Treasury Bonds, help with basics...

[OldAgePensioner]

Wabmester,
As I return to work, do you feel bonds are required in a portfolio while the individual has no desire for additional income?

[wabmester]

Originally Posted by OldAgePensioner

As I return to work, do you feel bonds are required in a portfolio while the individual has no desire for additional income?

There are several reasons to own bonds: income, relatively low volatility, and preservation of capital (if you hold to maturity). And TIPS have the additional attribute of being one of the best inflation hedges available. And I seem to recall that you bailed out of ER at least in part due to fear of volatility.

So, my short answer for you would be: hell yes!

[REWahoo]

Originally Posted by wabmester

So, my short answer for you would be: hell yes!

I'll second that. Otherwise you might be having a combined retirement celebration and funeral.

REW

[OldAgePensioner]

WAB & REW,
But why have them while earning money. Should I wait till I retire (die)?

By the way, spread the word, Mars is going to be a spectacular nightime viewing in August. If my feeble brain can still do the math, maybe I can provide some info on where to look.

[REWahoo]

Originally Posted by OldAgePensioner

WAB & REW,
But why have them while earning money. Should I wait till I retire (die)?

OAP, since the volatility of your portfolio helped spook you out of retirement once, what would you do if you had a 100% equity portfolio and it declined 10-15% in the weeks just prior to your second retirement? Based on your past performance, you might postpone your retirement again and look into that combined retirement/funeral package, right?

Having a healthy dollop of bonds in your portfolio should dampen that volatility significantly. Hopefully it will also help you learn to stomach the inevitable ups and downs of the marketplace while and add to your $2M by reinvesting the income from your bonds.

REW

[wabmester]

Originally Posted by OldAgePensioner

But why have them while earning money.

I must be missing a logical leap here. Why does working mean that you don't want your investments to throw off cash? If you look at stocks historically, you'll find that a large chunk of the long-term returns came from dividends. That may be true again some time in the future (which means either that stock prices will come WAY down or dividends will go WAY up).

You worked something like 35 years for your nest egg, right? And you plan to try ER again in another year or two, right? I would think that diversification, capital preservation, and lower volatility would be important to somebody like you. Unless you know something about the stock market I don't know.

[OldAgePensioner]

wab,
would I not be better of having stocks/funds that appreciate versus, income producers which cost me huge taxation?

[wabmester]

Originally Posted by OldAgePensioner

would I not be better of having stocks/funds that appreciate versus, income producers which cost me huge taxation?

Appreciation is wonderful, but not guaranteed.* *Stocks are volatile.* * If you hold them long enough, stocks will probably outperform bonds (long-term stock appreciation + dividends should grow at the rate of the economy - 2%).* * So, do you plan to hold your stocks long enough to guarantee appreciation?* *(Remember the example of Japanese stocks, which haven't appreciated in 20 years?)

[OldAgePensioner]

wab.
I read 4 Pillars like I was told to do after joining. I came away with very different impressions. Bonds seem very non-income prOviding

Can someone give me info on what I'd earn for 2000-2005 in bonds vs Stocks?

[wabmester]

Originally Posted by OldAgePensioner

wab.
I read 4 Pillars like I was told to do after joining.* I came away with very different impressions.* Bonds seem very non-income prOviding

Can someone give me info on what I'd earn for 2000-2005 in bonds vs Stocks?

Wow, what did Bernstein say to give you that impression?* *The S&P 500 is lower in 2005 than it was in 2000, so that means negative returns.* *Bond returns were excellent during this period since you got both interest and higher-than-average capital appreciation (due to falling interest rates).* * I don't have numbers for bond returns during this period, but I would guess about 10% pa.

Edit: I just looked up the five-year returns for a total bond market index, and you would have received about 8% pa for the past five years.

[OldAgePensioner]

wab,
Bern, said that over the long term stocks were the best investment!

Wab, Don Qixote was considered "insane" for his life but died "sane".

Nothing would please me more.

[wabmester]

Originally Posted by OldAgePensioner

he said that over the long term stocks were the best investment!

And your back-to-work term is long term?

[OldAgePensioner]

wab,
you have me flayed to the marrow. I'm the forum idiot.

But, it's nay, never, nay never, no more, will I be the wild rover, nay, never no morel

[wabmester]

Originally Posted by OldAgePensioner

I'm the forum idiot.

I didn't even realize you were a contender. Congrats!

Anyway, allow me a rant about Bernstein and long-term stock gains. What he doesn't tell you in his book (although he understands this) is that those long-term stock gains are a historical by-product of a young and vigorous nation during a 200-year period of jaw-dropping discoveries and technological inventions, and with a fast-growing population of youngsters willing to work their butts off.

The future may be different. In fact, we know for a fact that the demographics will be different. If you had to boil Bernstein's wisdom down to one sentence it is that stocks grow as the economy grows (less 2% for stock dillution). Your long-term (?) bet on stocks is a long-term bet on economic growth in this country (assuming you're buying domestic stocks).

[OldAgePensioner]

WAB,
As a the board's loon, I demand respect! Capice?

[cute fuzzy bunny]

Hey - Flip ya for it...

[OldAgePensioner]

Just Not,
Board loon? Even or odd?

[cute fuzzy bunny]

Originally Posted by OldAgePensioner

Even or odd?

Yessssssssssssss!

Ok, If I have to pick one, is there any other choice?

ODD!

[OldAgePensioner]

Odd, it is!

I lose. Board loon shall remain my domicile and bunker of resistance against those claiming that ER is simple.

[cute fuzzy bunny]

Oh crap, you mean odd loses the right to be board loon?

Crap.

EVEN then! But its odd to be even.