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Old 04-07-2014, 07:17 PM   #21
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At this point I am 100% out of equities..I am about 90% intermediate bonds and bond funds with a large portion of that in individual I-Bonds that I've owned for a very long time... I have never understood this fear of bonds in this low inflation period. If one's time horizon is at least as long as the duration of the bonds then the only significant risk I see is credit risk and inflation risk which is always there..BTW I'm sleeping very well at night..perhaps ignorance is bliss...
BTW..I would welcome higher interest rates but won't try to time the market..
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Old 04-07-2014, 09:02 PM   #22
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At this point I am 100% out of equities..I am about 90% intermediate bonds and bond funds with a large portion of that in individual I-Bonds that I've owned for a very long time... I have never understood this fear of bonds in this low inflation period. If one's time horizon is at least as long as the duration of the bonds then the only significant risk I see is credit risk and inflation risk which is always there..BTW I'm sleeping very well at night..perhaps ignorance is bliss...
BTW..I would welcome higher interest rates but won't try to time the market..
+1. What we often seem to forget is that bonds mature, and then you get your money back and can re-invest at the new rates. Stocks are more like the old British Consols- perpetual. If business is good, they may (or may not ) increase their dividends.

Ha
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Old 04-08-2014, 04:50 AM   #23
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with the long treasury bond up almost 8% this year i wouldn't say bonds are doing little.
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Old 04-08-2014, 05:41 AM   #24
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Where do you see 8%? The 10-year note is 2.7% as of this morning.
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with the long treasury bond up almost 8% this year i wouldn't say bonds are doing little.
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Old 04-08-2014, 06:39 AM   #25
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Where do you see 8%? The 10-year note is 2.7% as of this morning.
I think mathjak meant "up" 8%, not "at" 8%.
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Old 04-08-2014, 06:50 AM   #26
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+1. What we often seem to forget is that bonds mature, and then you get your money back and can re-invest at the new rates. Stocks are more like the old British Consols- perpetual. If business is good, they may (or may not ) increase their dividends.

Ha
This has been my basis for only buying individual bonds--mostly municipals. Based upon my reading of this Board for about 1 year, it appears that very few members of this Board (or investors in general) buy individual bonds. It appears that many have a fear of evaluating bonds but less of a fear making an individual stock purchase. I would suggest that there is a greater benefit owning individual bonds (rather than bond funds) than owning individual stocks (rather than stock funds).

People are more comfortable buying the stock of a household name than the revenue stream of say--the PA Turnpike.
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Old 04-08-2014, 10:55 AM   #27
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This has been my basis for only buying individual bonds--mostly municipals. Based upon my reading of this Board for about 1 year, it appears that very few members of this Board (or investors in general) buy individual bonds. It appears that many have a fear of evaluating bonds but less of a fear making an individual stock purchase. I would suggest that there is a greater benefit owning individual bonds (rather than bond funds) than owning individual stocks (rather than stock funds).

I'm not a fan of bonds right now, but you are spot on for those who do want bonds. Bond funds are dangerous if rates begin to rise quickly and can cost a great deal of principal. At least with individual bonds you have the option of holding to maturity, but do carry the entire risk of default. As with stocks, people need to check the financial health of the entity they are buying the bond from.
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Old 04-08-2014, 11:47 AM   #28
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I think mathjak meant "up" 8%, not "at" 8%.
correct , total return for TLT ytd is about 8%
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Old 04-08-2014, 12:06 PM   #29
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with the long treasury bond up almost 8% this year i wouldn't say bonds are doing little.
There will always be some arbitrary start point from which an asset is either up or down.


This is generally meaningless.

Ha
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Old 04-08-2014, 12:09 PM   #30
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Bond funds are not more dangerous than individual bonds. When rates go up both individual bonds and funds will go down.

However, over time you will get all your money back plus interest either way.

Unless you sell in the short term in which case both funds and individual bonds lose.
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Old 04-08-2014, 12:21 PM   #31
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Bond funds are not more dangerous than individual bonds. When rates go up both individual bonds and funds will go down.

However, over time you will get all your money back plus interest either way.

Unless you sell in the short term in which case both funds and individual bonds lose.
To me low cost bond funds have three giant advantages over individual bonds. Diversification, costs to buy or sell, and ease and cost of re-investing interest payments.

True if you buy only original issue bonds you will ordinarily incur no charge, but if you need to or want to sell, different story.
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Old 04-08-2014, 12:25 PM   #32
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I quit buying individual corporate bonds not long after I bought Enron stock..
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Old 04-08-2014, 01:21 PM   #33
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There will always be some arbitrary start point from which an asset is either up or down.


This is generally meaningless.

Ha

I think most of us track year by year starting jan 1 unless you have reason not to like you bought something 6 months in
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Old 04-08-2014, 01:26 PM   #34
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Bond funds are not more dangerous than individual bonds. When rates go up both individual bonds and funds will go down.

However, over time you will get all your money back plus interest either way.

Unless you sell in the short term in which case both funds and individual bonds lose.

Your opinion Retire is what I understand to be true. Yet this seems to be a debate that pops up occasionally here and at Bogleheads and for the life of me I don't understand why. Some steadfastly believe buying a bond over a bond fund protects you by holding to maturity, but I don't understand how it ultimately doesn't wash out in the end unless like you said someone sells early. But then again, that would also apply to the person holding individual bonds.


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Old 04-08-2014, 01:31 PM   #35
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I suppose they are pointing out that at some point you will want to sell out and when you do if you do so during rising rates you might end up selling shares at a lower price than you paid..All things considered I much prefer bond funds to individual bonds..
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Old 04-08-2014, 01:38 PM   #36
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I suppose they are pointing out that at some point you will want to sell out and when you do if you do so during rising rates you might end up selling shares at a lower price than you paid..All things considered I much prefer bond funds to individual bonds..

I assume along the line of a bond ladder with varying maturity dates? I could see that maybe having some value to a high net worth person, but I wouldn't have the capital to do it correctly and have proper diversification so I have to stick to bond funds and CDs.


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Old 04-08-2014, 03:05 PM   #37
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I wouldn't buy a long term bond fund for short or medium term principal withdrawals. SAME THING for individual bonds.

Buy a fund or ETF that has individual bonds in them of sufficient amounts and maturities you need. Or multiple funds/ETF's with targeted maturities.

That being said buying bonds of any kind right now pretty much locks in a pretty low return. But losing principal should not be an issue if you withdraw as planned.
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Old 04-08-2014, 03:21 PM   #38
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I think most of us track year by year starting jan 1 unless you have reason not to like you bought something 6 months in
Most may, as you say, track year by year starting Jan 1 but that's certainly a poor way to do it. I always look at multiple time frames and trends to try to get a more complete and telling picture of the situation.
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Old 04-08-2014, 03:34 PM   #39
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buying bonds of any kind right now pretty much locks in a pretty low return. But losing principal should not be an issue if you withdraw as planned.
zactly! For preservation I still see nothing that compares to bonds..

Hogs will get slaughtered in this environment..
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Old 04-08-2014, 06:05 PM   #40
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Bond funds are not more dangerous than individual bonds. When rates go up both individual bonds and funds will go down.

However, over time you will get all your money back plus interest either way.

Unless you sell in the short term in which case both funds and individual bonds lose.
Pretty much how I see it. I'm not willing to deal with individual bonds and I see no advantage - only extra trouble and costs and lack of diversity. Have owned most of our bond funds since 200 when interest rates were much higher, drew on them when we went through market crashes. Will be holding for decades more, so I don't get concerned about short term disruptions, I just rebalance.

I think we'll have both interest rate rising scares and deflation scares over the next several years. There will be no uniform directional glide path - it will be plenty volatile even if the ultimate very long term trend is in one direction, so rebalancing will help.
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