Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 08-16-2023, 09:30 AM   #61
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2016
Location: Northern Virginia
Posts: 6,927
Quote:
Originally Posted by COcheesehead View Post
It’s a few features in funds vs individual bonds that make the difference.
With a ladder I have no redemption drag, no management fees and the biggie: a par value to return to.
Yes duration drops the value on both funds and individual bonds, but I have an IOU in a par value with a bond. With a fund, it’s a hope and a guess.
I will leave it there with further comments. We repeat ourselves here too much without changing any views. It gets tiring for all.
I respect your views as you know.

You understand this stuff and individual bonds best meet your needs. No issue there.

I am simply drawing a contrast with the message that we all heard once upon a time that bond funds are always to be avoided. To me this was and is a false message.

But in another contrast, I am not trying to persuade anyone to always choose individual bonds or to always choose funds.

Neither message is useful or wise in my opinion.

But spending time to truly understand each "tool" is in fact time well spent in my view.

And that is directed at folks who heard and believed bond funds are to be avoided, not to more experienced investors (e.g., yourself, PB4 and others) who already understand this.
Montecfo is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-16-2023, 10:28 AM   #62
Thinks s/he gets paid by the post
Rianne's Avatar
 
Join Date: Aug 2017
Location: Champaign
Posts: 4,453
OP, unfortunately, you did not see this thread:

We are entering a "Golden Period" for fixed income investing

The thread alerted many of us to the rising treasury and CD rates. I noticed bond fund losses starting to mount in April 2022. They were in the tIRA. I sold all of them and created a ladder as many suggested here. IMO, take stock of your losses and try to calculate what gains will provide going forward. As of now, with a rolling ladder and the financial community in the news, the rates will remain solid for at least a year. As soon as a good portion of my ladder matures this year, I'm going long-term with treasuries and CDs (only my strategy). I will keep capital and have an income with higher coupon rates. Since we turned 65 this year, it gives us room to Roth convert as the ladder matures and interest drops into the settlement account.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."

Ralph Waldo Emerson
Rianne is offline   Reply With Quote
Old 08-17-2023, 06:33 PM   #63
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,773
Quote:
Originally Posted by VanWinkle View Post
I agree!!


Alternatively, what if the Fed’s historic rate hikes finally break something or we otherwise have sudden recession? If the Fed cuts rates in response and bond fund prices soar, won’t the OP wish he’d held?
Markola is offline   Reply With Quote
Old 08-17-2023, 06:41 PM   #64
Recycles dryer sheets
 
Join Date: Jan 2018
Location: Boise
Posts: 205
Quote:
Originally Posted by Markola View Post
Alternatively, what if the Fed’s historic rate hikes finally break something or we otherwise have sudden recession? If the Fed cuts rates in response and bond fund prices soar, won’t the OP wish he’d held?
So far I haven't sold anything....
__________________
Regards,

Tom
tominboise is offline   Reply With Quote
Old 08-17-2023, 07:11 PM   #65
Recycles dryer sheets
 
Join Date: Mar 2022
Posts: 68
Quote:
Originally Posted by Markola View Post
Alternatively, what if the Fed’s historic rate hikes finally break something or we otherwise have sudden recession? If the Fed cuts rates in response and bond fund prices soar, won’t the OP wish he’d held?
I’m not recommending he do anything. But if he did move from funds to a ladder of individual bonds, they get the same NAV jump if rates get cut.

A lot depends on the purpose of bonds in the portfolio. If you need or desire income, that seems to be one decision set. If you are looking for a potentially non-correlated asset to act as a possible off-set that is another decision set. Liability matching becomes yet another decision set potentially.
Quattro73 is offline   Reply With Quote
Old 08-17-2023, 07:20 PM   #66
Recycles dryer sheets
 
Join Date: Mar 2022
Posts: 68
Quote:
Originally Posted by Jerry1 View Post

I’m about to review my entire portfolio for the coming year and thinking my AA should just be a total market fund and CD’s.
I’m pretty much thinking some equity, a slug of i-bonds and treasury/cds. I would maybe consider some TIPS to build a DIY pension, if i could figure them out. The tax implications are a showstopper thus far since I don’t have tax deferred space. I wish they’d just up I-Bond limits. I’d be willing to accept the lower fixed rates, for the simple to understand variable rate inflation protection, principal protection, and tax deferment. Then I probably would not worry about TIPS.
Quattro73 is offline   Reply With Quote
Old 08-18-2023, 06:50 AM   #67
Thinks s/he gets paid by the post
Markola's Avatar
 
Join Date: Nov 2013
Location: Twin Cities
Posts: 3,773
Quote:
Originally Posted by tominboise View Post
So far I haven't sold anything....


OP, obviously, “You do you.” I appreciate this informed discussion as a way to reconcile the long and short term disappointment of my own 50% bond index fund allocation with Vanguard’s continued advice to stay the course.
Markola is offline   Reply With Quote
Old 08-18-2023, 07:12 AM   #68
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 34,737
Quote:
Originally Posted by Jerry1 View Post
... I’m about to review my entire portfolio for the coming year and thinking my AA should just be a total market fund and CD’s.
I'm currently all fixed income... mostly bonds, CDs and money market funds and a sprinkling of preferred stocks. Equity valuations are too rich for my taste.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 08-18-2023, 07:53 AM   #69
Recycles dryer sheets
 
Join Date: Sep 2021
Posts: 171
Quote:
Originally Posted by Quattro73 View Post
if he did move from funds to a ladder of individual bonds, they get the same NAV jump if rates get cut.
It depends on a variety of factors, but it is unlikely. I’ll come back later to whether the size of the difference is important. Imho, there is too little discussion of risk (which may partially explain how we got here). Won’t try to be comprehensive, but consider…

1st, so a ladder is constructed to match the fund. The next day it no longer matches. The space between rungs of the ladder comes into play here. The fund is more fluid than the ladder. ‘Most’ funds will attempt to maintain roughly the same duration (although there are target date funds, etc), while the ladder changes some. I don’t recall seeing convexity mentioned in threads on this board, but that affects also.

2nd, how are coupon payments/distributions handled? ‘Most’ funds distribute monthly & can be reinvested immediately. This compounds the return, but also from a portfolio view changes the holdings further from the ladder. Bonds held in a ladder will pay every 6 months, but size of ladder may determine if they can be used to purchase new bonds and rarely would it exactly match.

Are these sizable differences? That is a matter of opinion, although I’d suggest they are likely more sizable than other things that are often mentioned. Also, depends on how much time one spends building the ladder to offset the expense of the fund. To be honest, I think for most investors “will be fine” either way. I know many that are more interested in minimizing risk than maximizing return. Yet, much of the back & forth is on opinion & slight differences in return. Yet, I personally would hate to misrepresent the facts & lead someone to be caught off guard later.
all4j is offline   Reply With Quote
Old 08-19-2023, 03:12 AM   #70
Full time employment: Posting here.
 
Join Date: May 2013
Posts: 723
Quote:
Originally Posted by pb4uski View Post
I'm currently all fixed income... mostly bonds, CDs and money market funds and a sprinkling of preferred stocks. Equity valuations are too rich for my taste.
So you are getting around a 5% rate of return at the moment. If I was retired, I would be happy with a consistent 5% rate of return each year during retirement. That's all I need.

I would be curious to know exactly what your holdings are if you are willing to share. I won't be disappointed if you are not willing to share.
G-Man is offline   Reply With Quote
Old 08-19-2023, 05:42 AM   #71
Moderator
Jerry1's Avatar
 
Join Date: Nov 2014
Posts: 8,308
Quote:
Originally Posted by G-Man View Post
So you are getting around a 5% rate of return at the moment. If I was retired, I would be happy with a consistent 5% rate of return each year during retirement. That's all I need.

I would be curious to know exactly what your holdings are if you are willing to share. I won't be disappointed if you are not willing to share.
Pb4uski has posted about his holdings before. I’m guessing he’s averaging over 5% by buying agency bonds and high quality corporate bonds. Anyway, my point is that there’s higher yields out there with marginally higher risk. 5% is basically “risk free” treasuries.

Reading the fixed income thread - there’s a lot of discussion about higher rate fixed income options.
__________________
Every day when I open my eyes now it feels like a Saturday - David Gray
Jerry1 is online now   Reply With Quote
Old 08-19-2023, 06:09 AM   #72
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 34,737
^^^ Jerry is correct, portfolio includes agency and high quality corporate bonds. 90% is A or better and 99% is investment grade.

At the end of July my weighted average YTM was 5.2%. All yields except I-Bond yields are based on purchase cost and in most cases are close to coupon. I-bond yields are based on current rate at July 31 for remaining months at that rate and then 3 months at 0% thereafter. Preferreds are ALL-B, C-J and C-K.
 PercentageWeighted Average Yield
CD40.7%5.0%
Agency29.6%5.4%
Corp18.0%5.2%
I-Bonds7.0%4.1%
Preferreds3.6%7.6%
Money Market1.1%4.9%
 100.0%5.2%

For the CDs, agency and corporate bonds, purchase yields range from 4.430% to 6.375%.
CUSIP/TickerIssue NameTypeYTM
3130AJRV3FHLBAgency4.430
3130ATZE0FHLBAgency6.375
3130AU5K6FHLBAgency5.200
3130AU5N0FHLBAgency5.300
3130AUJV7FHLBAgency5.000
3133ENYM6FFCBAgency4.450
3133EPMD4FFCBAgency6.330
3134GYA77FEDERAL HOME LN Agency5.250
02007GF24ALLY BANKCD4.950
23204HNN4CUSTOMERS BANKCD5.100
32056GDS6FIRST INTERNET BANKCD4.450
33646CPQ11ST SOURCE BANKCD5.250
61690U5T3MORGAN STANLEY BANKCD4.600
61768ETF0MORGAN STANLEY BANKCD4.500
62847NDN3MVB BANK, INC.CD5.300
857894J42STEARNS BANK NTNLCD5.400
857894J59STEARNS BANKCD5.350
87164DUW8SYNOVUS BANKCD4.650
9497634S2WELLS FARGO & COCD4.700
9497634U7WELLS FARGO & COCD4.700
06749NFM9BARCLAYS PLCCorp5.550
17290A7H7CITIGROUP INCCorp5.125
74456QBH8PUBLIC SERVICE ECorp4.750
78014RKA7ROYAL BANK OF CANADACorp5.100
89114X6G3THE TORONTO-DOMINIONCorp5.000
89114XAL7THE TORONTO-DOMINIONCorp6.000
89115A2J0THE TORONTO-DOMINIONCorp4.755
91159HHW3U.S. BANCORPCorp5.050
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 08-19-2023, 07:08 AM   #73
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
target2019's Avatar
 
Join Date: Dec 2008
Location: On a hill in the Pine Barrens
Posts: 9,081
Quote:
Originally Posted by tominboise View Post
In my IRA, I am sitting on 5 bond funds which of course are in a loss position. I am contemplating selling (locking in the loss) and buying a CD ladder. It would take about 2 years at 5% to recover the loss from selling the bond funds. This does not account for any payments from the funds over those two years.

What are the odds ( I know no one can predict the future - just asking for opinions) that bond funds will recover over the next couple of years? Interest rates "should" start to fall as the FED gets inflation under control, but will the bond funds rise back to pre pandemic levels in that time?

I am 63 and not counting on this money for another 6 - 7 years. These bond funds are about 37% of my AA in the IRA. Stock funds make up the other 63%.
Quote:
Originally Posted by tominboise View Post
I've realized that for some time. Obviously I should have sold them when they got close to zero but I was in the "buy and hold" mentality at that time. Does that mean you think I should hold these funds?
Quote:
Originally Posted by tominboise View Post
The funds in question are:

FIPDX - down 3.87%
FUMBX - down 5.16%
VCSH - down 7.32%
FUAMX - down 11.77%
VCIT - down 17.44%

I am thinking to keep the FIPDX and sell the other 4 funds, to convert into CD's and/or Treasuries.
Quote:
Originally Posted by tominboise View Post
Where is your line on OK vs dog, on the annual yields?

FIPDX = 8.78%
FUMBX = 1.4%
FUAMX = 1.97%
VCSH = 2.19%
VCIT = 3.42%

It looks like the middle three are in the dog category to me.
Quote:
Originally Posted by tominboise View Post
So, digging some more, I found the 30 day yields for the funds:

FIPDX = 5.54%
FUMBX = 4.66%
FUAMX = 4.05%
VCSH = 5.44%
VCIT = 5.37%

So in the ballpark with SPAXX and others.
Quote:
Originally Posted by tominboise View Post
Good questions and food for thought. The bond funds were purchased in 2019 as part of our retirement AA in our IRA's. They were & are the safe harbor component. I have about 7 years before I need to access these IRAs, hopefully. Is a bond fund still considered as a safe harbor, when compared to other forms of assets like CD's and Treasuries?
Quote:
Originally Posted by tominboise View Post
They are the counter to stock mutual funds in my AA.
Quote:
Originally Posted by tominboise View Post
These funds are held in my IRA, so no tax loss harvesting available for them.
A long-term trend in bond funds hit bottom. Do you bail now?

Many of us came to realize that "bonds" is actually different things, and not what any particular group was telling us.

You have an asset allocation, so what are the percentages of total portfolio. If it adds up to 50% of all invested, then the challenge is different than if they add up to 25%.

Also, it is total performance which matters to you. Talking about just yield or just NAV does not help you or I in the long run.

So, did last year really knock you about, and now you have a different idea of what Ballast is, or should be?

I avoided some of the bond fund carnage. But now I am thinking about the next 25 years. Will my money market deliver 5% ballast during that time frame? If I go with a 5% 5-year CD (if it exists), that leaves me with another decision not too far into the future.

Our bond fund VBTLX allocation changed during the last 5 years from 20% to 5%, for various reasons. One decision was to sell some in my IRA, and re-invest in a balanced fund (VWIAX) for the future. That slightly changed our overall allocation to more equity.

In other areas where I moved to money market as a temporary substitute, I recognize that CD and MMF interest will drop over some period, and I will have another long-term decision to make in the next year or two. For my spouse I need to set the allocation for the next 25 years, continue to simplify, and not carry out additional tactical or strategic moves.

YMMV.
target2019 is online now   Reply With Quote
Old 08-19-2023, 09:01 AM   #74
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 16,405
You can get higher yields on CDs and agency bonds if you are willing to accept the lack of call protection. IMO, I need over 1% just to think about it.
__________________
Comparison is the thief of joy

The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 08-20-2023, 10:01 AM   #75
Full time employment: Posting here.
 
Join Date: May 2013
Posts: 723
Quote:
Originally Posted by Jerry1 View Post
Pb4uski has posted about his holdings before. I’m guessing he’s averaging over 5% by buying agency bonds and high quality corporate bonds. Anyway, my point is that there’s higher yields out there with marginally higher risk. 5% is basically “risk free” treasuries.

Reading the fixed income thread - there’s a lot of discussion about higher rate fixed income options.
I will visit the fixed income thread. If I can achieve 5% per year, I would be extremely happy.

Sorry. Which fixed income thread are you are referencing?
G-Man is offline   Reply With Quote
Old 08-20-2023, 10:05 AM   #76
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 34,737
G-Man, see post #72

Also https://www.early-retirement.org/for...14400-125.html

or https://www.early-retirement.org/for...ii-118485.html

or https://www.reddit.com/r/GPFixedIncome/
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 08-20-2023, 10:13 AM   #77
Full time employment: Posting here.
 
Join Date: May 2013
Posts: 723
Thank you.
G-Man is offline   Reply With Quote
Old 09-17-2023, 05:30 AM   #78
Recycles dryer sheets
 
Join Date: May 2023
Location: Nope
Posts: 63
I bought HY bond funds at just the wrong time, at the start of '22 when bonds were tanking. I've stuck with them. I was down about -10%, but reinvesting all dividends; plus, more current performance has brought me up to a loss of under -5% now. It's a long-term hold. I don't yet need the money. Let it gradually get me back to "even-steven," and into positive territory. TUHYX. PRCPX. Perhaps in future years I will retreat into something more tame. DODIX comes to mind. Certainly not shooting the lights out in '23.
GhostofTomJoad is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Cash for large expense: Money market @ 5%, or Sell bond funds for a tax loss? Amethyst FIRE and Money 20 07-09-2023 04:55 AM
Sell bond index funds at a loss in order to buy CDs? PointBreeze FIRE and Money 130 12-24-2022 06:28 PM
So Why Is It Not A Loss If I Sell Everything? SELL THE DIP RHONDAVE FIRE and Money 48 03-11-2022 04:16 PM
Real Estate: Sell first; buy later. Or Buy First Sell later Livin Large in MT Life after FIRE 39 07-31-2021 02:37 PM
buy and build or just buy land and wait ? lonedog Life after FIRE 11 02-13-2006 09:55 AM

» Quick Links

 
All times are GMT -6. The time now is 12:50 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2023, vBulletin Solutions, Inc.