Wellington duration

[bltkmt]

A finance friend of mine said that Wellington's bond portfolio has a duration in excess of 8 years currently. Is anyone else concerned? I am not ever sure if I should be concerned...

 

[REWahoo]

Isn't it a bit late to be concerned about this?

EDIT: FWIW, this says the average duration as of the end of February was 7.8 years.

VWELX Wellington Fund Investor Shares

 

[bltkmt]

I thought duration was always in years, not percentages?

 

[Gumby]

I thought duration was always in years, not percentages?

Typo. If you go to the link, it says 7.8 years.

 

[FANOFJESUS]

Other than the bear of 73-74 it went though the 70's rate rising pretty good.
https://finance.yahoo.com/quote/VWELX/performance?p=VWELX

 

[24601NoMore]

I had the same concern on Wellesley, which has a similar duration.

Assuming markets "look ahead" 6-9 months, the $64M question becomes..

How much of the announced and/or planned Fed Rate Hikes are "baked in" to the NAV and YTD returns as of this point? Are all 8 hikes already in the price?

I have some related questions about the link between different maturity Treasuries and bond market performance overall so am going to probably start a separate thread on that, as I'm seeing some unexpected things there..

 

[Phroig]

Isn't it a bit late to be concerned about this?

Perhaps not. Intermediate bonds (duration around 5 years) are down about a percent today, so we might get more declines as the Fed raises rates.

 

[VanWinkle]

So if dividends stocks go down, the dividends remain the same as it is per stock owned dividend and not based on value. This appears to be the same story with bonds. As my bond value decreases, the actual dividend payout remains the same and actually increases due to the rising interest rate. If I am living on the income produced, nothing bad has happened unless I lock in my loss by selling the shares. So would dividends investors sell their shares if the stocks went down 5-10% like the bond market has done lately.....

Does this comparison hold water.......

VW

 

[Dd852]

So if dividends stocks go down, the dividends remain the same as it is per stock owned dividend and not based on value. This appears to be the same story with bonds. As my bond value decreases, the actual dividend payout remains the same and actually increases due to the rising interest rate. If I am living on the income produced, nothing bad has happened unless I lock in my loss by selling the shares. So would dividends investors sell their shares if the stocks went down 5-10% like the bond market has done lately.....

Does this comparison hold water.......

VW

Exactly - the question to ask is why are you holding the bonds/bond funds. If you’re holding for an income stream, then you’ll stay steady (unless you’re in a fund which then adjusts its holdings and eventually gets to to a more current payout rate based on its target duration). If you’re holding because you at some point want to or need to sell holdings/buy holdings (i.e. play the market) then depending on when you sell (and when you bought) you could very well be baking in a loss. It all hinges on the “why” these (or any) holdings are in your portfolio. Any time you need to sell something - (for example to raise living expenses over and above your income stream from dividends, pension etc) - you run a timing risk. Anytime you buy something you also run a timing risk - that the price will be high or the dividend low or whatever permutation. So if you can hold and (if and when needed) “pick” your time you’re better off; any time circumstances pick the time for you, you’re at risk.

And that’s where the magic of asset allocation comes in - if I needed to sell something now, I’d sell some stocks, because they’ve been on a run and are now slightly overweight for me, the bond sell off has made bonds underweight in my personal allocation so that’s a clear signal (to me - this is always a personal decision) to hang on to (or add to) bonds and sell stocks …. But for me, only if needed, not to play the market

 

[FANOFJESUS]

I wonder if Wellesley or Wellington will be up this year. If so it will not be up much with bonds going down.