Sell bonds now?

[Tailgate]

Investment club speaker (retired CFP, RIA) mentioned that she thinks bonds are currently a loser's game and that her portfolio has more cash in it than ever before. Her statement had some caveats, but in general she is not a current fan of the bond climate or outlook. She simply viewed cash as a better hedge for current times where interest rates will surely begin rising at some point.

I'm not encouraging a discussion of FA's or any other advisor's worth or credibility, I'm just interested in this line of thinking about holding a large percentage of bonds at this time?

 

[GrayHare]

Bonds are a game of musical chairs now, but no one has been able to accurately predict when the music will stop. Search PIMCO and Bill Gross.

 

[Big_Hitter]

the myth of increasing interest rates?

 

[bradaz2488]

First off I do not claim to know anything about bonds, but I did make a couple of resent changes to my bond allocation which is currently only 15%. I moved from a intermediate bond index fund (FSITX) to a manage total bond fund (FTBFX). I guess my thinking here was given the potential increase in rates it may do better under a active manage fund vs a index fund... I also bought some GNMA bonds (SWGSX). I'm now way heavy in cash (~35%) and waiting for buying opportunities. Not willing to buy equity funds at these levels...

 

[nun]

Are we talking about bonds or bond funds? Also how long do you intend to hold these bonds/bond funds.

My bonds are all in Wellesley and I have no plans to sell for many years so I'll just sit tight.

 

[Sunset]

I cannot bear to buy bonds at this point, so I'll buy CD's paying 1.5 to 2 percent.
Even though the bond fund pays out more, it will drop a few percent IF interest rates rise again and again.
That said I have a small allocation in bond funds, and Wellsley and am keeping it.

 

[Tailgate]

Are we talking about bonds or bond funds? Also how long do you intend to hold these bonds/bond funds.
.

My interest is in bond funds/indexes. Planning to hold long term and I'm not talking about getting out totally, just adjusting AA to more like 50/25/25 vs current 50/50.

 

[RE2Boys]

Except in an active managed fund, Wellington, the only other bonds I hold are short term investment grade corporates. Unless you count Series EE and I savings bonds purchased between 1990 and 2004.

 

[GrayHare]

If you don't want to sell bonds but wish to hedge against a loss you can buy an inverse bond fund such as DTYS or TBT.

 

[FiveDriver]

If you didn't sell your Bonds in Sept 2016, I wouldn't sell 'em now. Your guest speaker is not looking in a Crystal Ball......she's looking in her rear view mirror.

The non-Equity portion of my AA consists of a little FTBFX, a CD ladder, CapOne MM and some of the Bureau of Engraving Collection of American Heroes like Andrew Jackson & Benjamin Franklin.

I used the EE Bonds to pay for Daughter's College, with a Tax Advantage.....the Bond Market doesn't owe me a thing.

 

[Which Roger]

interest rates will surely begin rising at some point.

I can't predict the future, but we have had similar discussions on this forum for the past several years, and "at some point" still hasn't arrived.

 

[Blue Collar Guy]

I guess this would be market timing? I am on an AA 80/20 , rising rates, falling rates market crash/ market charging ahead, its all noise now.. Until I found this forum, i only discussed investing / money management 1 time a year, the week between Christmas and New Years. Im done with tweaking & maneuvering trying to squeeze out the last % from investments. I do enjoy getting a bargain at the stores once in a while by saving a few cents. But the big ticket investments that by tweaking, and would maybe get me thousands I now avoid. Weird right?

 

[pb4uski]

I think it is fooish to get out of bonds entirely due to interest rate risk.... OTOH, I think it is prudent to try to mitigate interest rate risk. I have moved my bonds to target maturity bond funds from Guggenheim... they are like an individual bond portfolio maturing in a stated year.... in my case 2020.

 

[dallas27]

Governments paying interest for loans is sooooo 20th century.

 

[RetireAge50]

I think 18.4% bonds is perfect lol (because this is my current allocation and I'm too lazy to think about it further).

 

[haha]

Bonds are really on a multidimensional continuum with cash. Bonds have interest rate risk that is a function of their duration, credit risk if other than US govts, trading risk if you do not intend to keep until maturity, and a liquidity risk that may vary from time to time. If you anticipate needing the money quickly, a savings account that you can get to or money market fund likely ideal. But if this is a fairly steady part of an investment allocation, no problem, just minimize credit risk and stay short. You then miss any speculative profits from interest rate declines, but we can't have everything, right?

Ha

 

[GalaxyBoy]

This thread could have been started in any given year since about 2010.

 

[MichaelB]

This thread could have been started in any given year since about 2010.

There have been many over that period. The easiest way to see them, and the views expressed at the time, is do do a forum search with "Bond" and specify "Search Titles Only". Just browsing the titles will quickly lead to the same topic from years past.

 

[Montecfo]

Personally I have a cash and a bond allocation. As Haha said there is a continuum and you need to watch duration. I think you want active management in bonds as there are not truly representative indices. I keep durations short to midterm.

 

[loganbailey]

Decreasing your exposure to duration is a reasonable thing to do when investing in a bond fund in a potentially rising interest rate environment.

I would personally stay away from any mid to high duration bond funds even if just due to a percieved increase in interest rate risk. O

Plenty of alternatives, or just hedge your duration exposure with an inverse or even a negative duration bond fund.

 

[DrRoy]

This thread could have been started in any given year since about 2010.

+1. Short to medium term individual, investment grade corporates or municipals held to maturity are better than CD's to me.

 

[Golden sunsets]

DH and I have an AA of 54/41/5, with the 41 being bonds. We have purchased a ladder of individual corporate bonds in our IRA's with the amounts roughly equal to our anticipated RMD's which start this year for DH and in 2 years for me. The ladder goes out to 2025. The rest of our bond allocation of 8% of assets is in a vanguard short term muni fund in our taxable account. The income generated in our IRA's from bond interest and equity dividends doesn't quite equal anticipated RMD's but goes most of the way to purchasing the next rung on the ladder each year. Equity appreciation triggering rebalancing has made up the rest of next rung purchases for the past several years.


Sent from my iPad using Early Retirement Forum

 

[dallas27]

Emerging markets offer great bond rates, and often at lower defaults than US counterparts. There is plenty of money in bonds outside the US. And offer you can find them dollar denominated.

 

[braumeister]

If you want to sell bonds now, you have to ask yourself what the people buying them know that you don't know?

 

[pb4uski]

With the nice run in equities this year my AA has me buying bonds, not selling them.