Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Old 05-15-2015, 01:07 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,007
Quote:
Originally Posted by REWahoo View Post
But...but...you're missing out on all the cardio benefits gained while running around and wringing your hands!
Well - that is true!

I'm not sure how many calories constant worry really burns.....
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Bond Market Anxiety
Old 05-15-2015, 01:16 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 9,343
Bond Market Anxiety

Quote:
Originally Posted by mathjak107 View Post
i own mine years too but each year is a new story. i could see if this was years ago and rates on bonds were 5 or 6% . they have room to go up or down. but at zero real return bonds have no real upside and a whole lot of down side pulling your portfolio down needlessly.

i think a a lot of money is going to be spent chasing a ghost running on what used to be . .

i think folks who remain sitting in conventional bond funds will end up like those who failed to pay attention when the fed did everything but drop leaflets from helicopters warning folks not to stay in cash instruments as investments .. well those who stayed paid the price of not paying attention to the world around them.

this will now likely be the reverse . cash will likely not have the losses bonds will and be the better deal . cash getting 1% beats bonds getting 2% and losing 5% in principal.

other types of bond funds as i mentioned can be better places to put money.

but time will tell .

I think most people here probably know the consequences of bonds. But I have several social friends who will get the shock of their lives if a big upturn would occur. They only look at the total returns the bond funds have given and have no understanding of bond prices, capital gains, and true effective yield. Anytime I try to explain their faces just glaze over and do not listen.
But I don't think everything will collapse on government rate hikes for people selectively looking for yield. Historically speaking there is a nice spread between treasuries and some utility preferred stocks.
January 1, 2004, the 10 year was yielding 4.15% and one of mine was $51.80 yielding 6.25%. Today it is priced at 52.80 yielding 6.13%. It will bounce around a bit but nothing earth shattering. Now if the 10 year would go to 7-8% it will drop like a rock. But thats the chances one takes, and I am not losing sleep over it. Over time and at my age I will take my chances on that yield. Also paying 15% tax on the dividend instead of 25% for income is also an advantage for me.
However there are no free lunches in any investment decision so you tailor it to your own needs and then let it play out. Or at least until you cant stand the pain any longer.


Sent from my iPad using Tapatalk
Mulligan is offline   Reply With Quote
Old 05-15-2015, 02:14 PM   #23
gone traveling
 
Join Date: Sep 2003
Location: DFW
Posts: 7,586
Quote:
Originally Posted by mathjak107 View Post
personally i would bring allocations on conventional bond funds from 50% to maybe 20% and divy the rest up in income funds that do better when rates rise.

what i wouldn't do is just sit with 50% in conventional bond funds.

best bet may be 50% equities 50% cash instead. you would likely lose more trying to keep the bonds then you would give up holding cash. we already just about lost 6 months of interest on the bonds , next is principal from this point.
What is your definition of a conventional bond fund, and are you presuming everyone here is only invested in what you are red flagging? I try to stay diversified by being in a diversified bond fund, multi sector, high yield, floating rate, unconstrained, and strategic bond funds. Also have bond components in Wellington and Wellesley. That said, that only amounts to about 26% of my fixed income sleeve, and I have no intention of selling or reducing that due to raising rate concerns, as they do provide ballast when everything else goes to hell.

My suggestion is to keep duration short to intermediate, don't go too low in quality, stay diversified and rebalance, but I do not see any reason to abandon bonds entirely.
eytonxav is offline   Reply With Quote
Old 05-15-2015, 02:24 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
conventional= typical total bond , bond index , corporate bond fund , etc. just about any intermediate term bond fund with an effective duration of about 7 years.

but as i mentioned above there are quite a few bond funds that i would consider.

number 1 on my list is main stay's unconstrained bond fund which can hedge by going short.

fidelity floating rate high yield is another

if inflation picks up with rates TIP FUNDS , reit income funds , commodity linked bond funds are some more. even a strategic income fund would be better than sitting in some bond index.
mathjak107 is offline   Reply With Quote
Old 05-15-2015, 03:30 PM   #25
gone traveling
 
Join Date: Sep 2003
Location: DFW
Posts: 7,586
Ok, perhaps you presumed folks here are only using conventional int term bond funds, have a very high bond allocation and that they might not understand the impact of duration and raising rates. Like Mulligan indicated, I suspect most here are well aware of how raising rates can affect price and will stay the course/rebalance or will make or have made adjustments based on their risk tolerance.

So are you still considering adding bond funds to your port or have you made the adjustments you mention? As for me, I haven't changed anything in my bond port in quite some time.
eytonxav is offline   Reply With Quote
Old 05-15-2015, 03:34 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 6,115
i haven't changed anything yet and run 50/50 with short term bonds , corporate bonds and a total bond fund making up the bond portion.

i am just watching as things unfold and at some point in the near future i think i will keep 20% in total bond , 10% in floating high yield and 20% in the unconstrained bond fund.
mathjak107 is offline   Reply With Quote
Old 05-15-2015, 03:54 PM   #27
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: NC
Posts: 21,204
Quote:
Originally Posted by Dash man View Post
People brushed off warnings of a real estate bubble as "doom and gloom," but a lot of people got hurt. People made fun of warnings of the tech bubble in the stock market calling it "doom and gloom," but people got hurt. Even back in the 30s people ignored warnings of a guy named Hitler as "doom and gloom," but people got hurt. The world doesn't have to come to an end for a lot of people to get hurt.
Lots of leveraged investors, speculators and people who took out loans they couldn't afford (and should have known better in many cases) certainly got hurt. But long term investors who stayed the course and rebalanced recovered and went on to new highs - many post here regularly.

Quote:
Originally Posted by Dash man
Bonds gave seen a bull market for decades and people have forgotten no investment is perfectly safe.
That's a broad brush. I don't remember any knowledgeable member here saying any investment is perfectly safe, and they haven't forgotten anything significant.

Quote:
Originally Posted by Dash man
It's more than interest rate risk with global debt reaching unprecedented levels. Liquidity risk is also real as a sell off of bond funds would find there aren't enough buyers of the underlying bonds causing prices to plummet. The world wouldn't come to an end, but the finances of people will get hurt. Just because it doesn't happen within the short sighted timeline view of most people doesn't mean it won't happen.
Are we likely to see the real returns bonds have provided over the past several decades, nope. Will future real returns on bonds be (much) less, even lagging some CD's, seems inevitable.

If bonds are a big concern, what are you recommending? CD's? Equity income funds (not an equivalent, more equity will increase volatility)? Other?
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-15-2015, 04:01 PM   #28
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
I wonder, with regard to the performance of the bond portion of the portfolio, if those invested in Wellesly or Wellington gain some advantage over those of us who are hard-core indexers and just rebalance. Do the professional bond traders at those funds add value in some way (e.g. adjusting duration in a way that beats the market consistently)? Since the overall holdings are both stocks and bonds, are the mangers able to gain some synergies that us plain 'ol indexers aren't able to harvest (maybe be adjusting the stocks owned to temper risks they are taking on the bond side, etc).
I ask because a lot of "hands-off" investors are trusting these funds to do well and not lose much ground regardless of the circumstances, and if interest rates rise (hurting both stocks and longer-duration bonds) it would seem that they might get burned like everyone else. But maybe these managed balanced funds have tools available that we don't.
samclem is offline   Reply With Quote
Bond Market Anxiety
Old 05-15-2015, 04:24 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dash man's Avatar
 
Join Date: Mar 2013
Location: Limerick
Posts: 5,638
Bond Market Anxiety

Quote:
Originally Posted by Midpack View Post
Lots of leveraged investors, speculators and people who took out loans they couldn't afford (and should have known better in many cases) certainly got hurt. But long term investors who stayed the course and rebalanced recovered and went on to new highs - many post here regularly.

That's a broad brush. I don't remember any knowledgeable member here saying any investment is perfectly safe, and they haven't forgotten anything significant.

Are we likely to see the real returns bonds have provided over the past several decades, nope. Will future real returns on bonds be (much) less, even lagging some CD's, seems inevitable.

If bonds are a big concern, what are you recommending? CD's? Equity income funds (not an equivalent, more equity will increase volatility)? Other?

I don't make recommendations and wouldn't expect anyone to take mine anymore than I'd take theirs. My point though is bonds are riskier than people think. Holding individual bonds to maturity are only as risky as the company or government that issued them, but bond funds are much higher risk because of the liquidity problem that would present itself if there is a sell off because of rate increases. Everyone remembers the mortgage backed securities and what happened in 2008. Imagine bond fund holders selling off as rates rise, fund values go down and more people want to sell their holdings. The funds have to sell bonds to pay off their customers, but too many people are cashing in their shares and no one wants to buy the bonds, so the fund companies are forced into a fire sale to raise the cash. Fund companies may find themselves going out of business before things stabilize.
I don't own bonds, but do have equities in companies that sell things people always need or have strong brands. I do have CDs and real estate. With the huge growing global debt and geopolitical instability, I think it's just a matter of time before there is another major financial crisis that will be different than what we've seen in our lifetime. But I realize most people prefer to think things will continue as they are and nothing will happen. Maybe they are correct, maybe not.
Dash man is offline   Reply With Quote
Old 05-15-2015, 04:25 PM   #30
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
Quote:
Originally Posted by samclem View Post
I wonder, with regard to the performance of the bond portion of the portfolio, if those invested in Wellesly or Wellington gain some advantage over those of us who are hard-core indexers and just rebalance. Do the professional bond traders at those funds add value in some way (e.g. adjusting duration in a way that beats the market consistently)? Since the overall holdings are both stocks and bonds, are the mangers able to gain some synergies that us plain 'ol indexers aren't able to harvest (maybe be adjusting the stocks owned to temper risks they are taking on the bond side, etc).
I ask because a lot of "hands-off" investors are trusting these funds to do well and not lose much ground regardless of the circumstances, and if interest rates rise (hurting both stocks and longer-duration bonds) it would seem that they might get burned like everyone else. But maybe these managed balanced funds have tools available that we don't.
I'll let you know...
__________________
Numbers is hard
REWahoo is offline   Reply With Quote
Old 05-15-2015, 05:06 PM   #31
gone traveling
 
Join Date: Sep 2003
Location: DFW
Posts: 7,586
Quote:
Originally Posted by mathjak107 View Post
i haven't changed anything yet and run 50/50 with short term bonds , corporate bonds and a total bond fund making up the bond portion.

i am just watching as things unfold and at some point in the near future i think i will keep 20% in total bond , 10% in floating high yield and 20% in the unconstrained bond fund.
Seems reasonable to me, thanks!
eytonxav is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Anxiety Bimmerbill Health and Early Retirement 38 02-17-2009 07:38 PM
TIPS Or Total Bond Index If Bond Market Crashes? Marcretire FIRE and Money 2 02-05-2009 12:10 PM
earning or losing money -- which gives you more anxiety? lazygood4nothinbum FIRE and Money 20 12-26-2008 09:10 AM
Uh oh---anxiety after one week of FIRED! tangomonster Life after FIRE 68 08-17-2006 09:31 PM
Irrational Anxiety SteveR FIRE and Money 5 07-25-2005 06:00 PM

» Quick Links

 
All times are GMT -6. The time now is 05:31 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.