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Old 07-04-2013, 09:00 AM   #21
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Where exactly do you see a general economic recovery ? Anyway, my answer to your question is no. I am staying the course.

However, I may continue to buy deferred annuities with surplus money until I stop working.

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But with interest rates at rock bottom and nowhere to go but up, and with what appears to be a boom in housing sales, improved consumer confidence, and a general economic recovery, is not the interest rate writing on the wall? Even the talking heads are warning about the risks of getting into bond funds right now. Why stand idly by?

Then I guess the question then becomes where to go? I was thinking just shifting into short term funds, but there is always CDs or money markets, where returns are dismal but the principal is protected.
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Old 07-04-2013, 09:20 AM   #22
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I will be bailing into bonds (and international stocks) when I do my annual rebalancing this weekend, since performance of both has been lagging US stocks in the past year.
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Old 07-04-2013, 09:46 AM   #23
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I have been reducing the bond component of my fixed income over the past few months and increased cash. Just the hint of Fed easing purchases was enough to shake the market dramatically. Maybe it will be different when the stimulus is actually withdrawn, but it could also get much worse. The old adage of buy when securities are cheap and sell when they are high may apply depending on whether you adhere to a strict buy and hold philosophy or not. Bonds are still not cheap, even after this latest increase in rates, but on the other hand if the "you know what hits the fan", its still important to have some bonds in your portfolio for balast. That said, unfortunately there is no right or wrong answer on which approach to take, so just do what helps you to sleep better at night.
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Old 07-04-2013, 10:36 AM   #24
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I may continue to buy deferred annuities with surplus money until I stop working.
obgyn65, do you mind sharing what deferred annuities you are buying. I've been staying away due to general perception of too-high-fees, but taxes hurt a lot :-(

Sorry if this was discussed in another thread.
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Old 07-04-2013, 10:54 AM   #25
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didn't bail...just lowered the duration of my bond funds.
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Old 07-04-2013, 10:58 AM   #26
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I often wonder how the financial services industry rakes in billions when the overwhelming evidence is that one's greatest chance for success is to buy and hold index funds periodically rebalancing to take advantage of say bond funds dropping in price or stock funds tanking. Not much money in that for the middleman but this thread is just one more example of how those billions are made. Bill Gross projects the 10 year to be 2.2 soon? Bill Gross dumped treasuries a while back missing out of an enormous rally and his fund badly underperformed. The "king of bonds" with all his trading and expertise versus Vanguard Intermediate Index Admiral:
Harbor Bond:
5yr: 6.97 10yr: 6.16

Vanguard
5yr: 7.20 10yr: 6.18

And you think your trading can outperform this because?
If you look at PTTRX which is easily available through Vanguard, you will see a different picture of the relative returns versus Vanguard Intermediate Bond Adm VBILX. I don't know why PTTRX has done better then HABDX but it could be that the ER history has something to do with it. The M* numbers are:

PTRRX:
5yr: 7.3 10yr: 6.0%

VBILX:
5yr: 6.8 10yr: 5.3%

Also for completeness, Harbor Bond HABDX:
5yr: 6.6 10yr: 5.6%

Personally these returns are OK either way. Neither put you in the poor house.
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Old 07-04-2013, 11:04 AM   #27
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I had a look at Hartford, New York life, and a couple more. Please have a look at the "interesting comments on annuities" thread. The top 3 providers are broadly similar.

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Originally Posted by smjsl View Post

obgyn65, do you mind sharing what deferred annuities you are buying. I've been staying away due to general perception of too-high-fees, but taxes hurt a lot :-(

Sorry if this was discussed in another thread.
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Old 07-04-2013, 07:09 PM   #28
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I'm not bailing out of bond funds, but I don't have a whole lot in them anyway. My entire 401k is made up of Vanguard's Total Bond Market Index. That's about 14.01% of my overall investments. In my taxable account I have cash (10.83%) and stocks (53.92%). My Roth IRA is made up of US and foreign REITs split fifty/fifty (21.24%).

I don't have any specific asset allocation percentages that I shoot for. I put what I can into the 401k and Roth IRA, and whatever is left over goes into my taxable account. My cash is my emergency money (minimum of one year of living expenses), which is higher than usual because I have set money aside for a new car and a large tax bill coming next year. Everything else goes into stocks in my taxable account.
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Old 07-04-2013, 07:22 PM   #29
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Hanging in there with a 45/35/20 equity/bond /cash. Like many I have plowed all new contributions into a SV fund which has driven up my cash portion from 15 to 20%. However I can't help but wonder if all this cash on the sidelines won't help suppress rates even longer. Meanwhile I'm giving up about 1 % of interest income waiting for the rates to rise.
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Old 07-05-2013, 05:56 AM   #30
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I am actually a little over-weight in Wellington
This is the way I'm hiding my head in the sand: I'm slowly moving my bond holdings out of bond funds and into funds like Wellesley and Wellington where I can deceive myself into thinking someone smarter than me is managing my cash vs. bond exposure more intelligently than I can.
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Old 07-05-2013, 06:47 AM   #31
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This is the way I'm hiding my head in the sand: I'm slowly moving my bond holdings out of bond funds and into funds like Wellesley and Wellington where I can deceive myself into thinking someone smarter than me is managing my cash vs. bond exposure more intelligently than I can.

That is what I did with my mom's bond funds. I don't see any reasonable alternative other than the stock market. Perhaps the W&W fund managers have bugs in the Federal Reserve and Treasury Dept office. Which would account for their stellar performance over the decades. A bit of insider trading maybe the only way out of this mess
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Old 07-05-2013, 06:59 AM   #32
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Quote:
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This is the way I'm hiding my head in the sand: I'm slowly moving my bond holdings out of bond funds and into funds like Wellesley and Wellington where I can deceive myself into thinking someone smarter than me is managing my cash vs. bond exposure more intelligently than I can.
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That is what I did with my mom's bond funds. I don't see any reasonable alternative other than the stock market. Perhaps the W&W fund managers have bugs in the Federal Reserve and Treasury Dept office. Which would account for their stellar performance over the decades. A bit of insider trading maybe the only way out of this mess
And here I was thinking I was the only one who had this all figured out...
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Old 07-05-2013, 07:57 AM   #33
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I am pretty much a buy and hold guy and haven't made any major adjustments to my portfolio other than some informal balancing for a few years. I noticed my Fidelity intermediate bond fund's asset value YTD has already declined more than any hopes of interest income for the year and am think on bailing out of anything longer than short term. I am looking for opinions?

I am aware of the two basic arguments for buying and holding bond funds. First, that if you hold long enough the increasing returns will eventually outweigh losses in NAV. And that it is futile to try to predict interest rates and time the market. Well...on another day I would tend to agree. But with interest rates at rock bottom and nowhere to go but up, and with what appears to be a boom in housing sales, improved consumer confidence, and a general economic recovery, is not the interest rate writing on the wall? Even the talking heads are warning about the risks of getting into bond funds right now. Why stand idly by?

Then I guess the question then becomes where to go? I was thinking just shifting into short term funds, but there is always CDs or money markets, where returns are dismal but the principal is protected.
Yes. My primary bond component was sold early May when I rolled my 401k.
Where to go? Slowly into high quality, global equities.
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Old 07-05-2013, 02:12 PM   #34
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Something I just put together on my spreadsheet for tracking the portfolio is:



Might help me save my sanity and remain calm in a bond market day like today with my intermediate bond fund currently down -1.2% for the day as I write this.
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Old 07-06-2013, 07:00 PM   #35
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Right now we're seeing what passes for panic selling in the bond market. Short term funds with durations less than the start of any proposed 'tapering' have sold off considerably.

So, no, I'm not selling. I know how this tends to play out over several years, and it's not the Doomsday Scenario the financial punditocracy would like you to believe. Sure does generate the clicks and pageviews, though...
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Old 07-06-2013, 07:11 PM   #36
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Sure does generate the clicks and pageviews, though...
+1
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Old 07-06-2013, 07:24 PM   #37
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Government pensions are bailing on bonds.
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Old 07-06-2013, 07:40 PM   #38
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Government pensions are bailing on bonds.
How about a citation on that?

Ha
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Old 07-06-2013, 07:52 PM   #39
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Someone always comes along to spoil a good story by wanting facts...
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Old 07-06-2013, 08:08 PM   #40
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How about a citation on that?

Ha
http://m.pionline.com/gallery/201211...OW/112909999/3


Here is a link to an article that shows the general trend in the past year or so of public pensions reducing their bond allocation. I have also been studying individual states AA and have noticed a remarkable reduction in bonds in many of them.
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