fear from what government might do to them).

My portfolio is more conservative than experts recommend but I am focused more on preservation than appreciation.

Good Luck.
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Old 12-28-2014, 07:05 PM   #29
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Very interesting thread. I just finished the Tony Robbins book. The first thing I thought of when I saw the Ray Dalio All Season Strategy was "too many bonds and not enough stocks". This seems to be the consensus on this board.

A serious question for all the anti All Season Strategy folks: What is your education and experience? I mean that most respectfully. I am on the fence here. On one side I have my beliefs and on the other is a billionaire with 30 years of experience. My core beliefs are somewhat shaken. Is it the classic slow and steady wins the race while not losing money or go for the returns and get hammered when there is a down market.
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Old 12-28-2014, 09:24 PM   #30
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That is interesting.

Where do you buy individual Municipal Bonds? Do you recommend any web site/book for people who want to learn more?
Vanguard has an entire page, including obviously the duration and ratings.

Rich
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Old 12-28-2014, 10:15 PM   #31
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Very interesting thread. I just finished the Tony Robbins book. The first thing I thought of when I saw the Ray Dalio All Season Strategy was "too many bonds and not enough stocks". This seems to be the consensus on this board.

A serious question for all the anti All Season Strategy folks: What is your education and experience? I mean that most respectfully. I am on the fence here. On one side I have my beliefs and on the other is a billionaire with 30 years of experience. My core beliefs are somewhat shaken. Is it the classic slow and steady wins the race while not losing money or go for the returns and get hammered when there is a down market.
"My advice to the trustee couldn't be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard's.) I believe the trust's long-term results from this policy will be superior to those attained by most investors whether pension funds, institutions or individuals who employ high-fee managers."

Another billionaire's advice. This one from Warren Buffett. Now this was his advice to his charities, rather than to individuals, but from what I understand he was never too enthralled with bonds, and with today's low rates, how much more of a bond bull market can there be? Not giving any advice, just some food for thought.
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Old 12-29-2014, 04:32 AM   #32
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I am 54 and have been FI for many years and manage my own finances. I do not even own mutual funds and only own individual stocks and individual bonds which I analyze and buy. Approximately 30% of my investable assets are in muni bonds. Of them approximately 25% have 13-17 year durations. I do not go past 17 years but over the past 7 years my muni bonds have done well. And I always know that if I hold to maturity I get my full principal back (borrowing a rare default).

In this environment it has been hard rolling over maturing 5-6% tax free bonds to 2030 durations with a 3.5-3.8% tax free yield. However, I continue to do so. You do not need to follow anyone's advice to the letter, but nobody knows where interest rates are going. Virtually every pundit has gotten it wrong. For the past 5 years how many times have we heard "interest rates are about to rise......" I have no doubt that they will but the real question is when. To me it makes sense to obtain these yields (3.5-4.0% tax free) for a portion of my portfolio even if rates do rise. When they do I will rollover other maturing bonds. Just my opinion and sharing what I do.

since we have been in a bull market for bonds for almost 40 years one factor about muni bonds is coming to light.

most muni bonds are callable. so a 25-30 year muni is actually priced and has a yield that is more like a conventional 10 year bond.

however if rates rise they would no longer be called and as such get repriced as 30 year bonds.

you can get killed if you have to sell or own a muni fund when rates rise since you bought them based on being called and that no longer may be in the cards.
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