- Joined
- Oct 13, 2010
- Messages
- 10,735
I'd just like to make sure I'm not missing something, or brainwashed by Larry Kotlikoff and Scott Burns (just read 'Spend til The End').
The authors (in 2008) were big into TIPS for someone like me, who is near FIREing. The idea, which I found agreeable, is "why gamble if you can lock-in your consumption smoothed amount, and that amount is ok?" But I can't buy TIPS directly, since the money is in a 401k. So I've got an Intermediate bond fund or a stable value fund to choose from. I'm sure that authors, and many folks on this board would suggest the stable value fund, even though it's yeild is 1% less.
So the SVF will prevent you from the extreme southerly direction that bond funds took in 2008, for instance, at the price of just barely keeping up with inflation? I just read the wikipidia entry on SVF's and it had a risk in there about how money entering the fund at the wrong time can impact the yield. But the article also said that SVF's were the only funds not bashed in 2008. As a side note, the wikipedia entry for bond funds doesn't mention the risk that fund inflows and outflows have on bond funds. Someone that's smart about these things might consider fixing that! That's another reason I'm less interested in bond funds...if 2008 is a good example, they can take a steep dive when folks want to bail into cash. Not really true if you have individual bonds (it would be your own fault if you sold before maturity in a non-adventagious interest rate environment). But in a fund, you get the negative side effect of reactionary fellow investors.
Anyway, it's looking like the SVF is the right place for my "bonds" allocation. But if my thinking could use a tweak, or an overhaul, please advise.
The authors (in 2008) were big into TIPS for someone like me, who is near FIREing. The idea, which I found agreeable, is "why gamble if you can lock-in your consumption smoothed amount, and that amount is ok?" But I can't buy TIPS directly, since the money is in a 401k. So I've got an Intermediate bond fund or a stable value fund to choose from. I'm sure that authors, and many folks on this board would suggest the stable value fund, even though it's yeild is 1% less.
So the SVF will prevent you from the extreme southerly direction that bond funds took in 2008, for instance, at the price of just barely keeping up with inflation? I just read the wikipidia entry on SVF's and it had a risk in there about how money entering the fund at the wrong time can impact the yield. But the article also said that SVF's were the only funds not bashed in 2008. As a side note, the wikipedia entry for bond funds doesn't mention the risk that fund inflows and outflows have on bond funds. Someone that's smart about these things might consider fixing that! That's another reason I'm less interested in bond funds...if 2008 is a good example, they can take a steep dive when folks want to bail into cash. Not really true if you have individual bonds (it would be your own fault if you sold before maturity in a non-adventagious interest rate environment). But in a fund, you get the negative side effect of reactionary fellow investors.
Anyway, it's looking like the SVF is the right place for my "bonds" allocation. But if my thinking could use a tweak, or an overhaul, please advise.