Anyone with a Balanced Portfolio feeling major pain?

[rkser]

What would you do now of BND ?

What would you do NOW if you still have the etf form BND of the Vanguard VBTLF Total Bond Index.

Yes, (was dumb enough) I did not exchange to another fund last year & BND was bruised by -13% in 2022.

I (was) am of the buy & hold category. I exchanged to buy some CDs, but still 80% of etf BND are still in our IRAs.

I did do Roth conversions of etf in our IRAs to hold VTI in our Roths.

Thankyou in advance.

 

[BeTheMarket]

You can make comparisons to a lot of other fixed income assets available earlier this year.
Money markets are yielding in the 4.6%+ range
You could have bought CDs in the 4.9% - 5.4% range
Treasuries were over 5% recently.
Some investment grade corporates were over 6%
Agency bonds were over 6%
A ladder of bonds should easily be yielding over 5% with no loss of capital.

I am wondering, to "match" the overall performance of FXNAX, would I have to receive a yield of 5.87%(+1.78% NAV+4.09% yield)? Or is it only the yield that really matters?

If only yield matters, is it safe to ignore NAV when looking at bond fund performance? I see a lot of concern that funds like BND and FXNAX dropped in value last year, which is why it leads me to believe that one must consider NAV changes along with yield if we try to directly compare a bond fund to holding individual assets.

 

[BeTheMarket]

What would you do NOW if you still have the etf form BND of the Vanguard VBTLF Total Bond Index.

Yes, (was dumb enough) I did not exchange to another fund last year & BND was bruised by -13% in 2022.

I (was) am of the buy & hold category. I exchanged to buy some CDs, but still 80% of etf BND are still in our IRAs.

I did do Roth conversions of etf in our IRAs to hold VTI in our Roths.

Thankyou in advance.

I don't have the answers, but just thinking out loud and trying to learn. If you sold last year at the low, you have lost 6.6% increase in NAV since then and would be currently earning ~5%? It seems like selling at a loss to get a 5% yield and missing the upside isn't better?

So let's say you sold $10,000 at the low, and bought 5% assets. If you had held BND or FXNAX, your $10k would now be >$10,600 and your current yield would be a little over 4%, with potential to continue to increase in NAV over time(or decrease).

 

[Markola]

Abundant evidence shows that, for all sorts of reasons that seem logical to them at the time, investors tend to sell exactly when they should buy. The last couple of years were unusually negative for the Vanguard Total Bond Index, yes, but the ones before that were unusually positive. YMMV but I’m staying put.

 

[pb4uski]

What would you do NOW if you still have the etf form BND of the Vanguard VBTLF Total Bond Index.
...

I would sell BND unless it was in a taxable account and would result in a large gain and tax bill and reinvest the proceeds in a 5 or 7 year CD/UST/GSE ladder. Based on today's rates you should be able to achieve a 4.75-5.00% yield. I prefer the better control of a ladder to the lack of control of BND.

Investment hypothesis is that the Fed will increase another 25 bps and then hold for a while. Then if rates plateau and you can stretch out the ladder with maturities.

YMMV. Now what you should do is up to you.

 

[COcheesehead]

I am wondering, to "match" the overall performance of FXNAX, would I have to receive a yield of 5.87%(+1.78% NAV+4.09% yield)? Or is it only the yield that really matters?

If only yield matters, is it safe to ignore NAV when looking at bond fund performance? I see a lot of concern that funds like BND and FXNAX dropped in value last year, which is why it leads me to believe that one must consider NAV changes along with yield if we try to directly compare a bond fund to holding individual assets.

Almost any individual bond bought earlier this year has also likely risen in its mark to market price similar to your fund. So to keep things simple I would compare yield. I think your fund is actually underperforming and if rates rise, you’ll see NAV erosion in the near term.

Regarding fund NAV, a fund can be up or down when you need the money. A individual CD, bond, etc if held to maturity will return par - its original value. So along with income, you have capital preservation. So you need to consider that as well.

 

[pb4uski]

... Regarding fund NAV, a fund can be up or down when you need the money. A individual CD, bond, etc if held to maturity will return par - its original value. So along with income, you have capital preservation. So you need to consider that as well.

If it isn't an emergency but an anticipated cash flow need, then with a ladder you can just use or reinvest the proceeds from maturing instruments to meet the cash flow need, avoiding a need to sell. You can't do that with a bond fund, the only way to meet a cash flow need is to sell.

 

[yakers]

I am no longer a fan of BND or any bond INDEX funds. I never held much except as part of VBIAX VG Balanced index and in VG STAR fund, I exchanged these for Wellsley & Wellington, may or may not do better over time. But a bond index fund must buy even when the offerings are not good, in Europe there were negative rate bonds-why not just put the money in a mattress? I do hold some ibonds, preferreds and a very few treasuries no CDs right now. But fortunately most of my fixed income is in the Federal TSP G Fund which just sort answers what to do with fixed income/cash in my portfolio.

 

[jazz4cash]

Other than that, I have a small holding of FXNAX(total US bond index fund) that I bought early this year and have been investing 20% of my 401k contribution to weekly since then, in order to see how DCA into that fund works.

Iw

I have never been comfortable with bond funds. A lot of us conservative, passive, indexers are sort of preconditioned to buy funds instead of individual stocks and bonds. It is not convenient to buy individual bonds and CDs via payroll deduction as with a 401k. I used the stable value fund in my 401k to accumulate chunks of money I then transferred out to fund CD promos at my credit unions initially. As these matured and rates have improved I’ve bought bonds including munis.

 

[COcheesehead]

If it isn't an emergency but an anticipated cash flow need, then with a ladder you can just use or reinvest the proceeds from maturing instruments to meet the cash flow need, avoiding a need to sell. You can't do that with a bond fund, the only way to meet a cash flow need is to sell.

That is exactly the way I have mine structured. We live off the interest from our taxable account which is mostly in munis and reinvest maturing bonds. The interest is more than we need so we have a good cushion. Likely never having a need to sell unless something weird happens.
Equities - we have only 25% ish - could roll untouched perhaps for our lifetime.

 

[W2R]

Aside from equity funds, I've got reasonable amounts in each of the following:

1. TSP "G Fund"
2. VBIAX
3. Wellesley
4. Wellington
5. Cash

And then, every month I get deposits in my checking account from my mini-pension, from Social Security, and from RMDs out of "1." above. The sum of these deposits is more than I spend each year, except last year when I paid for my new roof from "5." above. I plan to replenish that from the other deposits as time passes. Oh, and then there's my dividends which steadily keep piling up in money market at Vanguard. None of this was by accident; like others here, I did considerable retirement planning before I retired.

My all time maximum sum of portfolio plus bank accounts was just last year so for me, getting upset with what the market is doing this year would be just plain stupid. I'm already 75 so surely this setup will last longer than I do.

 

[Exchme]

If you want some information on bonds vs. a bond fund, I suggest the Bogleheads.org wiki on the subject:

https://www.bogleheads.org/wiki/Individual_bonds_vs_a_bond_fund

The wiki is organized from overview to in-depth and linked to related topics so you can read just a little or go quite deep.

Bond funds, ladders, CDs, TIPs, i-bonds, zero coupons area all tools you can use to meet your needs. Bouncing around trying to outguess the next market's next move is not very likely to do so.

The concern in this thread is also rather late to the party. For instance, the mid-October bottom in BND seems to be holding and the NAV is up 8.5% since then.

 

[pb4uski]

... The concern in this thread is also rather late to the party. For instance, the mid-October bottom in BND seems to be holding and the NAV is up 8.5% since then.

Perhaps in some cases but many of us formerly in bond funds and now in ladders sold our bond funds many years ago due to interest rate risk concerns... it just took a few years longer than we were thinking for the decline in value due to higher interest rates to occur.

In the meantime we were parked in those 3.0% to 3.5% credit union CD specials.

 

[target2019]

What would you do NOW if you still have the etf form BND of the Vanguard VBTLF Total Bond Index.

Yes, (was dumb enough) I did not exchange to another fund last year & BND was bruised by -13% in 2022.

I (was) am of the buy & hold category. I exchanged to buy some CDs, but still 80% of etf BND are still in our IRAs.

I did do Roth conversions of etf in our IRAs to hold VTI in our Roths.

Thankyou in advance.

The problem with one-size-fits-all Boglehead approach is that there is nothing about changing assets when there is sea-change, as happened last year.

What I learned in 2022 is that I could mitigate some of the Total Bond under-performance by exchanging half of my VBTLX (10% overall) for VWIAX. This was not a wild success, but it was something.

I will still hold the VBTLX (now 5% overall) in my IRA. Other things in life prevail, and I do not want to leave individual bonds on the table when I depart. Are they better? Of course they are, but I have no desire to introduce that into my very simple Boglehead-ish portfolio.

All of this only applies to us, though. Your challenge is to hold less BND (I am guessing), and predicting what will keep value in the future.

EDIT: During accumulation the Boglehead approach fit us well. In decumulation, one bad year really gets your attention.