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Re: I like my bonds these days
Old 08-02-2006, 10:09 AM   #21
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Re: I like my bonds these days

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Originally Posted by ladelfina
HUh? My wacky portfolio is up 9.7% ytd.. the reason it is so LOW ....
That's a very good return.
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Re: I like my bonds these days
Old 08-02-2006, 11:16 AM   #22
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Re: I like my bonds these days

Thanks Audrey.. of course you are right about volatility.. I think I gave my reasons for my changes in perception -- from being 'on the cusp', so to speak! Right now about 85/15 stocks/bonds for 'investments'. Roughly 2 years' worth expenses in cash.

Spanky, I laid it all out for you guys.. just sell whatever you've got and dive right in!*

The water's fine (as long as it lasts). Most of you guys don't have the (sucky) dollar/ (stronger) Euro exchange to contend with!!! So aside from cap gains issues w/r/t selling (even at today's low rates I don't want force myself into a higher tax bracket) I don't see a good reason not to keep holding (and buying and holding..).

I "get" Bernstein.. but maybe I am just too scared right now to take a hit in order to get off the gravy train...?? If I were in the US I might have a different mindset right now.
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Re: I like my bonds these days
Old 08-02-2006, 07:02 PM   #23
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Re: I like my bonds these days

Quote:
Originally Posted by Rich_in_Tampa
Audrey, you sound at peace. How many years' expenses do you have in cash, if I may ask?
Rich - I've been living off investments since 1999, so "peace" comes with experience. *I deliberately set up my portfolio with a reasonable allocation according to modern portfolio theory. The idea was to require minimal effort to maintain - just occasional rebalancing. *I really try to avoid timing, but I found I just couldn't bring myself to add to my bond holdings until they got back into historical range.

My portfolio has done fine over the years, and I have definitely seen the benefits of an asset allocation approach and occasional rebalancing. *The truth is that I would have done even better if I'd just put all my money in DODBX and let them take care of me. *If you can find a good quality, low-cost, balanced fund, that's hard to beat.

In general, I keep a couple of years expenses in cash in a separate account from our retirement portfolio. *Then, because we only keep about 55% in equities, and most of the bonds are short-term bonds, by definition we have at least 10 years worth of expenses in non-stock assets in the retirement portfolio. *So I use these non-stock assets to for rebalancing the equities as things go up and down, but it can also be used as a buffer.

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Re: I like my bonds these days
Old 08-02-2006, 08:44 PM   #24
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Re: I like my bonds these days

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Originally Posted by audreyh1
In general, I keep a couple of years expenses in cash in a separate account from our retirement portfolio. Then, because we only keep about 55% in equities, and most of the bonds are short-term bonds, by definition we have at least 10 years worth of expenses in non-stock assets in the retirement portfolio. So I use these non-stock assets to for rebalancing the equities as things go up and down, but it can also be used as a buffer.
That's helpful, and comparable to what I plan. It seemed that the small incremental benefit of stretching some of your bond holdings to intermediate or longer just isn't worth the increase in volatility. If you want to trade volatility for gains, do it with your stock holdings.

I'd like to keep about 7 yrs of expenses in nothing longer than short term bonds, too. Maybe 2 years in MMF or the like. If you FIRECalc it out using 5 yr treasuries, this works out well. Glad to hear it works for you in the real world (I'm still in fantasy/working land for a few more years).
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Re: I like my bonds these days
Old 08-02-2006, 09:30 PM   #25
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Re: I like my bonds these days

Jeez Rich, so you're a belt and suspenders and staple gun to the legs kind of guy then?
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Re: I like my bonds these days
Old 08-02-2006, 11:16 PM   #26
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Re: I like my bonds these days

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Originally Posted by Rich_in_Tampa
That's helpful, and comparable to what I plan. It seemed that the small incremental benefit of stretching some of your bond holdings to intermediate or longer just isn't worth the increase in volatility.
From what I had studied, for rebalancing purposes short-term bonds were a better diversifier with stocks than long-term. In other words - you got less volatility for virtually the same long-term performance if you stuck with shorter-term bonds. For that reason I don't bother with longer duration bonds.

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Re: I like my bonds these days
Old 08-02-2006, 11:30 PM   #27
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Re: I like my bonds these days

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Originally Posted by ladelfina
Spanky, I laid it all out for you guys.. just sell whatever you've got and dive right in!
Thanks for the advice. I cannot afford the capital gain tax.
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Re: I like my bonds these days
Old 08-03-2006, 03:36 AM   #28
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Re: I like my bonds these days

yeh, me neither. so that's why I am just gritting my teeth and hanging on thru the ups&downs.
P.S. that 9.7% is annualized, not absolute.. where things will be if they keep up the same pace. (I use the IRR fn in Quicken; that's pretty much all I keep an eye on.) So maybe it is more in line with those reporting 5-6% if they calculate it differently. In fact, my ROI figure is 5.6% so maybe that's what I should have listed. Sorry if I inadvertently introduced any confusion or consternation.
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Re: I like my bonds these days
Old 08-03-2006, 03:53 AM   #29
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Re: I like my bonds these days

short term bonds 1-3 years have performed like cash..roughly a 3-1/2% return historically over the long term ...longer term bonds have exceeded 5% historically long term..thats a 40% difference
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Re: I like my bonds these days
Old 08-03-2006, 07:30 AM   #30
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Re: I like my bonds these days

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I'd like to keep about 7 yrs of expenses in nothing longer than short term bonds, too. Maybe 2 years in MMF or the like. If you FIRECalc it out using 5 yr treasuries, this works out well. Glad to hear it works for you in the real world (I'm still in fantasy/working land for a few more years).
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Originally Posted by Cute Fuzzy Bunny
Jeez Rich, so you're a belt and suspenders and staple gun to the legs kind of guy then?
Maybe.

I guess I'm thinking more like 2 years of cash, 4-5 yrs in short-term fed bond type fund (there's my 6-7 year bucket). Not convinced longer bonds offer me much in return for their greater volatility -- just as soon throw a few more percent at stocks if I have pocket change.

Belts, suspenders, but probably no staples, huh?
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Re: I like my bonds these days
Old 08-03-2006, 07:47 AM   #31
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Re: I like my bonds these days

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Originally Posted by Rich_in_Tampa
Maybe.*

I guess I'm thinking more like 2 years of cash, 4-5 yrs in short-term fed bond type fund (there's my 6-7 year bucket). Not convinced longer bonds offer me much in return for their greater volatility -- just as soon throw a few more percent at stocks if I have pocket change.

Belts, suspenders, but probably no staples, huh?
Rich, given your conservative inclinations, perhaps 2 years in cash/money market and the next 4 or 5 years in a treasury note or CD ladder would make sense. You could even do a ladder of treasury zeros for the 4 to 5 year stuff.
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Re: I like my bonds these days
Old 08-03-2006, 11:22 AM   #32
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Re: I like my bonds these days

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Rich, given your conservative inclinations, perhaps 2 years in cash/money market and the next 4 or 5 years in a treasury note or CD ladder would make sense. You could even do a ladder of treasury zeros for the 4 to 5 year stuff.
I'm open to that.

Would t-notes and CDs offer significantly better yields than short-term federal funds, historically? Looked like just a tiny difference to me and I like the convenience of a mutual fund (as well as the potential to react to changes in interest rates, unlike a CD), but I guess for that much money the details matter.
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Re: I like my bonds these days
Old 08-03-2006, 11:27 AM   #33
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Re: I like my bonds these days

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I'm open to that.

Would t-notes and CDs offer significantly better yields than short-term federal funds, historically? Looked like just a tiny difference to me and I like the convenience of a mutual fund (as well as the potential to react to changes in interest rates, unlike a CD), but I guess for that much money the details matter.
Depending on facts and circumstances, you might get better yield. More importantly, with a CD or a treasory zero, you know exactly how much cash you will be getting and when you will be getting it. That's worth something, if you are planning on using the money to live on.
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Re: I like my bonds these days
Old 08-03-2006, 11:45 AM   #34
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Re: I like my bonds these days

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Depending on facts and circumstances, you might get better yield. More importantly, with a CD or a treasory zero, you know exactly how much cash you will be getting and when you will be getting it. That's worth something, if you are planning on using the money to live on.
Gotcha.

Maybe it's just the timing, but I've found almost no meaningful volatility in the Vg STF fund for years. Are you pointing out that this may not always be the case down the road given the right circumstances?

That right there would lead me to take your advice and stick with t-notes or CDs for this "sure thing" money.
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Re: I like my bonds these days
Old 08-03-2006, 11:49 AM   #35
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Re: I like my bonds these days

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Gotcha.

Maybe it's just the timing, but I've found almost no meaningful volatility in the Vg STF fund for years. Are you pointing out that this may not always be the case down the road given the right circumstances?

That right there would lead me to take your advice and stick with t-notes or CDs for this "sure thing" money.
Its not volatility, per se that I would worry about. Its more a question of "if I put $X dollars in today, how many dollars will I have in the future at a specific date?" With a ST bond fund, you will have no idea because rates and (to a lesser extent) NAV will flop around a good bit. With a Zero of a CD you know with absolute certainty how many dollars you will have at a specific date in the future, so you don't have to care about volatility or rate fluctuations.

Now what those dollars will actually be worth in the future...
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Re: I like my bonds these days
Old 08-03-2006, 11:55 AM   #36
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Re: I like my bonds these days

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Now what those dollars will actually be worth in the future...
You'll know if you buy TIPS.

OK, given that nominals should have better returns than TIPS some of the time, how about this for a one-size-fits-all bond allocation?

50% nominals + 50% TIPS.

Nobody should ignore TIPS, IMHO.
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Re: I like my bonds these days
Old 08-03-2006, 12:05 PM   #37
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Re: I like my bonds these days

Providing you dont have to sell the things before they hit maturity.

I guess i'm 'nobody'. Wouldnt touch them with an 11' pole unless they're paying at least 3-3.5%.
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Re: I like my bonds these days
Old 08-03-2006, 12:33 PM   #38
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Re: I like my bonds these days

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Providing you dont have to sell the things before they hit maturity.

I guess i'm 'nobody'.* Wouldnt touch them with an 11' pole unless they're paying at least 3-3.5%.
You must hate fixed bonds then. 5% coupon less 4+% CPI = under 1% real yield. A lot worse than TIPS...
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Re: I like my bonds these days
Old 08-03-2006, 12:51 PM   #39
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Re: I like my bonds these days

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You must hate fixed bonds then.* 5% coupon less 4+% CPI = under 1% real yield.* A lot worse than TIPS...
Brewer, you don't understand. This is one of CFB's hairballs.
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Re: I like my bonds these days
Old 08-03-2006, 12:53 PM   #40
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Re: I like my bonds these days

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Originally Posted by wab
You'll know if you buy TIPS.

OK, given that nominals should have better returns than TIPS some of the time, how about this for a one-size-fits-all bond allocation?

50% nominals + 50% TIPS.

Nobody should ignore TIPS, IMHO.
These are after-tax funds.
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