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Old 05-14-2018, 09:15 AM   #21
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Originally Posted by pb4uski View Post
I read your post. You do realize that they issue long-term CD's .... right? I was just on Vanguard and there are lots of them.... out to 20 years (3.921%) if you want them.

If you had written that he was less than 50 so forget about short-term CD's then that might have been more understandable..... though some people use a barbell strategy to manage interest rate risk where they buy a lot of short-term fixed income and long-term fixed income.
Locked in 3.9 for 20 Years Talk about interest rate risk. If you want advise I would go to Bogleheads.com there are some real smart people there.
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Old 05-14-2018, 09:20 AM   #22
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I have been watching bonds over the past year also, but couple questions I remind my self of on a regular basis:


1) Most would agree that you can't time the market over the longer term. Why do you think this time is different ?
2) Are you worried about tomorrow or 5-10 years from now ? As rates rise, sure you will see some loss as funds are forced to sell below face value to fund redemptions but any new bonds purchased by the fund will continue to rise with rates.
3) Why do you have bonds in your portfolio ? If you want capital gains from increasing prices then you are trying to beat the market. If you want a more stable balance to your equities then a small loss is a balance against a larger loss in equities.


Having said that, I am trying to stay in short term funds that have a duration of less than 3 years. Much shorter than your fund. I also have laddered CDs with Navy federal and Pentagon federal credit unions. They are paying 2.74% for 5 year CD and no risk of loss unless credit unions all go away.
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Old 05-14-2018, 09:34 AM   #23
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Originally Posted by RetireBy90 View Post
I have been watching bonds over the past year also, but couple questions I remind my self of on a regular basis:


1) Most would agree that you can't time the market over the longer term. Why do you think this time is different ?
2) Are you worried about tomorrow or 5-10 years from now ? As rates rise, sure you will see some loss as funds are forced to sell below face value to fund redemptions but any new bonds purchased by the fund will continue to rise with rates.
3) Why do you have bonds in your portfolio ? If you want capital gains from increasing prices then you are trying to beat the market. If you want a more stable balance to your equities then a small loss is a balance against a larger loss in equities.


Having said that, I am trying to stay in short term funds that have a duration of less than 3 years. Much shorter than your fund. I also have laddered CDs with Navy federal and Pentagon federal credit unions. They are paying 2.74% for 5 year CD and no risk of loss unless credit unions all go away.
Varying versions of the above comments has been mentioned here.
If one is "playing" between Bonds or CD's, is it really market timing if one's Equity allocation remains the same?
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Old 05-14-2018, 09:34 AM   #24
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Originally Posted by RetireBy90 View Post
I have been watching bonds over the past year also, but couple questions I remind my self of on a regular basis:


1) Most would agree that you can't time the market over the longer term. Why do you think this time is different ?
2) Are you worried about tomorrow or 5-10 years from now ? As rates rise, sure you will see some loss as funds are forced to sell below face value to fund redemptions but any new bonds purchased by the fund will continue to rise with rates.
3) Why do you have bonds in your portfolio ? If you want capital gains from increasing prices then you are trying to beat the market. If you want a more stable balance to your equities then a small loss is a balance against a larger loss in equities.


Having said that, I am trying to stay in short term funds that have a duration of less than 3 years. Much shorter than your fund. I also have laddered CDs with Navy federal and Pentagon federal credit unions. They are paying 2.74% for 5 year CD and no risk of loss unless credit unions all go away.
And if the 10 year goes to 4% ? Are sure you won't lose.
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Old 05-14-2018, 11:01 AM   #25
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Locked in 3.9 for 20 Years Talk about interest rate risk. If you want advise I would go to Bogleheads.com there are some real smart people there.
You could always terminate the CD's early (and pay the penalty) if rates really increase. No biggie, it's part of a strategy for holding long term CD's.
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Old 05-14-2018, 07:37 PM   #26
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... If you are more than 10 years out from retirement you don't need short term bond or cd's the duration is too short. ...
I guess I missed the memo on this. I always thought that the investor's taste for interest rate risk and other portfolio factors determined his/her choice of maturities or durations, regardless of age.
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Old 05-14-2018, 08:07 PM   #27
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I guess I missed the memo on this. I always thought that the investor's taste for interest rate risk and other portfolio factors determined his/her choice of maturities or durations, regardless of age.
I guess you can't read. Read my last sentence in post #19.
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Old 05-15-2018, 05:02 AM   #28
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Varying versions of the above comments has been mentioned here.
If one is "playing" between Bonds or CD's, is it really market timing if one's Equity allocation remains the same?
I have to say I struggle with this as well. It took me some time to make peace with a 60/40 AA after being previously at 80/20, but I bought in after realizing I didn't need the extra risk and my "40" was there to primarily minimize that risk. While my plan calls for me to move to RE at end of 2019, for now, I plan to ride 60/40 thru RE with my 40 having the same objective as it does today. Most of my 40 has been riding in intermediate bond funds/ETFs and despite multiple interest rate increases in 2016/17, they produced overall positive gains. As we all know this year, that is not the case YTD. I have to say it bugs my a$$ to see negative returns in my 40 and always has me questioning should I be tinkering more here (i.e. shorter term bonds or funds/ETFs, CD ladders, MMKTs... most of what has been said)?? If I had bought into these emotions in 2016/17, I suppose my knee jerk would have been to get out of intermediate bonds as we were in a "climbing interest rate environment" that screams lower returns. Only difference is I can now look back and say it worked out in the end doing nothing and while YTD has negative total returns, who knows how it will settle out. Just need to keep that little market timing devil out of my head!
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Old 05-15-2018, 06:39 AM   #29
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I have to say I struggle with this as well. It took me some time to make peace with a 60/40 AA after being previously at 80/20, but I bought in after realizing I didn't need the extra risk and my "40" was there to primarily minimize that risk. While my plan calls for me to move to RE at end of 2019, for now, I plan to ride 60/40 thru RE with my 40 having the same objective as it does today. Most of my 40 has been riding in intermediate bond funds/ETFs and despite multiple interest rate increases in 2016/17, they produced overall positive gains. As we all know this year, that is not the case YTD. I have to say it bugs my a$$ to see negative returns in my 40 and always has me questioning should I be tinkering more here (i.e. shorter term bonds or funds/ETFs, CD ladders, MMKTs... most of what has been said)?? If I had bought into these emotions in 2016/17, I suppose my knee jerk would have been to get out of intermediate bonds as we were in a "climbing interest rate environment" that screams lower returns. Only difference is I can now look back and say it worked out in the end doing nothing and while YTD has negative total returns, who knows how it will settle out. Just need to keep that little market timing devil out of my head!
I hear ya. The negative returns on a bond portfolio does bother me. Same results as you in 2016/2017.
My current move from Bonds to CD's was for just 6% of the portfolio, so still have some intermediate bonds for liquidity.
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Old 05-15-2018, 07:06 AM   #30
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Varying versions of the above comments has been mentioned here.
If one is "playing" between Bonds or CD's, is it really market timing if one's Equity allocation remains the same?
I suppose it’s timing if one shortens or lengthens their average duration and/or credit quality in anticipation of interest rate changes or economic conditions.

I tend to keep the same overall average duration and credit quality. CDs versus bonds - I just look at relative value and don’t consider that a timing issue. If CD rates are competitive with bonds/bond funds of a similar duration then it makes sense to purchase a CD if liquidity is not a concern.
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Old 05-15-2018, 07:49 AM   #31
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I suppose itís timing if one shortens or lengthens their average duration and/or credit quality in anticipation of interest rate changes or economic conditions.

I tend to keep the same overall average duration and credit quality. CDs versus bonds - I just look at relative value and donít consider that a timing issue. If CD rates are competitive with bonds/bond funds of a similar duration then it makes sense to purchase a CD if liquidity is not a concern.
I guess I am a DMT from a Duration perspective, as my intermediate bonds are around 6 years duration. However there are not too many investors who would lock into a similar duration CD currently.
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