Bond Mutual Funds

[pb4uski]

If that "some point" were now, where would you put your "bail bond" money? Stocks (at this level)? MM? CDs? Other??

My fixed income AA is currently in an intermediate term investment grade bond fund, a short-term bond fund and a high-yield corporate bond fund.

I'll probably hold and might even add to the short term and high yield corporate bond funds and liquidate the intermediate term investment grade bond fund over time and reinvest in a dividend growth stock fund (like the VG Dividend Growth fund) and an international bond fund. While I understand that the dividend growth adds equity risk to my portfolio, I'm more scared of interest rate risk than equity risk.

YMMV.

 

[akck]

Since I am getting close to retirement, I started to buy individual bonds in my portfolio 3+ years ago, getting up to a 35% allocation. With the way rates have gone, I sold some for a good profit and most of the others have been called. Rates are currently projected to be low until 2015, so look to 2016 or 2017 before any increase. Oh, low rates have been extended out for the past 3 years, so further extensions are possible and we may be looking until 2018 before any increase.

Currently, I'm heavy to cash, but I switched my FI allocation over to dividend producing stocks. I figure 3-6% annual dividends beat what's available in bonds or bond funds. While I agree rates will rise slowly, I wouldn't be surprised to see a 1-2% increase occurring over a year's time when it happens.

 

[mickeyd]

The response that I have received several times to similar questions has been: "Get your employer to provide better choices." I haven't found my employer to be even remotely constructive in that regard, though I plan to renew my attempts today.

You certainly have the right attitude. Workers often forget that the money in the 401(k) plan IS THEIRS! What a revelation huh? It's the retirement plan of the employee, not the employer. Employees that consistently take the time to inquire about how their retirement fund is run, what options are/are not offered, how much cost/fees is pushed off on employees are looking our for their retirement and can often make a difference. If not you, who?

 

[bUU]

Yup, though once we bring up the cost/fees we begin to lose leverage, given that employers recognizing how the labor market has become a buyers' market can view the costs they incur as sponsors of the plan as hurting the bottom line.

All the best advice I've read regarding talking with plan sponsors recommend to ensure that what we're suggesting is truly a win-win, i.e., that it somehow benefits the company, not just the employee. It used to be that we could express those benefits in terms of employee attraction and retention, but I'm getting that flat stare when I raise such matters now - the flat stare that says, "Fine: Go find another job, just try, will ya?"

I've been pushed off about a dozen times already. I've pinned the company accountant (who really has no power, but at least might listen) down for tomorrow morning 7:30 am. We'll see if she finds something else to do instead.

I want to float the idea of providing an option for us to pay a fee for something better, but I doubt any of my colleagues would be happy about such a move, and I don't want to open a door that I'll regret opening.

 

[brewer12345]

I have been steadily liquidating my junk exposure lately. There is far more downside than upside and I do not like the behavior I see going on in the junk market.

 

[Senin]

I am pleased to announce that in the month since 2/18/2013 when this thread was started that the total returns of VFIIX, VIPSX, VBMFX are positive. VWITX has lost about 0.25% of its value.

Instead of picking some arbitrary timeline, how about year to date.

VWITX is the only thing in positive territory. The others are losses.

VFIIX Chart Vanguard GNMA Inv Fund Chart

So, LOL, how are your bonds doing to date, please tell us.

LOL

 

[LOL!]

It is well-known on the forum that I use VCSH, BIV, VFIJX, FSITX. Here are their YTD performances according to M*:
+0.45% VCSH
-0.06% BIV
-0.12% VFIJX
-0.26% FSITX

I am not worried about the performance of my bond funds. I have bought lots more FSITX recently and it has gone up since my last purchase so the YTD above from M* is not my YTD. See this thread: http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-5.html#post1286002

And I wish to note for others that I did not pick arbitrary timelines. I picked times where you announced a purchase or started a thread.

 

[kmt1972]

PTTRX is very good. It pretty much returns at least 6-7% every year on average and did white well during the 2008-2009 crisis. Main downside is that in periods of high inflation it does not do as well in real terms. So it is best to hedge this with some inflation based assets.

 

[MichaelB]

PTTRX is very good. It pretty much returns at least 6-7% every year on average and did white well during the 2008-2009 crisis. Main downside is that in periods of high inflation it does not do as well in real terms. So it is best to hedge this with some inflation based assets.

PTTRX opened in 1988, and since that time there has been no high inflation, so we really don't know how it would do. We do know it has positive real returns in 21 of 24 years.

 

[seraphim]

I've mentioned my problem with bonds in a different thread. I currently maintain 60 stocks / 40 bonds in the market (275k) and when I retire in 30 days I'll have about $660 k to transfer into Vanguard funds. I was going to do the same ratio, but the thought of putting $264 k into bond funds right now seems irresponsible - the bond fund (VBTLX) has lost 1.25% in the last few months, and I only see bond fund NAVs dropping further the next few years. I'm planning on leaving that bond money in their stable accounts (1.75and 3%) until the bond funds seem to bottom out in future years. I see no need to put new money into almost guaranteed losses for the next several years. When the NAVs further down, then buy. Note: I'm relatively new in the market and realize I dont know everything lol.

* I'm planning a2% withdrawel beginning 2014 - travel money

 

[bondi688]

Seraphim
A Bubble Bigger than Housing Is About to Pop -- Here's How to Protect Your Portfolio - Yahoo! Finance
This just published article in Yahoo Finance certainly takes a dim view of the US Treasury and Bond market.
"Despite the country's battered financial condition, Treasury bonds are still viewed as one of the safest securities in the world. But with a terrible risk-reward ratio, growing fiscal deficits, record-low yields and attractive alternatives, the Treasury market is ripe for a long overdue correction."

 

[seraphim]

Thanks for the link. It makes sense.

 

[seraphim]

Morningstar Free Smartpage | News

 

[bondi688]

Morningstar Free Smartpage | News

I think you have to be watchful and be nimble on your feet with any investments. The Fed and all the other central banks are doing the utmost to down interest rate (how come no one think of that as collusion or manipulation) because a meaningful rise in interest rate will make servicing the enormous government debts around the world impossible. Until the Central Banks lose the struggle against Bond vigilantes, and the Central Banks have all the power in this battle, substantial interest rate increase is a threat more in theory or what should normally happen. But we are living in a very abnormal time.

 

[seraphim]

But how long can they keep up the manipulation?

 

[bondi688]

But how long can they keep up the manipulation?

As long as all the Central Banks, facing the same threat from the enormous debts of their respective governments, can maintain a united front against the bond vigilantes? Conventional savers, many of them in retirement, looking at zero % interest rate and now the possibility of taking a big haircut like what happened in Cypress, be damned. I am not disagreeing with you, but I put forth again, we are giving in very abnormal time.

 

[pb4uski]

Thanks for the link. It makes sense.

I read the article as bearish on Treasuries and bond mutual funds with a concentration of treasuries but not necessarily bearish on bonds in general.

I actually don't own any treasuries and haven't for a year or so. Mostly short and intermediate term corporates for me at this point.

 

[bondi688]

I read the article as bearish on Treasuries and bond mutual funds with a concentration of treasuries but not necessarily bearish on bonds in general.

I actually don't own any treasuries and haven't for a year or so. Mostly short and intermediate term corporates for me at this point.

More often some corporate bonds tank before the US Treasuries because of the individual fortune of the company, but usually corporate bonds and US Treasuries move in unison and in the same direction. And if US Treasuries, considered the safest investment, do badly, do not see how it would not adversely affect the general bond market.

 

[pb4uski]

The difference IMO is that for corporates you are getting fairly compensated for the risks you are taking and for Treasuries you are not getting adequately compensated for the risk you are taking.

http://www.bloomberg.com/news/2012-...-while-buffett-says-bonds-are-dangerous-.html

 

[Senin]

It is well-known on the forum that I use VCSH, BIV, VFIJX, FSITX. Here are their YTD performances according to M*:
+0.45% VCSH
-0.06% BIV
-0.12% VFIJX
-0.26% FSITX

I am not worried about the performance of my bond funds. I have bought lots more FSITX recently and it has gone up since my last purchase so the YTD above from M* is not my YTD. See this thread: http://www.early-retirement.org/forums/f44/lol-s-market-timing-newsletter-57042-5.html#post1286002

And I wish to note for others that I did not pick arbitrary timelines. I picked times where you announced a purchase or started a thread.

That's cool, LOL.

You stick to your bonds.

I'll stick to my stocks.

Let's see what comes out ahead.

LOL

 

[LOL!]

Thank you. I will stick to my bonds AND stocks.

 

[mickeyd]

I'm planning on leaving that bond money in their stable accounts (1.75and 3%) until the bond funds seem to bottom out in future years.

When will that be? See, that's the problem. You can not easily time the market and there are limited options other than to pick an asset allocation for the long term and stay the course.

 

[seraphim]

Yes, I understand it's market timing. When will it happen? *shrug*. Two years? Three? But I'd rather have a stable value now. Considering the cash as fixed income vs equity, I'm still maintaining my AA - just not putting it in something teetering on the edge. Hedging a bit. After interest rates have risen and value has dropped, I'll be more comfortable putting new money into bonds.

Since I won't need to make withdrawals in retirement unless I wish, I can play cautious.