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When interest rates start to rise, are you planning any portfolio changes?
11-18-2011, 01:12 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Location: Milford, OH
Posts: 1,897
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When interest rates start to rise, are you planning any portfolio changes?
The lowering of interest rates over the last 5-10 years created a GREAT period to be a bond investor. Are you planning to make any changes now or in near future when the fed suggests they will raise short term interest rates?
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11-18-2011, 01:16 PM
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#2
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Moderator
Join Date: Jul 2005
Location: Houston
Posts: 12,693
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 Quote:
Originally Posted by jIMOh
The lowering of interest rates over the last 5-10 years created a GREAT period to be a bond investor. Are you planning to make any changes now or in near future when the fed suggests they will raise short term interest rates?
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No.
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Retired in Jan, 2010 at 55
Now it's adventure before dementia
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11-18-2011, 01:21 PM
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#3
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Recycles dryer sheets
Join Date: Oct 2009
Posts: 433
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I figure I'll be most likely dead by the time the FED normalizes rates.
Oh, and by the way, I'm not expecting to die anytime soon 
Reality is that the debt levels are so high at the government/private sector (more individuals than corporations) that the economy will not be able to stand significant increases in interest rate levels for years to come. Therefore, the FED will be maintaining ZIRP for the foreseeable future. Get used to it...
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11-18-2011, 01:22 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,756
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Quote:
Originally Posted by Alan
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Same here  ...
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11-18-2011, 01:58 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,378
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Quote:
Originally Posted by LARS
I figure I'll be most likely dead by the time the FED normalizes rates.
Oh, and by the way, I'm not expecting to die anytime soon
Reality is that the debt levels are so high at the government/private sector (more individuals than corporations) that the economy will not be able to stand significant increases in interest rate levels for years to come. Therefore, the FED will be maintaining ZIRP for the foreseeable future. Get used to it... |
Isn't that the truth! 
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11-18-2011, 02:15 PM
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#6
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Administrator
Join Date: Jan 2007
Location: New Orleans
Posts: 24,588
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Quote:
Originally Posted by Alan
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Quote:
Originally Posted by rescueme
Same here ... |
+2
Investing and life are both too complicated for me to time respond to the markets to any great extent. I guess if I did then I would sell bonds and buy real estate, but I'd rather stay put since I feel comfortable with my present AA.
I did come very, very close to doing that last summer - - selling bonds and using that money to buy another house to live in, before selling my present home. That would have been for personal life satisfaction rather than as an investment move. But I chickened out due to the rocky economy and somebody else bought the house.  Sour grapes, it just didn't feel like home to me anyway.
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11-18-2011, 02:19 PM
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#7
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Thinks s/he gets paid by the post
Join Date: May 2009
Posts: 2,225
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Quote:
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Originally Posted by LARS
I figure I'll be most likely dead by the time the FED normalizes rates.
Oh, and by the way, I'm not expecting to die anytime soon
Reality is that the debt levels are so high at the government/private sector (more individuals than corporations) that the economy will not be able to stand significant increases in interest rate levels for years to come. Therefore, the FED will be maintaining ZIRP for the foreseeable future. Get used to it... |
I was about to lump some cash into a 5 year CD about a year ago that paid 3.75%. Then I thought what idiot would tie up their money for that. I know the answer to that question now.... Me. If I could go back in time!
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11-18-2011, 02:32 PM
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#8
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Moderator
Join Date: Jan 2008
Location: The northernmost tip of Latin America
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Quote:
Originally Posted by Alan
No.
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Could you be more specific? 
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It's not the cards you're dealt in life but what you do with them that matters
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11-18-2011, 02:45 PM
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#9
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Moderator
Join Date: Jan 2008
Location: The northernmost tip of Latin America
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Quote:
Originally Posted by jIMOh
The lowering of interest rates over the last 5-10 years created a GREAT period to be a bond investor. Are you planning to make any changes now or in near future when the fed suggests they will raise short term interest rates?
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The only change I would make would be to shift some allocation from fixed income to equities, but that would be triggered by falling stock prices, not rising rates.
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It's not the cards you're dealt in life but what you do with them that matters
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11-18-2011, 02:55 PM
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#10
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jul 2006
Posts: 5,553
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Rising interest rates would lead me to increase my investments in 5 year GICs (CDs) rather than bonds. I would consider both to be Fixed Income.
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11-18-2011, 03:10 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Sep 2003
Posts: 2,261
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I might be inclined to rebuild my CD ladder if and when such rates go up. The last holding of my previous CD ladder expires in 2013.
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11-18-2011, 04:22 PM
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#12
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jul 2003
Location: north of Kansas City
Posts: 6,829
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Hmmm - sort of involuntarily. Target Retirement 2015 so my asset class shifts toward inflation protected and shorter term as the clocks on - but slowly.
Remember the early days of this forum? This is where the posters who understand duration, concave, convex and that sort of stuff leap forward to post.
So far the Fed is hanging in there but Mr Market may have other plans. I'm old enough to remember the 70's and 80's thrills and chills inflation/interest wise.
heh heh heh - stay tuned.
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11-18-2011, 04:27 PM
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#13
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jul 2003
Location: north of Kansas City
Posts: 6,829
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And then there is skewness and co-skewness.
heh heh heh - less we forget. 
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11-18-2011, 04:37 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,256
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Will take a look at CD's and I-Bonds.
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11-18-2011, 05:31 PM
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#15
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Recycles dryer sheets
Join Date: May 2006
Posts: 337
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Why not consider short duration bond funds instead of CDs? Vanguard's short-term investment grade bond fund is yielding >1.7% with a duration of 2.2 years. Currently, the best CD rates at our local banks are running at 1% for 24 months.
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11-18-2011, 06:57 PM
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#16
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Moderator
Join Date: Jul 2005
Location: Houston
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I have lots of bonds within Wellesley and Target Retirement Funds in VG and Fidelity.
The only bond fund I'm invested in is a VG short term bond fund which should recover well enough for my needs in a rising interest environment.
The only individual bonds I hold are I-Bonds.
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Retired in Jan, 2010 at 55
Now it's adventure before dementia
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11-19-2011, 07:56 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Oct 2010
Posts: 1,025
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Quote:
Originally Posted by IBWino
Why not consider short duration bond funds instead of CDs? Vanguard's short-term investment grade bond fund is yielding >1.7% with a duration of 2.2 years. Currently, the best CD rates at our local banks are running at 1% for 24 months.
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+1 I have moved to the short end of duration with my bonds.
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11-19-2011, 07:59 AM
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#18
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Moderator
Join Date: Jan 2008
Location: The northernmost tip of Latin America
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Quote:
Originally Posted by Alan
I have lots of bonds within Wellesley and Target Retirement Funds in VG and Fidelity.
The only bond fund I'm invested in is a VG short term bond fund which should recover well enough for my needs in a rising interest environment.
The only individual bonds I hold are I-Bonds.
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Sounds reasonable. Thanks
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It's not the cards you're dealt in life but what you do with them that matters
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11-19-2011, 08:21 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Nov 2010
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I'm in VBTLX and HABDX, which have relatively long durations (5.2 and 6.6, respectively) and are 40% of my portfolio.
If interest rates rise, that would likely be in response to an economic recovery. While the value of these bond funds would decline wouldn't one expect that equities would rise and offset the decline in bonds? (in theory anyway).
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11-19-2011, 01:39 PM
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#20
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Thinks s/he gets paid by the post
Join Date: Apr 2007
Location: Milford, OH
Posts: 1,897
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Quote:
Originally Posted by IBWino
Why not consider short duration bond funds instead of CDs? Vanguard's short-term investment grade bond fund is yielding >1.7% with a duration of 2.2 years. Currently, the best CD rates at our local banks are running at 1% for 24 months.
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This is along the lines of what I am doing- focusing primarily on short term bonds with that part of my portfolio.
__________________
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
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