Wouldnt touch tips or treasuries with a ten foot pole right now. Really wouldnt touch any long term bonds. Maybe a little good quality junk. Otherwise...wait a while.
Losing 15-20% of your money on bonds really, really sucks...
Not to pick on CFB
have I really lost?
Oh come now, its a popular sport. Go ahead! You just might want to strap on your protective headgear first
Interesting - I have no idea how bonds work bought separately. I buy mutual fund everything.
Ah, but if you consider future payments as negative net worth, and they go down as much as your "paper losses", then your net worth hasn't really gone down at all. [I think I got that right]But I will say, I don't believe in "paper losses". If you can "paper lose" 50K in your bonds, you lost 50K from my viewpoint. I think in terms of net worth/net liquidateable value calculated daily.
It doesn't feel to me like TIPS rates of 1.36% for 10yrs is a reasonable real rate to lock in. Looking at the Fed charts it looks a bit low doesn't it? Here is the chart link : St. Louis Fed: Series: DFII10, 10-Year Treasury Inflation-Indexed Security, Constant MaturityTime to bail on bonds - May. 15, 2008
So if fear is driving others, is it time to stock up?
I agree that in a depression long Treasury (not corporate) bonds would be best. What percentage of your portfolio do you have in long term bonds? I've read though haven't seen the data that long bonds have not compensated you for the risk and that intermediate bonds are therefore best. The reason is apparently that long bonds are used by insurance companies to match their obligations' duration so they accept lower yields to do so.without including long term bonds in your plan despite what you think may happen , you have no coverage really that can protect your portfolio if some event not even on the radar pushes us towards deflation/depression.. shorter term bonds dont react with enough oooomph to carry ones portfolio enough.
I agree that in a depression long Treasury (not corporate) bonds would be best. What percentage of your portfolio do you have in long term bonds? I've read though haven't seen the data that long bonds have not compensated you for the risk and that intermediate bonds are therefore best. The reason is apparently that long bonds are used by insurance companies to match their obligations' duration so they accept lower yields to do so.
I've chosen to emphasize inflation risk over depression risk in our portfolio. So am using 10yr TIPS and short term bonds as per some suggestions from Larry Swedroe. Currently out of TIPS as they are much lower then the long term average for real rates on intermediate bonds of 2.3%.
I run 2 portfolios , one consists of following the fidelidy insight newsletter which i have been doing for over 20 years.
the other is my bullet proof portfolio which i recently started because of this confusing economic enviornment we are in. i figure if the trend is bad enough ill profit no matter what .
25% TLT LONG TERM TREASURY
25% GLD GOLD
25% VTI MARKET INDEX
25% US TREASURY MONEY MARKET
Not to pick on CFB , but I'm curious if people also realize that when long term nominal bonds/TIPS fall in value because interest rates rise, the present value of their long term liabilities are also falling. If my TIPS fall by 15-20% at the same time he present value of my future liabilities fall by a similar amount, have I really lost?
Just curious,
Alec