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Old 02-10-2024, 01:06 PM   #121
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At age 46. I still have no bonds in my portfolio. I am not sure if I should have some in the future?
if you are still a long term investor it makes little sense to use bonds to mitigate temporary short term dips with less capable assets and permanently hurt long term growth.

unless you don’t have at least a decade left until you hit that proverbial red zone.

for those who will follow the red zone glide path here is a guide

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Old 02-10-2024, 01:11 PM   #122
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At age 46. I still have no bonds in my portfolio. I am not sure if I should have some in the future?
We didnít until close to retirement. Then we picked a retirement AA and started transitioning to it.
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Old 02-10-2024, 01:15 PM   #123
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if you are still a long term investor it makes little sense to use bonds to mitigate temporary short term dips with less capable assets and permanently hurt long term growth.

unless you donít have at least a decade left until you hit that proverbial red zone.

for those who will follow the red zone glide path here is a guide

I plan to retire at 59.5. Yes, LT.

Portfolio is all VTSAX.
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Old 02-10-2024, 02:46 PM   #124
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There’s no reason to buy any bonds. I’ve been buying CD’s from banks and credit unions from the age of 15. They are simple to understand - deposit your money in a CD and your principal is returned when the CD matures. It’s very, very difficult to loose money - after a bank/credit union failure which has never happened to me. Keep your balance under $250,000 per bank/credit union and you are covered. Brokerage CD are similar but not exactly the same. If you buy call protected CD’s then you are guaranteed to get the full interest over the term. Interest is deposited into your base account, so you do not get compound interest. It’s more difficult to redeem your brokered CD early, the brokerages will help you sell the CD on the secondary market.
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Old 02-10-2024, 02:47 PM   #125
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We didnít until close to retirement. Then we picked a retirement AA and started transitioning to it.
Oh ok. You mean the 2 or 3 fund portfolio that includes Bonds? How close?
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Old 02-10-2024, 03:20 PM   #126
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, no matter what, unless the issuer goes bankrupt and then you are at the front of the line in bankruptcy. That's a lot more security than you will ever have from a stock.
!

Actually you are not even close to the front of the line with normal unsecured bonds...



You have DIP financing, secured loans, administrative costs, tax liens, employee claims and maybe more before getting to unsecured claims...


You are above preferred and common stock but that is about it...
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Old 02-10-2024, 03:58 PM   #127
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Actually you are not even close to the front of the line with normal unsecured bonds...



You have DIP financing, secured loans, administrative costs, tax liens, employee claims and maybe more before getting to unsecured claims...


You are above preferred and common stock but that is about it...
And unsecured claims include a lot more than just bonds. There could be bank loans, trade creditors, tort creditors and deficiency claims of secured creditors, among others. In most cases, you will share and share alike with all those other unsecured creditors, absent any subordination agreements or guarantees.
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Old 02-10-2024, 04:29 PM   #128
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Oh ok. You mean the 2 or 3 fund portfolio that includes Bonds? How close?
I donít understand your question.
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Old 02-12-2024, 03:46 PM   #129
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How close?
The green line show No bonds right up until the end which happened to be Dec '19 for me.
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Old 02-12-2024, 04:06 PM   #130
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I donít understand your question.
Which bond fund and when did you transition?
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Old 02-12-2024, 06:10 PM   #131
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Bond transition syndrome. Now there's a new economic disease that will immerse us in a toxic environment that promotes our self destructive behavior in an addictive display of dysfunctional investing. I had never thought of it in that way.


Sorry, I could not resist a chance for some humour.
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Old 02-12-2024, 06:20 PM   #132
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Which bond fund and when did you transition?
We transitioned around retirement back in 1999. We averaged in over 2-3 years from our all equities portfolio. These days we mostly hold Fidelity bond index funds, short-term and intermediate (US Bond Index).
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Old 02-13-2024, 01:10 AM   #133
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We transitioned around retirement back in 1999. We averaged in over 2-3 years from our all equities portfolio. These days we mostly hold Fidelity bond index funds, short-term and intermediate (US Bond Index).

Sorry to interrupt. How do you allocate that? Enough fixed income to fund 10-15 years of retirement and the rest in stocks? (or 50/50; 60/40 or 75/25)?
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Old 02-13-2024, 02:29 AM   #134
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We transitioned around retirement back in 1999. We averaged in over 2-3 years from our all equities portfolio. These days we mostly hold Fidelity bond index funds, short-term and intermediate (US Bond Index).
one of my favorite fidelity bond funds is ffrhx floating rate high uncome.

i use two others ,one is a short term bond and the other a intermediate term bond with under a 4 year duration .

so very low interest rate sensitivity

my experimental carolina reaper portfolio which is a leveraged risk parity portfolio uses a 3x bond fund tyd along with a 3x stock fund upro and a managed futures fund dbmf
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Old 02-13-2024, 03:38 AM   #135
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The green line show No bonds right up until the end which happened to be Dec '19 for me.
that isnít kitces green line is it ? that is your doing , correct ?
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Old 02-13-2024, 04:48 AM   #136
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one of my favorite fidelity bond funds is ffrhx floating rate high uncome.
FFRHX is not a bond fund - it is a bank loan fund, investing in fairly risky loans.

It won't behave like a bond fund in the event of a recession. Don't consider it an alternative to a total bond fund like FXNAX/VBTLX.
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Old 02-13-2024, 05:24 AM   #137
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FFRHX is not a bond fund - it is a bank loan fund, investing in fairly risky loans.

It won't behave like a bond fund in the event of a recession. Don't consider it an alternative to a total bond fund like FXNAX/VBTLX.
i agree , it’s a fixed income fund like a high yield fund and you wouldn’t own this if recession was looming … but it has been very well behaved thru what we did have recently.

it goes with my other bond funds , which by the way unless treasuries likely won’t hold up in a recession.

most bond funds today are concentrated in BBB which is the sweet spot for non govt bond investing

it is the last rung of investment grade before junk .

any slip in credit rating and those holdings can no longer be held by any fund , pension , fund , insurer or institution that is required to hold investment grade bonds and will be dumped with few takers

moodys calls it the next disaster in a down turn . there is 10x the money in that segment today then 2008 and represents 78% of the non govt bond market dollars wise
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Old 02-13-2024, 05:53 AM   #138
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if you are still a long term investor it makes little sense to use bonds to mitigate temporary short term dips with less capable assets and permanently hurt long term growth.

unless you donít have at least a decade left until you hit that proverbial red zone.

for those who will follow the red zone glide path here is a guide


This is a useful construct but it is viewing retirement date as "fixed," if shooting for FIRE the retirement date is a bit more flexible so if there is a drop there is less risk since the retirement date can also be moved (to the right potentially even to the left). It's also viewing the withdrawal rate as constant and the higher the WDR the more risk there is and thus more need to mitigate that risk -possibly with bonds. With an ultra-low WDR, say 3% or less, and a flexible retirement date, adding more fixed income may not be necessary as there is a bit less risk exposure due to the low WDR and ability to mitigate by shifting the retirement date. There is also potential flexibility in spending.. if a fairly "FAT" FIRE there is room to adjust spending without much pain if SORR bites the early retiree. If it's a "lean" retirement with a 4% or higher WDR and the date is inflexible for some reason I would be more conservative in the equity allocation and even perhaps in the fixed income portfolio (CDs/individual treasuries).
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Old 02-13-2024, 06:16 AM   #139
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Sorry to interrupt. How do you allocate that? Enough fixed income to fund 10-15 years of retirement and the rest in stocks? (or 50/50; 60/40 or 75/25)?
50/50
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Old 02-13-2024, 08:02 AM   #140
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it goes with my other bond funds , which by the way unless treasuries likely wonít hold up in a recession.
I don't believe total bond funds drop during recessions. In the last 2 ('09 and '20) they didn't.
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