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Old 12-29-2017, 01:31 PM   #61
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Yup. They got spanked real bad. See orange line. 4.78% annually during that 8 years 2006-2013.

VTSAX Vanguard Total Stock Market Index Fund Admiral Shares Fund VTSAX chart
Thanks
Never quite sure what im doing with bond funds and this made me feel a bit safer.
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Old 12-29-2017, 02:31 PM   #62
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VTSAX? Is that the correct symbol; the correct fund?
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Old 12-29-2017, 02:50 PM   #63
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If one has access to a stable value/guaranteed bond income fund it can provide some peace of mind. The majority of my bond allocation is in my 401K stable income fund whose yearly yield has dipped below 3% only once for as long as I have owned it. With retirement imminent and my target SWR to be less than 3%, it is a good balance against the volatility in the rest of my portfolio.
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Old 12-29-2017, 03:06 PM   #64
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An excellent illustration.
But to lump all bonds together and dismiss the entire asset class does everybody a disservice.
My 2008-2009 "pummeled" comment came from my experience with the bond fund that was offered by my 401k. Not having paid that much attention to investing back then, I totally bought into the fairy tail of "bonds zig when stocks zag". Obviously it's more complicated than that. But what I saw was the price of the bond fund dropping at the same time as the equity fund. The bond funds were dropping much less than the equities, for sure, but just seeing minus signs everywhere is what my flawed brain remembers. I "almost" want to look up those records to see if my bond funds back then did as bad as I remember them doing.

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If one has access to a stable value/guaranteed bond income fund it can provide some peace of mind. The majority of my bond allocation is in my 401K stable income fund whose yearly yield has dipped below 3% only once for as long as I have owned it. With retirement imminent and my target SWR to be less than 3%, it is a good balance against the volatility in the rest of my portfolio.
I'm also taking advantage of the guaranteed income in my 401k. That's basically my "bond allocation".
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Old 12-29-2017, 04:35 PM   #65
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VTSAX? Is that the correct symbol; the correct fund?
Yes - the graph is showing VTSAX (Vanguard Total Stock Market) compared to BND which is the Vanguard Total Bond ETF, and illustrates how BND not only did not get pummeled in 2008/2009, but also stayed well ahead of VTSAX for many years until quite recently.
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Old 12-29-2017, 05:24 PM   #66
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audreyh1 - If you don't mind me asking, what bond funds do you hold?
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Old 12-29-2017, 05:39 PM   #67
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VTSAX? Is that the correct symbol; the correct fund?
You need to open the chart... it shows both VTSAX and BND for 2006-2013 so you can see the difference... BND is the orange line.
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Old 12-29-2017, 05:42 PM   #68
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My 2008-2009 "pummeled" comment came from my experience with the bond fund that was offered by my 401k. Not having paid that much attention to investing back then, I totally bought into the fairy tail of "bonds zig when stocks zag". Obviously it's more complicated than that. But what I saw was the price of the bond fund dropping at the same time as the equity fund. The bond funds were dropping much less than the equities, for sure, but just seeing minus signs everywhere is what my flawed brain remembers. I "almost" want to look up those records to see if my bond funds back then did as bad as I remember them doing. ....
I had a similar experience in my 401k with the Evergreen Core Bond Fund. I noticed that fund got pummeled... was down 20%...... turns out that the fund's managers had decided to make a bet on MBS that went wrong.
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Old 12-29-2017, 05:43 PM   #69
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Yes - the graph is showing VTSAX (Vanguard Total Stock Market) compared to BND which is the Vanguard Total Bond ETF, and illustrates how BND not only did not get pummeled in 2008/2009, but also stayed well ahead of VTSAX for many years until quite recently.
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You need to open the chart... it shows both VTSAX and BND for 2006-2013 so you can see the difference... BND is the orange line.
I see and understand it now. Thanks.
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Old 12-30-2017, 12:04 PM   #70
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I had a similar experience in my 401k with the Evergreen Core Bond Fund. I noticed that fund got pummeled... was down 20%...... turns out that the fund's managers had decided to make a bet on MBS that went wrong.
Mine wasn't as bad as yours, as it turns out. I went back and looked at my "post mortem" analysis spreadsheet that I created at the time. The total bond fund dropped 7% from 12/31/2007 to 02/28/2008. That looks pretty tame when I look at the equity index, which dropped 47%. Of course, on hindsight, I'd have picked a bond fund more like "BND", but that wasn't an option for me. I just looked-up VBMFX for that time period and it was only down 2.5%. It was down around 6% for the first 11 months of 2008.

Remember when we were all calling our 401k's "201k", due to the halving effect of that time period?
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Old 08-17-2018, 07:38 PM   #71
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I remember reading an article, about five years ago, stating that there was not much point in having bonds in one's AA. The author advocated a far simpler AA of 80/0/20 - 80% stocks, 0% bonds, 20% cash.

I have ran a few tests on this site: https://www.portfoliovisualizer.com/backtest-portfolio

The test was for from 1993 to 2018 using Vanguard Total Stock Market Index, Vanguard Total Bond Market Index and Cash. For the sake of simplicity I started with 1,000,000.
No adjustments were made for taxes or inflation. Re-blancing was done annually.

$40,000 withdrawal the first year, then an annual withdrawal adjusted for inflation.

The 80/0/20 portfolio ended up with 4.16 million.
The 60/40/0 portfolio ended up with 3.93 million.

That the worst down year saw the 80/0/20 AA taking a 29% hit versus at 20% hit with the 60/40/0 AA. The difference in the best years was 1% more for the 80/0/20 AA.

Overall the graph shows them tracking each other very closely,

So for an aprox cost of $230,000 over a 25 year period, one takes a smaller hit in the down markets. Is it worth an average of $9,200 a year to have bonds provide a better buffer in the down years?
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Old 08-17-2018, 08:48 PM   #72
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Going from 60 to 80 % stocks is not something I would do. Especially in this stage of a bull market.
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Old 08-17-2018, 09:13 PM   #73
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If having bonds keep one from selling in a bear market because of the smoother ride as far as volatility, then to me it's worth it to hold bonds. It's difficult to keep the faith when the market loses 4% in a day if one has everything in stocks. A few posters have commented that one of the bond funds I hold is dangerous. I beg to differ.


I have owned it for over two years and it's nothing like some of the more aggressive bond funds out there. Yes it will go down a certain percentage to stocks, but it's nothing like stocks as far as volatility goes or even the more aggressive bond funds. Stocks are great when the market goes up, but when it goes down, it's rough. If mentally not selling securities is the advantage one gains from having bonds in a bear market, to me, that is a big advantage.


Plus bonds provide income, something stocks can do, but most stocks are not really geared for that.
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Old 08-17-2018, 11:02 PM   #74
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I remember reading an article, about five years ago, stating that there was not much point in having bonds in one's AA. The author advocated a far simpler AA of 80/0/20 - 80% stocks, 0% bonds, 20% cash.

I have ran a few tests on this site: https://www.portfoliovisualizer.com/backtest-portfolio

The test was for from 1993 to 2018 using Vanguard Total Stock Market Index, Vanguard Total Bond Market Index and Cash. For the sake of simplicity I started with 1,000,000.
No adjustments were made for taxes or inflation. Re-blancing was done annually.

$40,000 withdrawal the first year, then an annual withdrawal adjusted for inflation.

The 80/0/20 portfolio ended up with 4.16 million.
The 60/40/0 portfolio ended up with 3.93 million.

That the worst down year saw the 80/0/20 AA taking a 29% hit versus at 20% hit with the 60/40/0 AA. The difference in the best years was 1% more for the 80/0/20 AA.

Overall the graph shows them tracking each other very closely,

So for an aprox cost of $230,000 over a 25 year period, one takes a smaller hit in the down markets. Is it worth an average of $9,200 a year to have bonds provide a better buffer in the down years?
I'm not sure that is a fair comparison... to me the purpose of bonds is to add some stability. See https://www.portfoliovisualizer.com/...location3_3=20

Portfolio 1 (60/40/0) has slightly lower total return, similiar best years but the worst year is only 2/3 the loss of Portfolio 3 (80/0/20) and better risk-adjusted returns.
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Old 08-17-2018, 11:36 PM   #75
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Bonds really suck and are a drag on returns..........
Until you are retired and stocks go down 50%, like '02-3 and '08-9.

Read up on sequence of return risks.
I was <10% bonds until I was 47 (2005), then I increased bonds gradually to 40%.

That helped, a bit, in '08; I didn't have to postpone retirement, for example.

But do whatever floats your boat.

In my experience, bonds are always scorned, until the "adjustment" occurs of 30-50% in stocks.
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Old 08-17-2018, 11:55 PM   #76
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I see SPY as about 140 at jan 2007 and 89 at Jan 2009, hitting a low of about 76.
So if you were 100% in stocks without cash, that would have been some puckering, I suspect. My Intermediate Treasure fund was up 8% 1 yr in jan '09; 14% since I bought it in Sep '07. Everything else was red, red, red, red, red, red. Since I wasn't yet retired, I bought Fidelity Contra and China and Biotech with the Treasury fund proceeds. If I had been retired, I would have sold Treasury fund for subsistence.

11 years later from Jan '07 the SPY is 209 from 140.

Woot! (this does not factor in dividends, however).

This doesn't mean much; however again I would point out if for nothing else bonds or cash helps mitigate sequence of returns risk. The measure of how much you would have in your portfolio after the debacle is not a good measure, or at least I don't think so. Unless you want to risk your well-being to leave a nice nut for your kids or charity, which also is an admirable goal--just not mine.

As Shakespeare says, timing is all (and bonds are underrated, at least when you are withdrawing funds to live on in a crash).



None of this applies if you are accumulating.

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so how did it compare 9 yrs out?
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Old 08-17-2018, 11:58 PM   #77
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If you have a withdrawal rate of <2% like many apparently on the blog, you however probably can easily tolerate 110% allocation in stocks despite a 60% drawdown.

And power to you'all!
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Old 08-18-2018, 12:17 AM   #78
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There is nothing wrong with owning a portfolio of laddered Corporate and Treasury bonds. You can get some pretty good returns and principal protection. Since the end of 2013, bonds returns have been pretty good. Most bond funds on the other hand are a total waste. They offer no principal protection and paltry yields. I'm up now 7.9% YTD with my bond portfolio vs most bond funds that are struggling to beat cash stuffed in a mattress.
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Old 08-18-2018, 06:40 AM   #79
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They offer no principal protection and paltry yields. I'm up now 7.9% YTD with my bond portfolio vs most bond funds that are struggling to beat cash stuffed in a mattress.
Help me out here. I know what you are saying, but I'd like to explore further.

When you say you are up 7.9%, does that include the actual market value of the bonds you are holding, if you had to sell them today? Isn't that what causes a bond fund to drop, i.e. the actual "sell today" value is part of the price?

I understand hold to maturity. But for apples to apples, don't you have to value your bonds as if they were on the market?
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Old 08-18-2018, 07:50 AM   #80
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..... Since the end of 2013, bonds returns have been pretty good. Most bond funds on the other hand are a total waste. They offer no principal protection and paltry yields. I'm up now 7.9% YTD with my bond portfolio vs most bond funds that are struggling to beat cash stuffed in a mattress.
You should start a bond fund.... with your magic with bonds you would outperform the big, well established bond funds by a wide margin and you would have a long line at the door to invest in your bond fund.... charge a modest management fee and you'll be rich beyond your wildest dreams.
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