sell bond fund buy Utilities fund.

[ducky911]

For the past many years I think I would have been better off not owning bond funds/etfs.

With interest rates going up can someone recommend a fund/etf. I want to make a move in my ira.

Feel free to point out if you think I am nuts.

[njhowie]

What is your AA?

By selling bond fund and buying utilities fund what will be your AA?

[Montecfo]

Why utility?

[foxfirev5]

Why not. Bond Funds are down and dividend payers are up. Sell low and buy high. What can go wrong?

On a more serious note. Unless you failed to duration match the purchase of the bond fund, selling now is a losing proposition. You've lived through miniscule returns and now going to take a loss of a couple years interest. If you need the money prior to the duration of the fund take your lumps and sell. Buying a utility fund would not address this issue.

Personally I've started dipping my toe back into the bond fund market this week. After years of bond ladders (CD's/Treasuries) I'm ready to simplify. At my age, unless TIPS go positive, I'll take maturing bonds for the next 7 years and split between tIRA w/d's and rolling over to bond funds.

[Jerry1]

Quote:

Originally Posted by foxfirev5 Why not. Bond Funds are down and dividend payers are up. Sell low and buy high. What can go wrong?

While bond funds are down, my belief/understanding is that as interest rates increase, the bond prices will slide further. Therefore, I’m not sure the “sell low” comment is correct. Maybe selling after historic highs can be a “low”, but doesn’t seem anywhere near the bottom.

My bonds are all fairly low duration (under 5 years) but I’m still wondering if I should just move that part of my AA to a money market fund and try to capture some of the rate increases going forward. Who knows. Holding tight right now.

[njhowie]

Quote:

Originally Posted by Jerry1 While bond funds are down, my belief/understanding is that as interest rates increase, the bond prices will slide further. Therefore, I’m not sure the “sell low” comment is correct. Maybe selling after historic highs can be a “low”, but doesn’t seem anywhere near the bottom. My bonds are all fairly low duration (under 5 years) but I’m still wondering if I should just move that part of my AA to a money market fund and try to capture some of the rate increases going forward. Who knows. Holding tight right now.

I will point you to the discussions of a couple years ago when 2 to 5 year CDs were in the 3%+ range. Lots of folks here were doing meticulous calculations and came up with a "sweet spot" telling them to buy the 2 and 3 year CDs. They turned out to be very wrong as rates cratered. Folks who locked in 3% and higher rates for 5 or more years made out much better.

Trying to time interest rates is just as foolish as trying to time the market...probably more so.

[Jerry1]

Quote:

Originally Posted by njhowie Trying to time interest rates is just as foolish as trying to time the market...probably more so.

That’s certainly the most logical way to think about this, but it just seems like when interest rates are so close to zero there’s just only one direction to go. It just doesn’t feel as much like timing even though I can’t argue the point. Still holding but getting itchy.

[Sunset]

Quote:

Originally Posted by Jerry1 That’s certainly the most logical way to think about this, but it just seems like when interest rates are so close to zero there’s just only one direction to go. It just doesn’t feel as much like timing even though I can’t argue the point. Still holding but getting itchy.

+1
interest is at the bottom, and inflation is sky-high. Makes me believe the interest rates will go up, even if the gov't claimed it will go up

[capjak]

So you want to change your Asset Allocation to include more stocks and less bonds. On top of that you believe that utility stocks will do better than stocks as a whole over the next 10-20 years.

I would just buy a stock index if you need more growth.

I guess if you want a bond alternative to keep your Asset Allocation the same and you do not need the money in the next 5 years, I might look at a MYGA from an AMBEST A- or higher rated insurance company. I own 3 that pay from 3% to 3.5% and have 5 year maturities for a portion of my fixed income allocation.

[audreyh1]

Utilities are interest rate sensitive too.

[foxfirev5]

Quote:

Originally Posted by njhowie I will point you to the discussions of a couple years ago when 2 to 5 year CDs were in the 3%+ range. Lots of folks here were doing meticulous calculations and came up with a "sweet spot" telling them to buy the 2 and 3 year CDs. They turned out to be very wrong as rates cratered. Folks who locked in 3% and higher rates for 5 or more years made out much better. Trying to time interest rates is just as foolish as trying to time the market...probably more so.

Ah yes, the 10 year 3.65% from 2018. I bought all I could and now they are the anchor of my 10 year ladder. That was the high water mark of my bond timing. Now it's going to be a slow transition to ST and IT bond funds as I age.

Reasoning - Because I don't want to leave 100+ CD's for anyone to manage.

[Montecfo]

to the OP, there are only these strategies as I see it.
1. go low duration. cash, CD, MM, ultrashort bond

2. Go with floating rate bonds (little rate risk, higher credit risk)

3. Go with junk bonds (similar). Bonds get upgrades in a good economy.

Going with equities of any kind is apples to oranges.

[Magus]

Quote:

Originally Posted by Jerry1 While bond funds are down, my belief/understanding is that as interest rates increase, the bond prices will slide further. Therefore, I’m not sure the “sell low” comment is correct. Maybe selling after historic highs can be a “low”, but doesn’t seem anywhere near the bottom. My bonds are all fairly low duration (under 5 years) but I’m still wondering if I should just move that part of my AA to a money market fund and try to capture some of the rate increases going forward. Who knows. Holding tight right now.

Yup. Long duration bonds in particular will get crushed if interest rates go back to a "normal" 4-5%. US Treasury I would not call "low" - they are by virtually any metric extremely expensive by historic standards. Negative real interest rates are NOT normal at all.

[OldShooter]

Warren Buffet: "Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell. ... Lethargy bordering on sloth should remain the cornerstone of an investment style."

[njhowie]

Quote:

Originally Posted by Magus Yup. Long duration bonds in particular will get crushed if interest rates go back to a "normal" 4-5%. US Treasury I would not call "low" - they are by virtually any metric extremely expensive by historic standards. Negative real interest rates are NOT normal at all.

"If" interest rates go back to your normal 4-5% there are much more dire consequences that will follow.

[Dash man]

I’ve sold many of my bonds, putting most of the money into SCHF since my international allocation was low. I’m taking advantage of the tax loss harvesting benefit of selling. I think bonds will continue to decline in value.

[mrfeh]

Quote:

Originally Posted by ducky911 For the past many years I think I would have been better off not owning bond funds/etfs. With interest rates going up can someone recommend a fund/etf. I want to make a move in my ira. Feel free to point out if you think I am nuts.

VBTLX returned an average of 3.65% from '17 -> '21. Seems pretty good to me.

If you're saying you would be better off having owned equities, yeah, you're right. But, I assume you have an AA you are sticking with, which includes fixed income.