Bridgewater: “Bonds are a terrible place to be.”

[audreyh1]

Quote:

Originally Posted by Jerry1 I have some bond funds. They are sort to medium term. I don't really want to liquidate them but I would like to increase my cash. My thought is to shut off all reinvestment of interest payments. I'm not even sure if that's possible with a bond fund, but I'll check into it. Anyway, that would allow me to increase my cash while the fund managers deal with this environment. Thoughts?

Yes that’s possible. None of my bond funds reinvest.

[garyt]

A couple bond funds I've held for years are SPHIX and MWHYX any opinions on these? They've done very well for me through the years.

[pb4uski]

One alternative to keep in mind are target maturity bond ETFs. The sort of straddle between individual bonds and bond funds. The invest in a diversified portfolio of bonds that all mature in a stated target year... near the end of that target year, after all the bonds have matured, they make a terminal distribution to investors. They are an easy way to own a portfolio of individual bonds.

One thing to be aware of though... as bonds mature during the target year the fund invests the proceeds in short term investments since that money will pay out in the coming year... so target year yields are unimpressive. What I did was to sell about 12-18 months before the terminal distribution... perhaps not a perfect workaround, but good enough.

[Chuckanut]

Quote:

Originally Posted by ejman I would be very surprised if either Wellesley or Wellington start straying substantially from their investment objectives as indicated in their respective prospectus as a result of current events. As active funds they may or may not adjust their holdings within prospectus parameters as Wellington has done since 1929 and Wellesley since the mid 70's thru all kinds of weather . And really why should they substantially change? Take YTD market action for example. Both stocks and bonds took a beating but Wellesley is down 1.49%, S&P 500 down 5.19%.

The only bonds I currently own (other than short term bond funds) are in Wellesley. I am trusting the fund mangers to manage their way through what appears to be a few years of rising interest rates. Wellesley is not a big part of my investments so the risk is relatively small for me.

Most Wellesley people that I know invest to get a reliable income payment every quarter. They can endure the ups and downs of the bond market as long as the interest payments don't vary much.

[Ramen]

Quote:

Originally Posted by ejman I think Buffet said something to the effect that inaction bordering on sloth is the preferred investing course.

I think John Bogle and Rick Ferri might agree.

Quote:

Originally Posted by NW-Bound We may be entering a period where you win by losing less than the next guy.

I recall losing 15% in 2008 when many others lost 35% or more. No fun either way, but I was thankful in context.

[ejman]

Quote:

Originally Posted by Ramen I think John Bogle and Rick Ferri might agree. I recall losing 15% in 2008 when many others lost 35% or more. No fun either way, but I was thankful in context.

Yes. according to Quicken my 50/50 portfolio was down 17.29% in 2008. That was my 6th year of ER. I vividly remember all the headlines at the time telling us the end of financial world as we knew had arrived. And of course, I was concerned along with everyone else. Did I sell in a panic? of course not, my stash has tripled since then, living off dividends and cap gains derived from my taxable account. Hadn't even touched my tax deferred until this year when I started RMD's. So far so good.

[Ramen]

Quote:

Originally Posted by ejman Yes. according to Quicken my 50/50 portfolio was down 17.29% in 2008. That was my 6th year of ER. I vividly remember all the headlines at the time telling us the end of financial world as we knew had arrived. And of course, I was concerned along with everyone else. Did I sell in a panic? of course not, my stash has tripled since then, living off dividends and cap gains derived from my taxable account. Hadn't even touched my tax deferred until this year when I started RMD's. So far so good.

This is good to hear. I too stayed the course in 2008-09 and am up more than fourfold now (that includes working and saving into 2020). But I'm only in year two of FIRE and will try to remain calm as things churn. Rent inflation has me worried, but I'm not planning any portfolio overhauls.

[ejman]

Quote:

Originally Posted by Ramen This is good to hear. I too stayed the course in 2008-09 and am up more than fourfold now (that includes working and saving into 2020). But I'm only in year two of FIRE and will try to remain calm as things churn. Rent inflation has me worried, but I'm not planning any portfolio overhauls.

I did have a fully paid house, cars etc no other debt before I ER'd at the end of 2002. I remember reading somewhere that the folks that really suffered financial collapse during the Great Depression that started in 1929 were those that had substantial debt they could no longer cover. So, I decided no debt at the time of ER was the ticket for me. Plenty of folks now want all the debt they can acquire since debt costs so little to repay at current rates. Not for me thanks.

[yakers]

Quote:

Originally Posted by ejman Yes. according to Quicken my 50/50 portfolio was down 17.29% in 2008. That was my 6th year of ER. I vividly remember all the headlines at the time telling us the end of financial world as we knew had arrived. And of course, I was concerned along with everyone else. Did I sell in a panic? of course not, my stash has tripled since then, living off dividends and cap gains derived from my taxable account. Hadn't even touched my tax deferred until this year when I started RMD's. So far so good.

Retired March 2008 my roughly 60/40 portfolio was down 18.8% and the next year went up 18%. Didn't buy much but didn't sell, doing very well these days. We'll just use pensions, SS, RMDs and sell whatever we need to to play, older now and very unlikely to run out of financial resources, just may effect how much we leave to sons & charity.

[audreyh1]

I have cash, short term high credit quality bond index funds, intermediate high credit quality bond index funds, and plenty of equities. My investment horizon is very long term. I just ride it out and rebalance occasionally as needed.

BTW if sellers drive down the price of bond funds in the short term, no problem, because that usually means I’m buying more.

[ventoux]

Quote:

Originally Posted by audreyh1 I have cash, short term high credit quality bond index funds, intermediate high credit quality bond index funds, and plenty of equities. My investment horizon is very long term. I just ride it out and rebalance occasionally as needed. BTW if sellers drive down the price of bond funds in the short term, no problem, because that usually means I’m buying more.

We also have cash on the side and would be open to buying more bond fund VBTLX. Audreyh1, this may border on a foolish question but with VBTLX losing 4% ytd already does that signal a potential buy opportunity?

I feel as if I'm asking a "market timing" question which isn't my intent. But, rather I read more than post on ER and I know you and others are savvy to bond and bond fund behavior, much more than I. So, really just trying to learn.

[audreyh1]

I just look at how far off my overall asset allocation is.

[ventoux]

Quote:

Originally Posted by audreyh1 I just look at how far off my overall asset allocation is.

Got it, thanks.

[daylatedollarshort]

If you have access to stable value funds, ours have had the same yields as short term bonds and so far no YTD losses like the short term bond funds have.

[jazz4cash]

Quote:

Originally Posted by daylatedollarshort If you have access to stable value funds, ours have had the same yields as short term bonds and so far no YTD losses like the short term bond funds have.

My SVF has been very disappointing for the last few years. It’s averaged only 2.1% for the last 3 yrs. This year looks like it may not crack 2%.

I’ll need to re-read this entire thread and try to find the linked commentary in the OP. Eight months after the original post bonds are becoming very attractive but bond funds look lousy to me.

[daylatedollarshort]

Quote:

Originally Posted by jazz4cash My SVF has been very disappointing for the last few years. It’s averaged only 2.1% for the last 3 yrs. This year looks like it may not crack 2%. I’ll need to re-read this entire thread and try to find the linked commentary in the OP. Eight months after the original post bonds are becoming very attractive but bond funds look lousy to me.

Yes, we are in the process of rolling over all our 401Ks to IRAs so we can buy more individual bonds. Even the 401Ks we have with brokerage options have now put rules in place to either prevent us from moving more money into our brokerage accounts or not permitting us to buy individual bonds, even with the brokerage option, so we have to drop the 401Ks altogether. I am sure the brokerages are behind these changes to try to stop more outflows from their money losing bond funds.

We liked having the stable value and extra ERISA protection of the 401Ks, but the SVs, because of the way they are structured, react very slowly to changing interest rates. This was great when interest rates bottomed out last year, but now the opportunity cost of keeping them is too high with one year Treasuries over 4%. And they were the only funds not actually losing money year to date in the lists for what we can invest on from most of the 401Ks.

[jazz4cash]

I am trying to hang onto my 401k in case I need the SVF in the future. It is managed by Fidelity and there are no changes for retirees except no contributions, naturally.