I choked

[OldShooter]

... 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

Even if that's true (I don't know.), serious investors don't care what happens over such a short period of time. And how many traders knew on January 1 that this would be true?

 

[lawman]

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

1. How low will you go in ratings?
2. To what extent will you investigate the company's financial health?

About all I can do is go with high rated companies and fairly short terms..

 

[daylatedollarshort]

And how many traders knew on January 1 that this would be true?

Here is an article from January of 2022 -

Here’s how rising interest rates may affect your bond portfolio in retirement
https://www.cnbc.com/2022/01/19/heres-how-rising-interest-rates-may-affect-your-bond-portfolio-.html

"Last week, Federal Reserve Chairman Jerome Powell said he expects a series of rate hikes this year, with reduced pandemic support from the central bank, to quell rising inflation. This may alarm investors since market interest rates and bond prices typically move in opposite directions, meaning higher rates generally cause bond values to fall, known as interest rate risk...With higher yields elsewhere, investors tend to sell their current bonds to purchase the higher-paying ones, and heavy selling causes prices to slide...Generally, if you’re trying to reduce interest rate risk, you’ll want to consider bonds or bond funds with a shorter duration."

 

[lawman]

Before the last two increases interest rates could only go one way..I was very confident rates would be going up. What I didn't know was that share price could be so adversely affected by a 1% increase..I lost 40K with a one 1% increase. I don't even want to think about how much I would have lost with a 5% or even 8% increase which may still yet happen

 

[COcheesehead]

That’s why individual bonds are better. They will return to par at maturity.

 

[lawman]

That’s why individual bonds are better. They will return to par at maturity.

That's my conundrum...If I knew I would never need to sell my fund it would be an easy choice..But no one knows what his future financial needs will be..Also, if I just knew when I was going to die this would be much easier..

 

[COcheesehead]

That's my conundrum...If I knew I would never need to sell my fund it would be an easy choice..But no one knows what his future financial needs will be..Also, if I just knew when I was going to die this would be much easier..

I think with a bit of planning, some foundational insurance and a rainy day fund, most can get pretty close to understanding future financial needs and can buy bond durations accordingly.
If you ladder, there is no liquidity issue - you’ll always have fresh cash.

 

[daylatedollarshort]

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

I'm pretty sure that was exactly Bill Bengen's point in the previously linked article when he said, "Historically, markets have taken many years to come back, like [after] the Great Depression....protect your retirement nest egg because if it gets damaged, there may not be a quick cure."

If you are already retired, 5 years could easily be outside, or at least a big chunk inside, of a retiree's remaining life span.

 

[lawman]

If you ladder, there is no liquidity issue - you’ll always have fresh cash.

A good example of how everyone's situation is different.The day may come when I want to build another house. If i do that would be one source of the funds I would need to do it.In a fund that is no problem but not doable with individual bonds ..One can only make his best guess of what the future holds and that's a tall order

 

[mathjak107]

I'm pretty sure that was exactly Bill Bengen's point in the previously linked article when he said, "Historically, markets have taken many years to come back, like [after] the Great Depression....protect your retirement nest egg because if it gets damaged, there may not be a quick cure."

If you are already retired, 5 years could easily be outside, or at least a big chunk inside, of a retiree's remaining life span.

Most think it took decades to recover from the Great Depression but it really didn’t ….

The raw market numbers don’t include dividends , some of which were 14% ….they didn’t include many popular stocks like ibm not in the index and most important , the cpi fell 18% .

So adjusted for inflation recovery was fairly quick at just 4-1/2 years

 

[COcheesehead]

A good example of how everyone's situation is different.The day may come when I want to build another house. If i do that would be one source of the funds I would need to do it.In a fund that is no problem but not doable with individual bonds ..One can only make his best guess of what the future holds and that's a tall order

Not doable? You can sell individual bonds. I do from time to time. You’d have your money within hours.

 

[jazz4cash]

A good example of how everyone's situation is different.The day may come when I want to build another house. If i do that would be one source of the funds I would need to do it.In a fund that is no problem but not doable with individual bonds ..One can only make his best guess of what the future holds and that's a tall order

Not only is it doable, but you can cherry pick the individual bonds to sell rather than being forced to sell some of your “better” bonds as you would with a bond fund.

 

[pb4uski]

+2 definitely doable

 

[UnrealizedPotential]

I don't follow you..They've done pretty well..Using that line of reasoning none of the mutual fund and ETF managers know how to make money..

Listen to Old Shooter. He is giving it to you straight.

 

[target2019]

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..

Distribution yield is Trailing 12-months average - TTM.
SEC yield "is calculated by dividing the previous 30 days' worth of income by the best share price on the last day of the period." https://www.thebalance.com/distribution-yield-vs-sec-yield-which-should-you-use-416978

The way I think of this is, SEC yield gives you a better estimate of what will happen next month.

In your example SEC yield is improving. Of course the bond fund value trailed down over the past year.

BTW, you don't have to play 1001 quotes. The only one that applies to you is "I've won the game, why keep playing?"

 

[Koolau]

I'm pretty sure that was exactly Bill Bengen's point in the previously linked article when he said, "Historically, markets have taken many years to come back, like [after] the Great Depression....protect your retirement nest egg because if it gets damaged, there may not be a quick cure."

If you are already retired, 5 years could easily be outside, or at least a big chunk inside, of a retiree's remaining life span.

That's another reason to be as diversified as possible. Typically, not everything is down (or down as much) at the same time. Many here don't want to hear it, but PMs (in limited quantities) can buffer a portfolio. I've seen numbers like 3% to 5% PMs which is about what I have. Obviously, this is very much YMMV.

 

[Dtail]

Most think it took decades to recover from the Great Depression but it really didn’t ….

The raw market numbers don’t include dividends , some of which were 14% ….they didn’t include many popular stocks like ibm not in the index and most important , the cpi fell 18% .

So adjusted for inflation recovery was fairly quick at just 4-1/2 years

Yes correct, not a well known fact.

 

[pb4uski]

1. How low will you go in ratings?
2. To what extent will you investigate the company's financial health?

About all I can do is go with high rated companies and fairly short terms..

Probably not very low. I might not even bother with corporates at all and just stick with UST and CDs. If corporate bond credit spreads widen then perhaps buy some highly rated corporates (A or better by either S&P or Moodys).

On investigating corporate health, I don't... odd given that I did corporate due diligence when I was working... at this point I have much better things do do with my time than read 10ks (which I also helped write when I was working).

 

[Chuckanut]

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

That is the only place where I own any medium to long term bonds, having purged the rest a while back when there were signs of some banks going to negative interest rates. That seemed like a bond price high to me.

 

[Koolau]

Yes correct, not a well known fact.

Just think of the great recession we all lived through. Looked like "forever" but just a few years. YMMV

 

[lawman]

I might not even bother with corporates at all and just stick with UST and CDs. .

This individual bond thing is new me..Why would anyone buy corporates when C.D's and treasuries are paying better?

 

[COcheesehead]

This individual bond thing is new me..Why would anyone buy corporates when C.D's and treasuries are paying better?

Check again.

 

[lawman]

Check again.

All I have to go by is the listings on Charles Schwab..Investment grade corporates are lower than C.D.'s and treasuries..

 

[COcheesehead]

All I have to go by is the listings on Charles Schwab..Investment grade corporates are lower than C.D.'s and treasuries..

From Fidelity as of tonight:
3-5 year CD 3.15% - 3.3%
3-5 year Treasury 2.92% - 3.1%
3-5 year A rated corporates 4.04% - 4.35%
3-5 year taxable muni 3.8% - 4.18%

 

[lawman]

From Fidelity as of tonight:
3-5 year CD 3.15% - 3.3%
3-5 year Treasury 2.92% - 3.1%
3-5 year A rated corporates 4.04% - 4.35%
3-5 year taxable muni 3.8% - 4.18%

I stand corrected. Thanks