I choked

[Graybeard]

Another very interesting and informative thread.

 

[Koolau]

Not my style..Market conditions change over time and so should I..Doing nothing is too easy and that has cost me way more than taking action and making moves..For example I knew a year ago I should have moved out of my investment grade bond fund..Having served me well for 15 years it was easy to do nothing...BIG MISTAKE

I think I posted a scene from Charlie Wilson's War - It spoke of a Zen Master talking about a young boy and the various life-experiences he went through. The Zen Master's take was that assigning a "good" or "bad" label to a particular experience may turn out to be wrong. In this case, Doing nothing may have been a big mistake OR in 2 years you may decide it was the best financial decision of your life.

I make no value judgement about your particular decision, but just think it may be difficult to know what to do when you tweak a portfolio. NOT tweaking it just might turn out to be the best decision - but you won't know for a while. Very much a YMMV situation.

What the heck. Here's the scene from CWW-Zen Master (language alert!) Sorry if this is a repeat.

 

[lawman]

Good point..

 

[Turbo29]

And 28% in equities produces almost as much return as 60% in equities.

But if you compound it over 30 years, that "almost as much" becomes a much bigger gap.

 

[COcheesehead]

Which I think shows the power and value of equities.

And little in cash.

 

[COcheesehead]

But if you compound it over 30 years, that "almost as much" becomes a much bigger gap.

But do you need the “extra” for a successful retirement? Take only as much risk as needed.

 

[Koolau]

But if you compound it over 30 years, that "almost as much" becomes a much bigger gap.

Heh, heh, what 30 years? I'm 75! I actually just lost a friend and she was 106. But, many of us - even on the forum - don't have 30 years. For the young'uns, a large commitment to equities makes all kinds of sense. Not so much for me though YMMV.

 

[Phroig]

But do you need the “extra” for a successful retirement? Take only as much risk as needed.

The graph makes this point. All portfolios with 28% or more in equities are on the efficient frontier. How much you should hold depends on your risk preferences.

 

[SecondCor521]

Not my style..Market conditions change over time and so should I..Doing nothing is too easy and that has cost me way more than taking action and making moves..For example I knew a year ago I should have moved out of my investment grade bond fund..Having served me well for 15 years it was easy to do nothing...BIG MISTAKE

This may (or may not, but I think it may) represent the logical fallacy of confirmation bias.

 

[daylatedollarshort]

Bill Bengen of the 4% rule fame recently said: "My biggest concern are buy-and-hold advisors who don’t modify their allocation in response to market risk....Historically, markets have taken many years to come back, like [after] the Great Depression; and during the 1960s and ‘70s, the markets did nothing at all. Maybe we’re headed for another one [of those]. That’s why I say protect your retirement nest egg because if it gets damaged, there may not be a quick cure.

https://www.thinkadvisor.com/2022/0...s-4-rule-says-to-cut-stock-and-bond-holdings/

 

[mathjak107]

In real return it took less then 5 years to get all your purchasing power back after the Great Depression

 

[target2019]

Good point.. The old risk/reward conundrum. In the end I'm one of those who do not have much tolerance for risk. At this point in my life I've decided I really do not want more in the stock market than I can afford to lose..That probably is not the best move statistically but I just don't have the stomach for it..

I was interested in the fund BLNDX and took a look. https://www.morningstar.com/funds/xnas/blndx/portfolio

That's not an asset mix you see often in a mutual fund. It works out to 40% equity, 12% other and 47% cash. For equity it invests in four very-similar total us market funds. On the int'l side they are 50/50 with developed/emerging markets.

So you must have substantial percentage invested in other fixed income to average out to 20/80 overall as you mentioned early.

BTW, we are approx 50/45/5 equity/fixed/cash.

 

[lawman]

So you must have substantial percentage invested in other fixed income to average out to 20/80 overall as you mentioned early.

BTW, we are approx 50/45/5 equity/fixed/cash.

Actually my largest holding right now now is cash closely followed by my I-bond account.

 

[braumeister]

Anyone here have an opinion on BLNDX or other possibilities?

My only opinion is that it has only been around for two years, during a bull market. Looking at it after it develops a track record would make more sense to me than piling in now.

 

[OldShooter]

Not my style..Market conditions change over time and so should I..Doing nothing is too easy and that has cost me way more than taking action and making moves..For example I knew a year ago I should have moved out of my investment grade bond fund..Having served me well for 15 years it was easy to do nothing...BIG MISTAKE

@lawman, there is nothing easier than market timing by looking in the rear view mirror. We have all been there: shoulda, coulda, woulda ...

Some worthwhile reading: Taylor Larimore's market timing quotes https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes Sorry if I have already posted this in one of your threads. It's a favorite of mine.

 

[Koolau]

I'm old and I can't afford another lost decade. Just sold half of my equity positions. Looking at a graph of the last 10 years I realized that I've done well enough. I don't want to lose ground over the course of a decade. I can't see me ever buying more equities on any significant scale..Now I need to figure out what to do with the money. I'm looking for something with less risk than the stock market but more risk than C. D.'s or treasuries. I do have one fund (BLNDX) that has been very good but even though it has been pretty steady I still wonder how safe it is..It's an all weather fund that trades in equities, currencies, commodities, and bonds.. On it's face it looks to me to be very high risk but they market it as an all weather fund that one might use to replace a bond fund..Anyone here have an opinion on BLNDX or other possibilities?

I don't know enough about BLNDX and, yes, it is new. If I could only invest in one managed fund (i.e., NOT an index fund) I would choose pssst. Wellesley. It has a good track record. It's about 60/40 IIRC. It's been around for a long time.

Full disclosure, I do own it though most of my equities/bonds are in index funds. YMMV

 

[daylatedollarshort]

Those market timing quotes are all like saying even Jerome Powell doesn't know what interest rates are going to do, despite the fact that he is head of The Fed, the group that sets the federal funds rates and is in charge of quantitative easing.

We don't always know so clearly a year in advance what the Fed is going to do, but this year they have said at the start they intended to fight inflation as a priority and would be raising interest rates 6 - 7 times. So far they have kept their promise. If they change it they will post it in their meeting minutes. Their May meeting minutes were along the lines of full steam ahead on the interest rate increases. The people who ditched the longer duration bond funds after the Fed's announcements earlier in the year have pretty easily avoided 10% losses so far this year.

From the May meeting minutes: "Fed minutes released Wednesday indicated that officials are prepared to move ahead with multiple 50 basis points interest rate increases...In addition, the Federal Open Market Committee said policy may have to move past “neutral” and into “restrictive” territory." https://www.cnbc.com/2022/05/25/fed-minutes-may-2022.html

 

[Dtail]

Those market timing quotes are all like saying even Jerome Powell doesn't know what interest rates are going to do, despite the fact that he is head of The Fed, the group that sets the federal funds rates and is in charge of quantitative easing.

We don't always know so clearly a year in advance what the Fed is going to do, but this year they have said at the start they intended to fight inflation as a priority and would be raising interest rates 6 - 7 times. So far they have kept their promise. If they change it they will post it in their meeting minutes. Their May meeting minutes were along the lines of full steam ahead on the interest rate increases. The people who ditched the longer duration bond funds after the Fed's announcements earlier in the year have pretty easily avoided 10% losses so far this year.

From the May meeting minutes: "Fed minutes released Wednesday indicated that officials are prepared to move ahead with multiple 50 basis points interest rate increases...In addition, the Federal Open Market Committee said policy may have to move past “neutral” and into “restrictive” territory." https://www.cnbc.com/2022/05/25/fed-minutes-may-2022.html

True, but for example if one is still staying at their AA and moving bond fund allocations to CD's/MYGA's, etc, then that would not be a direct market timing as opposed to just getting out of stock into cash.

 

[jimbee]

Not my style..Market conditions change over time and so should I..Doing nothing is too easy and that has cost me way more than taking action and making moves..For example I knew a year ago I should have moved out of my investment grade bond fund..Having served me well for 15 years it was easy to do nothing...BIG MISTAKE

So, level 1?

 

[daylatedollarshort]

From last January - Fed plans to raise rates starting in March to cool inflation | AP News.

 

[daylatedollarshort]

True, but for example if one is still staying at their AA and moving bond fund allocations to CD's/MYGA's, etc, then that would not be a direct market timing as opposed to just getting out of stock into cash.

I think you have to actually look at the actual market timing quotes about staying the course in mutual funds and no one knowing the direction of interest rates. Not all of them have aged well in our current investing environment. Like here is one, "Buying and holding a few broad market index funds is perhaps the most important move ordinary investors can make to supercharge their portfolios." (Stein & DeMuth, authors and advisors)"

Related Link: Buy-and-Hold Has Lost to Every Single Chart Model in 2022 Stock Market - https://www.bloomberg.com/news/arti...st-to-every-single-chart-model-in-2022-stocks

 

[lawman]

Speaking of funds, after listening to some here talk about the advantage of individual bonds over bond mutual funds I have been looking at going the individual route with all the cash I have accumulated now and parked in 1- 6 month cd's and treasuries.. What I've found is I cannot find issues that I would be comfortable holding that pay anywhere near what my old fund is now paying (VFIDX). That fund has a distribution yield of 2.99% and and a SEC yield of 4.2%. I have tried to understand the difference between the two but I still cant understand how those numbers could be so far apart..I suppose once the Fed slows down on interest rate increases perhaps the fund might once again be prudent..

 

[pb4uski]

True, but for example if one is still staying at their AA and moving bond fund allocations to CD's/MYGA's, etc, then that would not be a direct market timing as opposed to just getting out of stock into cash.

I would view moving from bond funds to CDs/UST/MYGAs more as an interest rate risk reduction change than market timing since a swap of bond funds for other fixed income instruments doesn't change AA.

 

[OldShooter]

Those market timing quotes are all like saying even Jerome Powell doesn't know what interest rates are going to do, despite the fact that he is head of The Fed, the group that sets the federal funds rates and is in charge of quantitative easing.

We don't always know so clearly a year in advance what the Fed is going to do, but this year they have said at the start they intended to fight inflation as a priority and would be raising interest rates 6 - 7 times. So far they have kept their promise. If they change it they will post it in their meeting minutes. Their May meeting minutes were along the lines of full steam ahead on the interest rate increases. The people who ditched the longer duration bond funds after the Fed's announcements earlier in the year have pretty easily avoided 10% losses so far this year.

From the May meeting minutes: "Fed minutes released Wednesday indicated that officials are prepared to move ahead with multiple 50 basis points interest rate increases...In addition, the Federal Open Market Committee said policy may have to move past “neutral” and into “restrictive” territory." https://www.cnbc.com/2022/05/25/fed-minutes-may-2022.html

Sir John Templeton: “The four most expensive words in the English language are 'This time it’s different.' ” Maybe. Maybe not.

 

[pb4uski]

Speaking of funds, after listening to some here talk about the advantage of individual bonds over bond mutual funds I have been looking at going the individual route with all the cash I have accumulated now and parked in 1- 6 month cd's and treasuries.. What I've found is I cannot find issues that I would be comfortable holding that pay anywhere near what my old fund is now paying (VFIDX). That fund has a distribution yield of 2.99% and and a SEC yield of 4.2%. I have tried to understand the difference between the two but I still cant understand how those numbers could be so far apart..I suppose once the Fed slows down on interest rate increases perhaps the fund might once again be prudent..

The 4.2% sounds about right. The yield to maturity of the portfolio is 4.4% and the expense ratio is 0.1%... so a net of 4.3%. However, that is for a portfolio with an average maturity of 7.4 years and average duration of 6.4 years. And 52% BBB and 30% AA quality bonds. 7 year corporates are in that mid 4% range, so it seems to make sense.

To me, the more important thing right now is reducing interest rate risk and your current holdings of 1-6 month CDs and UST does that, but it is unrealistic to think that you can replicate the yields of VFIDX without going longer which results in more interest rate risk, so you're looking for the holy grail.

I doubt that I'll jump back into bond funds or ETFs once interest rates stabilize.... I'll just go longer on individual bonds.