Markola
Thinks s/he gets paid by the post
^^^^ Different strokes for different folks and YMMV. Cheers.
You've received sound advice and chose to ignore it. Because you didn't act before early 2022 those bond fund losses are locked in at this point. Since it looks like rates are close to plateauing the losses due to rising interest rates will eventually slow. You'll eventually get back to where you were. Good luck to you.^^^^ Different strokes for different folks and YMMV. Cheers.
Yup, I did sell all my stocks as a shift to capital preservation when things were so uncertain due to covid. Our retirement is so overfunded that we didn't really need stocks to have a successful retirement and 100% success. I don't miss stocks at all even though I concede that our net worth would be higher had I stayed in.
The outlook for equities isn't compelling. As a boglehead, you're likely familiar with Vanguard's 10 year outlook for US equities of 3.7% to 5.7% and for US bonds of 4.0%-5.0%, so if they are right then my shift to fixed income isn't going to be very different... could be favorable on the down end and unfavorable on the upside, but not much different at all in the middle.
https://advisors.vanguard.com/insights/article/series/market-perspectives#projected-returns
The outlook for equities isn't compelling. As a boglehead, you're likely familiar with Vanguard's 10 year outlook for US equities of 3.7% to 5.7% and for US bonds of 4.0%-5.0%, so if they are right then my shift to fixed income isn't going to be very different...
https://advisors.vanguard.com/insights/article/series/market-perspectives#projected-returns
...It also says 70% chance of recession in US and 90% in Europe. If that happens, one assumes but can’t know, that rates will be slashed, causing bond index fund prices to rise. Then again, the Fed might well be engineering a recession and won’t lift a finger. I’m back to Nobody Knows Nuthin’.
^^^ A simple approach that combines the best of both worlds is to ladder target maturity bond ETFs. iShares offer Treasury, Corporate, Municipal and High Yield target maturity ETFs for 2023-2033 maturities that can be easily laddered... a link to their ladder tool is below. Currently, a 2024-2033 ladder would yield 4.75%, 5.87%, 3.57% and 8.28% for Treasury, Corporate, Municipal and High Yield, respectively, and it provides very good diversificationat a modest cost... 0.07%, 0.10%, 0.18% and 0.35%, respectively.
I may ultimately use this product for my corporate and high-yield allocations rather than spend time researching individual credits. The product mixes the ability to hold to maturity that you can't get with a bond fund with the ease of a bond fund at a modest cost.
When I am gone it would be an easy way for DD and DW to invest in a bond ladder.
https://www.ishares.com/us/resources/tools/ibonds
That's a good idea. Thanks!
I was playng around and a 70% Treasury/30% Corporate mix looks a lot like BND to me but you have better cash flow and more control in that you can decide how much of each year's maturity to reinvest.
5.09% yield vs 4.94% for BND
5.17 year weighted average maturity vs 8.8 years for BND
0.08% ER vs 0.03% for BND
4,895 bonds vs 10,646 for BND
If you look around here you will see lots of debates on the lack of vitrue of bond funds. Many of us got out of them long ago when it was clear that rates couldn't go any lower because they were close to nil and interest rate risk was a concern, perticularly for longer duration bond funds and bond ETFs.
It took a long time but rates finally did go up and the bond funds and bond ETFs got creamed.
Today, many of us are in individual bonds... brokered CDs, US Treasuries, agency bonds, corporate bonds with a little spice of some high quality preferred stocks. Since we intend to hold to maturity, we pretty much ignore market value fluctuations. I have 52 different positions that are still pretty short 9shorter than I would like)... a weighted average maturity of 2.6 years and weighted average yield of 5.2% with 89% of the portfolio rated A or better by S&P (78% AA+ or better).
I much prefer the control of individual bonds to bond funds or bond ETFs.
Just keep in mind that your bond fund losses are sunk costs at this point.. not much you can do about them... its the future that is more important.