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Old 03-09-2021, 05:22 AM   #61
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Sold nearly all of my 10 year T bond fund FUAMX this past month. It was great in 2020, but can't see much upside in bond funds in the near future.

Sitting on a pile of MM funds now and trying to figure out the next move. Appreciate everyone posting their insights to help in decision making.
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Old 03-12-2021, 04:36 PM   #62
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No. My investment time horizon is not YTD. It’s 60+ years. Asset allocation with annual rebalancing is my best friend. And I meditate daily.
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Old 03-12-2021, 05:15 PM   #63
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Has Jack Bogle been dead that long? Come on, people.
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Old 03-12-2021, 05:45 PM   #64
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The nice thing about Bonds are if you hold them to maturity you get the price they were issued at. I bought mine at 88 and it will mature at 100, so see if it is selling at a discount or at par. Most went down to par when interest rates went up, so I still have a nice gain, but am just collecting the income on it.
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Old 03-12-2021, 06:34 PM   #65
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Ah, the good old days of the late '70s and '80s until Tall Paul Volcker broke the back of inflation. I'm old enough to remember (for a brief period) 16% CDs.

Note: I don't think we're going to get back there, although maybe gradually to 3%.





Quote:
Originally Posted by Closet_Gamer View Post
This.

As a generation we've only ever lived in a low rate environment. Its been a 30 year bond bull market. If (when) it reverses, the damage will be breathtaking...but you'll also be able to get yield on your assets for less risk.
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Not for me
Old 03-12-2021, 06:39 PM   #66
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Not for me

I don't invest in any taxable bond fund. I have had an Intermediate Tax-Exempt fund for a number of years, but have been moving $ out of it into stock investments. I use T and other stocks with a stable dividend policy as my bond investments, if you will. With the out of control monetary policy of the Federal government it isn't worth it to invest in bond funds any longer.
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Old 03-12-2021, 06:47 PM   #67
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Originally Posted by arlene View Post
The nice thing about Bonds are if you hold them to maturity you get the price they were issued at. I bought mine at 88 and it will mature at 100, so see if it is selling at a discount or at par. Most went down to par when interest rates went up, so I still have a nice gain, but am just collecting the income on it.
That's fine if you hold actual bonds. if you own a bond fund or ETF you have no such guarantee.
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Old 03-12-2021, 08:27 PM   #68
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“Time in the markets beats timing the market.”


I’ve got to push back on this old axiom. Stocks have drifted higher over decades because earnings increased due to innovation and rising population. What would even be the theoretical reasoning behind bonds doing well over long periods of time when starting at near record low yields?
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Old 03-12-2021, 08:48 PM   #69
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Anyone else worried about YTD performance of their bond index funds?


No!! I had it when it made 8-9% last year, and I'll keep it while it loses 3-5 % this year. Over the long haul, it still supplies ballast for my equities which is why I have it in the first place.

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Old 03-12-2021, 09:36 PM   #70
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As I understand it if the duration is 6 then if rates increase by 1% then it will take 6 years for the bond fund to make up for the decline in value through the higher interest rates... so you would be treading water for 6 years to offset a 1% increase in interest rates. Not for me!
According to Christine Benz the formula is bond fund avg duration minus SEC yield.
Part 6: What Kinds of Bonds Should I Hold?

"...to estimate how much an investor could lose during a 12-month period if Treasury yields increased by 1 percentage point during that same 12 months, subtract a fund's SEC yield from its current duration."
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Old 03-12-2021, 09:45 PM   #71
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Yes I am heavily invested and worried about my bond funds. I'm not worried that prices have come down because when I went into them many years ago I knew prices would fluctuate and I really didn't care since I had no plans to sell. I hoped for higher interest rates. But now I see little hope of interest rates moving up significantly for many years and I know of no place to invest conservatively that will offer a decent return..I refuse to be forced into more equities at these valuations.. Suggestions
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Old 03-13-2021, 06:39 AM   #72
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I too try to stay as diversified as possible via investments in index funds.

I’m no expert, but it sure seems me that bonds (and thus bond index funds) are going to be losers for the foreseeable future.

My asset allocation is 85:15, but that 15 is in GLD now.
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Old 03-13-2021, 07:06 AM   #73
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Originally Posted by audreyh1 View Post
Yes, all asset classes have been inflated due to uber-low interest rates. Rising rates affect everything.

I just rebalance on the way up, and on the way down. Same old same old.

@Audreyh1 I agree with you - but how often/when do you rebalance? I try to limit to twice a year and then only if my AA is out by five points or more.
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Old 03-14-2021, 01:48 PM   #74
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A poster on another forum likes to say that if at least one asset isn't making you unhappy at any given time, you're probably not diversified enough. For many, this year it's bonds.
Yep, diversify diversify diversify to steal a philosophy from the real estate people.
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Old 03-14-2021, 02:47 PM   #75
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Would holding individual bonds in a “ladder” where you have equal amounts maturing in, say, 1 year, 2 years, 3 years, etc. be a reasonable alternative to holding a bond fund? It would eliminate a lot of interest rate risk for the bonds closest to maturity, so if you need to sell, some (hopefully all or most) of your principal would not be at risk; if you did not need the cash, you could reinvest at the long end of the ladder and have a portfolio of bonds that mature on a regular schedule. I guess I was thinking with a bond fund, if your fellow investor panic, the fund might have to sell at a loss even if you were content to stand pat.
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Old 03-14-2021, 02:57 PM   #76
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Originally Posted by ProGolferWannabe View Post
Would holding individual bonds in a “ladder” where you have equal amounts maturing in, say, 1 year, 2 years, 3 years, etc. be a reasonable alternative to holding a bond fund? It would eliminate a lot of interest rate risk for the bonds closest to maturity, so if you need to sell, some (hopefully all or most) of your principal would not be at risk; if you did not need the cash, you could reinvest at the long end of the ladder and have a portfolio of bonds that mature on a regular schedule. I guess I was thinking with a bond fund, if your fellow investor panic, the fund might have to sell at a loss even if you were content to stand pat.
There is certainly nothing wrong with this strategy. But I don’t see it as a way to eliminate interest rate risk. It may feel better psychologically to know that you can hold the bonds to maturity without losing any value. But all of the studies I’ve read suggest that the interest rate risk is no different between individual bonds and bond funds. They just handle the risk differently.

With an individual bond you can hold on to it until maturity but if rates rise you are holding a substandard investment. Or you can sell it at a loss but reinvest the money in higher yielding bonds.

With bond funds, the NAV will go down as rates rise, but over time the fund manager will replace the lower yielding bonds as they mature with higher yielding bonds in their place. And that will eventually bring the NAV back up.

The advantage to bond funds is that you can buy them in any denomination. So if you want to buy $200 worth you can do that. With individual bonds you have to go into the market place and buy whatever is available. And in small quantities you will not negotiate as good of a price as a fund manager buying millions of dollars worth.

So over the long term you will do roughly equal with either strategy. It just comes down to which one is more comfortable for you and a better fit for your overall portfolio.
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Old 03-14-2021, 03:13 PM   #77
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With an individual bond you can hold on to it until maturity but if rates rise you are holding a substandard investment. Or you can sell it at a loss but reinvest the money in higher yielding bonds..
This makes sense. My only comment would be that if you held a bond fund to date X, and an individual bond to the same date, you would know with certainty what you would have in your pocket with the individual bond on date X, not so much with the bond fund. Maybe that is different than interest rate risk?
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Old 03-14-2021, 03:32 PM   #78
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This makes sense. My only comment would be that if you held a bond fund to date X, and an individual bond to the same date, you would know with certainty what you would have in your pocket with the individual bond on date X, not so much with the bond fund. Maybe that is different than interest rate risk?
Correct. But from a practical standpoint how useful is this? You generally buy bonds or bond funds as part of a long term investment strategy, and then gradually sell a small portion at a time to cover your living expenses once retired. I suppose if you knew for sure that you would need all of the money on an exact date, and could line that date up with the maturity of an individual bond, you could get more certainty. I just don’t know how much that applies in the real world of investing.
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Old 03-14-2021, 03:45 PM   #79
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You generally buy bonds or bond funds as part of a long term investment strategy, and then gradually sell a small portion at a time to cover your living expenses once retired.
I don't agree with the bolded part. People purchase bonds and collect the monthly interest payments to use toward their living expenses. When the bond matures, they take the principal and buy another bond to continue that monthly income stream. My 90-year-old mother has been doing that for 30 years. She has never sold bonds to access the principal.


The problem in recent years has been that as older bonds matured, the interest rate available on new bonds has been very low making it hard to replace the income unless you ventured into higher risk issues.
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Old 03-14-2021, 06:50 PM   #80
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Quote:
Originally Posted by oldtimer View Post
According to Christine Benz the formula is bond fund avg duration minus SEC yield.
Part 6: What Kinds of Bonds Should I Hold?

"...to estimate how much an investor could lose during a 12-month period if Treasury yields increased by 1 percentage point during that same 12 months, subtract a fund's SEC yield from its current duration."
Agreed.... I was referring to solely the change in value and not total return for the year... but the point was that all else being equal it'll take about 6 years to get back to where you started and that doesn't sound very good to me.
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