brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
- Messages
- 18,085
Do NOT buy GNMAs.
If my Asset Allocation is Telling me to Buy Bonds, Should I?
- Thread starter nico08
- Start date
steelyman
Moderator Emeritus
Do you mean short/intermediate term or just don't buy, period? I ask because I've been averaging into a GNMA fund with the intent to hold for at least 10 years. This is in a tax-deferred account.
steelyman
Moderator Emeritus
I should clarify, I think. I don't mean short/intermediate in terms of bond duration, but holding period for fund shares, with reinvestment.
brewer12345
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
- Joined
- Mar 6, 2003
- Messages
- 18,085
Quoted durations are meaningless for these funds. Google "negative convexity" and I will try to answer questions.
steelyman
Moderator Emeritus
Thank you! I skimmed a couple and believe I am too ignorant at this point to formulate a worthwhile question, but I may hit you up later. But I have homework reading.
jIMOh
Thinks s/he gets paid by the post
What is the goal of the rebalance?
What is the goal of the bond funds?
Ask those questions to yourself, and give yourself 3 answers to each...
The goal of the rebalance is to
a) buy low, sell high
b) get back to appropriate risk tolerance
c) reduce exposure to stocks
More than likely all 3 are correct to some degree
The goal of the bond funds is to
a) generate income
b) diversify away from stocks (have an investment not correllated to stocks)
c) Take advantage of buying something not at its peak?
If you could find an investment which did a) and b) and possibly c), would you do it?
Maybe that investment is
a) convertibles (do not behave like normal bonds)
b) long-short funds (income strategy which has less correlation to bond market)
c) cash (as others have suggested)
d) commodities
e) Real Estate (REITS)
It is my opinion as long as you avoid high exposure to long term bonds, you should be OK.
My allocation is 60-40, and my 40% are
10% to high yield
10% to diversified bonds
10% to inflation bonds
10% to Real Estate
If I could move the assets, I would reduce the 10% high yield and 10% diversified bonds into a long-short and convertible bond funds...
What is the goal of the bond funds?
Ask those questions to yourself, and give yourself 3 answers to each...
The goal of the rebalance is to
a) buy low, sell high
b) get back to appropriate risk tolerance
c) reduce exposure to stocks
More than likely all 3 are correct to some degree
The goal of the bond funds is to
a) generate income
b) diversify away from stocks (have an investment not correllated to stocks)
c) Take advantage of buying something not at its peak?
If you could find an investment which did a) and b) and possibly c), would you do it?
Maybe that investment is
a) convertibles (do not behave like normal bonds)
b) long-short funds (income strategy which has less correlation to bond market)
c) cash (as others have suggested)
d) commodities
e) Real Estate (REITS)
It is my opinion as long as you avoid high exposure to long term bonds, you should be OK.
My allocation is 60-40, and my 40% are
10% to high yield
10% to diversified bonds
10% to inflation bonds
10% to Real Estate
If I could move the assets, I would reduce the 10% high yield and 10% diversified bonds into a long-short and convertible bond funds...
