Balanced Portfolio and frustration of this market...

[mikes425]

Hi, and sorry if this is a duplication of prior post(s) but i continue to be confounded and frustrated with my 45/55 AA portfolio performance, specifically the fact that ultra-short and short bond funds - which are my largest FI positions - continue to move "in tandem" with equities - and, lose NAV...just not as extremely as last year. Yes I have shifted some of my FI to MM funds for the safe 4-5% return..but maybe not enough? I have an hourly/occasional FA who bills me for questions and have raised this issue multiple times but he has only suggested reducing equity a bit and --adding proceeds to 1-3 yr Treasury or MM, plus reiterating that DIV returns are improving on bond funds. I am in fact on track to realize about 80k in interest/div. income for '23, an improvement over last year so, no complaints on that. However while I try to ignore the day to day, I can't help feeling like this is simply a "going nowhere" PF - largely due to bond funds selected for relatively low sensitivity to rising rates or credit issues only showing further downside this year and are certainly nowhere close to making up for last year's losses, collectively. Above all, seeing these 'ballast' vehicles move down significantly "together" with equities on down days frankly angers me more and more. I'm sure there may be some macro picture i'm not appreciating fully about this but with multiple positive economic signals, the volatility seems tied to market manipulation- politically motivated or otherwise.

Happy to get any thoughts about when this 'trend' may turn around. or from others in the same boat who share my sentiments. At least i can get a reality check if i'm "not the only one" experiencing this frustration in what is traditionally considered a defensively allocated PF. Thanks for letting me vent and don't beat me up if i'm missing 'the obvious' but it just isn't all 'adding up' logically on many levels. Or maybe..it's just a balanced portfolio reflecting a flat "going nowhere" market for a year or two.

 

[jebmke]

I have no idea; I'm in same position. I'm a long term investor so I don't pay attention much.

 

[naggz]

This is likely worth a read....
https://earlyretirementnow.com/2016/08/17/bond-diversification-is-a-myth/

 

[OldShooter]

... However while I try to ignore the day to day, ...maybe its just a balanced portfolio reflecting a flat "going nowhere" market for a year or two.

Or three or four. If you don't like what you see, stop watching. Five years is the beginning of "long term." One or two years is noise traders' territory. We look at our portfolio once a year. Sometimes that results in a trade, but usually not.

From my Warren Buffett clip file:

“The stock market is a device for transferring money from the impatient to the patient.”

"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."

“The only value of stock forecasters is to make fortune-tellers look good."

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." ... "Lethargy, bordering on sloth should remain the cornerstone of an investment style."

 

[COcheesehead]

Fidelity’s Jurrien Timmer had a great chart the other day showing the current market vs the historical CAPE rate. In his opinion, based on history, the next meaningful leg up may not be until 2030. So if you have time, chill out. If you don’t, then maybe look at making changes. Personally I am 70% individual bonds and achieving about 140% of our spending needs and not looking to add to or remove from equities.

 

[mikes425]

This is likely worth a read....
https://earlyretirementnow.com/2016/08/17/bond-diversification-is-a-myth/

Thanks. Useful article.

Well at least the author's reply to a question about what bond class might be a good place to be in as bonds fell/fall -confirms my FA's advice- "I'd prefer TIPS or something floating-rate..." - I have several funds with both, in my mix.

 

[mikes425]

Or three or four. If you don't like what you see, stop watching. Five years is the beginning of "long term." One or two years is noise traders' territory. We look at our portfolio once a year. Sometimes that results in a trade, but usually not.
From my Warren Buffett clip file:

“The stock market is a device for transferring money from the impatient to the patient.”
"I never have the faintest idea what the stock market is going to do in the next six months, or the next year, or the next two."
“The only value of stock forecasters is to make fortune-tellers look good."

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." ... "Lethargy, bordering on sloth should remain the cornerstone of an investment style."

Yep, that is what's always been recommended to me.. Thanks for the reminder: )

 

[mikes425]

Fidelity’s Jurrien Timmer had a great chart the other day showing the current market vs the historical CAPE rate. In his opinion, based on history, the next meaningful leg up may not be until 2030. So if you have time, chill out. If you don’t, then maybe look at making changes.

Hopefully he's wrong about that timeframe but in any event, FireCalc, etc. would say i'll be fine and have no reason to make any major changes in my situation if his forecast is right. Let's hope it's more like a 1 to 3 year timeline. Maybe not for a substantial "leg up" but at least a fair to moderate improvement - or just relative 'stability'

 

[audreyh1]

I guess I don’t get the frustration. I just rebalance occasionally and buy more when a given asset class drops more than others. I also retired close to a major bear market (in 1999) and tried to stay diversified and ignore short term moves. I honestly never look at the NAV of anything as it really doesn’t matter. I look at the total return of an asset class and I don’t worry about YTD or a few years performance. Each asset class has its role.

I’m pretty good at sitting on my hands most of the year. I may take an opportunity to tax loss harvest - rebuying similar but more tax efficient or lower cost MF if warranted. Rebalancing is generally about once a year.

I have no idea; I'm in same position. I'm a long term investor so I don't pay attention much.

Same here.

 

[FREE866]

Fidelity’s Jurrien Timmer had a great chart the other day showing the current market vs the historical CAPE rate. In his opinion, based on history, the next meaningful leg up may not be until 2030.

The CAPE creator even says to not use it as a predictor of stock prices. It's one set of data among many and historically PE ratios have not been a good predictor of stock prices. If it were only that easy!

 

[COcheesehead]

The CAPE creator even says to not use it as a predictor of stock prices. It's one set of data among many and historically PE ratios have not been a good predictor of stock prices. If it were only that easy!

Ok, I wish you the best.

 

[OldShooter]

… Jurrien Timmer …

Never heard of the guy so I looked him up. He’s a technician. Technical analysis has long since been debunked by numerous studies. Its value is attested to by the fact that in thirty or so years Timmer’s expertise hasn’t made him enough money that he can leave his day job.

 

[FREE866]

Never heard of the guy so I looked him up. He’s a technician. Technical analysis has long since been debunked by numerous studies. Its value is attested to by the fact that in thirty or so years Timmer’s expertise hasn’t made him enough money that he can leave his day job.

Yep. In general anyone making a 7 year market prediction is suspect. Furthermore, If I invested my assets based on the CAPE or any technical analysis I'd still be working today.

 

[Phroig]

You could slowly start increasing duration. With equities, if you have an asset allocation you’re comfortable with, just stick to it.

 

[ejman]

Dunno. I have a 50/40/10 portfolio that shows a 7.5% annualized growth per Quicken this after taking my living expenses out. If this continues I don't think I'll be complaining too much. Sure there are some components that have gone up much more, particularly growth funds others less so as in value funds and bonds but it all seems to balance out over time. Retired 21 years survived 2008, 2020, 2022 bears mostly by ignoring them. Relax.

 

[ER Eddie]

From my Warren Buffett clip file:

“The stock market is a device for transferring money from the impatient to the patient.”

“The only value of stock forecasters is to make fortune-tellers look good."

"Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell." ... "Lethargy, bordering on sloth should remain the cornerstone of an investment style."

Haha, I love those quotes.

 

[COcheesehead]

Never heard of the guy so I looked him up. He’s a technician. Technical analysis has long since been debunked by numerous studies. Its value is attested to by the fact that in thirty or so years Timmer’s expertise hasn’t made him enough money that he can leave his day job.

He is director of Global Marco for Fidelity, but go ahead and diminish him based on your bias.

 

[FREE866]

He is director of Global Marco for Fidelity, but go ahead and diminish him based on your bias.

He doesn't manage money. He's one of numerous prognosticators in the investment business

 

[COcheesehead]

Yep. In general anyone making a 7 year market prediction is suspect. Furthermore, If I invested my assets based on the CAPE or any technical analysis I'd still be working today.

There have been long periods of market underperformance. Folks don’t like that fact, but should be aware they occur. You don’t have to believe or agree with what I posted, but in reality it could and has happened.
I don’t think people fully digest what this quick rise in rates will do in the next few years.

 

[COcheesehead]

I think I hit a nerve. Lots of push back.

 

[FREE866]

There have been long periods of market underperformance. Folks don’t like that fact, but should be aware they occur. You don’t have to believe or agree with what I posted, but in reality it could and has happened.
I don’t think people fully digest what this quick rise in rates will do in the next few years.

Long periods of decline? Historically its very uncommon. Have they happened? sure. could they in the future? of course, but the long term average of equities of ~10% INCLUDES all the bear markets, wars, recessions, etc


For me, it's about reaching my investment goals and if markets do half of the historical average I'm fine. So thats where I'm placing my bet in the lowest cost most tax efficient way possible.

 

[COcheesehead]

Long periods of decline? Historically its very uncommon. Have they happened? sure. could they in the future? of course, but the long term average of equities of ~10% INCLUDES all the bear markets, wars, recessions, etc


For me, it's about reaching my investment goals and if markets do half of the historical average I'm fine. So thats where I'm placing my bet in the lowest cost most tax efficient way possible.

I think your data is out of date.

 

[FREE866]

I think I hit a nerve. Lots of push back.

its not a nerve, but draconian calls from people that don't manage money annoy me......if hes wrong he will just move onto another article with another prediction.


You're in a unique position---70% bonds tells me you have boatloads of money because over time inflation and withdrawals will eat away at that.

 

[FREE866]

I think your data is out of date.

It's actually up to date....heres a calculator to play around with.....put in 10-20-30 year time frames....the numbers are astounding


https://www.officialdata.org/us/stocks/s-p-500/2000?amount=1000000&endYear=2022

 

[COcheesehead]

its not a nerve, but draconian calls from people that don't manage money annoy me......if hes wrong he will just move onto another article with another prediction.


You're in a unique position---70% bonds tells me you have boatloads of money because over time inflation and withdrawals will eat away at that.

We live on the interest so there are no “withdrawals”. We earn 140% of our income needs from interest alone. That is one of the benefits of individual bonds. You earn interest and at maturity you get you money back.

Regarding inflation…you don’t buy bonds for inflation. It’s sort of like complaining that cars won’t fly. It’s not their intended purpose. Bonds are for income and preservation.
I own other things for my inflation hedge.