MasterBlaster
Thinks s/he gets paid by the post
- Joined
- Jun 23, 2005
- Messages
- 4,391
First of all really good work.It is very important to realize that capital appreciation/loss of fixed income isn't included in the calculations. Not exactly a bug but returns that aren't easily replicated in the real world.
The likely capital loss of bond funds going forward are probably going to make up for the higher coupon rates.
My highest bond allocation was back in 2000/2001. I started selling bonds in 2009 and pretty much sold all bonds except for Sallie Mae inflation bonds this year. I wracked up some nice capital gains which were especially helpful in 2009 when equities tanked.
Regarding VUSTX, that is really weird fund. It only holds 29 bond issue mostly long term T-Bonds. Yet it has 105% turnover, but according to Morningstar it has very closely tracked its index. Obviously the folks at Vanguard know what they are doing regarding index, bu
t I am sure puzzled.
As how to do better than 3.5% going forward, don't discount the higher growth rates of the US economy and most importantly the huge potential for developing country. Anyway this is my bull case.
So no bonds and only US and emerging equities !
You may be right and do very well, but then again what if you are wrong ? Why bet the farm on some reasoned hunches ?
For me I'll stick with an age-appropriate risk-appropriate portfolio. The bonds may indeed moderate equity growth. But they, as usual, keep one from losing big-time.