I have sold everything else, why not these as well??
If you think it's bad now with the 10 year Treasury at 1.57%, wait until it hits 3% and see what happens to your bond fund.
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.
I’ll have to do some reading. I bought my first house when I was in my 20’s and interest rates were double digits. I’ve really only seen interest rates go down. Now that they’re zero and will likely go up, I need to have a better understanding on what to do investment wise. I always thought of bonds as a asset class that moves counter to stocks.
We haven't sold anything, and don't time the market.Anyone else worried about YTD performance of their bond index funds?
My Vanguard VBTLX is now -2.28 for the year. Whats the deal?
I have sold everything else, why not these as well??
Bond funds are continually buying new bonds to replace bonds in the fund that mature. If interest rates rise, the fund will take advantage of this by buying bonds that have a higher yield. The NAV will go down a bit in the short term but interest rates have been moving so slowly that I’m not really concerned about a big drop in NAV on the funds.
I jettisoned bonds in favor of CDs many years ago because of concern for interest rate risk... I was just before my time!
Bond funds are continually buying new bonds to replace bonds in the fund that mature. If interest rates rise, the fund will take advantage of this by buying bonds that have a higher yield. The NAV will go down a bit in the short term but interest rates have been moving so slowly that I’m not really concerned about a big drop in NAV on the funds.
I did too back when rates were around 3.5%. But now that my CDs have matured I’m not finding that to be a viable strategy any more so I’ve gone back to municipal bonds. If I’m going to make next to nothing on yield I might as well not have to pay taxes on it.
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!
I think it is quite possible... look at 2013, 2009 and 1999. Plus there are many years that it went down 1% or more so. If/when the economy gets going then a 100 bps increase is very possible IMO.
https://www.macrotrends.net/2016/10-year-treasury-bond-rate-yield-chart
Anyone else worried about YTD performance of their bond index funds? My Vanguard VBTLX is now -2.28 for the year.