Anyone Else still holding Bond Funds?

[Kook]

I sold my Total Bond (VBTLX) a few months ago at a pretty healthy loss. However, I held on to my Short Term Investment Grade (VFSUX) and my Intermediate Term Tax Exempt (VWIUX). The total of these holdings is high in the 6 figures. Losses are a bit more than 40K at this point. I have had both these funds for many years.

I have always subscribed to the Buy and Hold philosophy, that Bonds are the Ballast, the safety net....that Bonds zig when stocks zag and blah, blah, blah. I have kept telling myself to stay the course and stick with my IPS. However, with large pending rate increases, it seems that Bonds have a lot more falling to do. Dividend payments should slowly increase, of course, but it is going to take a lot of years to make up for the losses.

Now I am wondering if I should just suck it up, lock in my losses and plop the money in short term cd or treasury ladders until the rate increases stabilize. It goes against my IPS but this environment is challenging my prior thoughts.

Hindsight is 20/20.

So....anyone else still holding bond funds and staying the course?

Still learning,
KooK

 

[HarryHawk]

If you feel they are going to be headed down, why would you hold them? It's not like you won't be able to buy them again when you feel more positive about where they might be headed.

 

[Koolau]

I haven't appreciably altered my AA. Therefore, I haven't sold bond funds. As things shake out, I'll try to rebalance. YMMV

 

[Kook]

If you feel they are going to be headed down, why would you hold them? It's not like you won't be able to buy them again when you feel more positive about where they might be headed.

I guess because I am a dummy.
I have always been a buy and hold kinda guy but I don't want to stick my head in the sand, either!
I think that stocks will likely fall more as well.....but I am still holding on to my stock funds....

 

[aja8888]

All holders of bond funds made a lot of money when interest rates steadily went down over the last decade or so (including me). Now that rates have bottomed and are heading up, why hold the funds when you know you will lose more value as rates increase? I have been buying 3, 6, 9 and 12 month treasuries and rolling them as banking the interest payment.

There is no guarantee that the "market" will go back to the "good old days" anytime in the future. If you think so, go look at Japan's stock and bond market performances over the last 30 years.

 

[W2R]

So....anyone else still holding bond funds and staying the course?
KooK

Me If I bought and sold during periods of market volatility like this, I'd be broke by now. Market timing never works for me so I am just holding on tight for now.

 

[Magus]

All holders of bond funds made a lot of money when interest rates steadily went down over the last decade or so (including me). Now that rates have bottomed and are heading up, why hold the funds when you know you will lose more value as rates increase? I have been buying 3, 6, 9 and 12 month treasuries and rolling them as banking the interest payment.

There is no guarantee that the "market" will go back to the "good old days" anytime in the future. If you think so, go look at Japan's stock and bond market performances over the last 30 years.

+1

 

[Rianne]

All holders of bond funds made a lot of money when interest rates steadily went down over the last decade or so (including me). Now that rates have bottomed and are heading up, why hold the funds when you know you will lose more value as rates increase? I have been buying 3, 6, 9 and 12 month treasuries and rolling them as banking the interest payment.

There is no guarantee that the "market" will go back to the "good old days" anytime in the future. If you think so, go look at Japan's stock and bond market performances over the last 30 years.

^^^Exactly what we're doing. My bold. And treasury rates are rising. How could we say no to a 13-month treasury at 3%?

 

[audreyh1]

Yes.

I’m buying some t-bills with my cash allocation, but holding on my short-term and intermediate term bond funds.

If you feel they are going to be headed down, why would you hold them? It's not like you won't be able to buy them again when you feel more positive about where they might be headed.

When things go down, I buy more through rebalancing.

It depends of course on what goes down the most! Right now equity funds are my worst performers.

Me If I bought and sold during periods of market volatility like this, I'd be broke by now. Market timing never works for me so I am just holding on tight for now.

Exactly! I’m invested indefinitely and rebalance occasionally, so I don’t worry about short-term asset performance.

 

[iloveyoga]

Yes, sticking with my allocation, which include short term bond funds.

 

[easysurfer]

I am.

I'm a Total Bond Market Index Fund investor and rebalance every year.

Still about 6 months before rebalance time .

 

[timbervest]

I still hold them as part of my overall AA which has not changed. I have about 21-23% in various intermediate term bond funds with a current yield around 3.25%. Doesn't really impact my AA and a decent yield so I don't plan on making any changes short term.

 

[corn18]

If I still had my total bond fund, I would not sell it at this point. Yeah, it sucks to see total stock down 23.51% AND total bond down 17.9%, but this has happened before.

I made a decision in Apr 2020 that my stable value fund @ 1.8% yield was a better option for me. Mostly because I have a 30 year 2.25% fixed rate mortgage and that was a great balance for that. So I sold my total bond fund in my 401k and bought the stable value fund. That represents all of my 40% fixed income in my portfolio. Wish I could claim that I knew that BND was going to tank, but that wasn't the case. It was nice avoiding the $120k of NAV drop I would have had if I hadn't switched. I am now buying 1-3 year treasuries and CDs averaging 3% yield. So I am making more money than my mortgage rate now, so there's that.

The yield on BND is going up fast, so at least there is an offset for the NAV drop. If you don't need the money in the next 10 years, no reason to sell and chase yield. You will be fine.

 

[Bergamo]

All holders of bond funds made a lot of money when interest rates steadily went down over the last decade or so (including me). Now that rates have bottomed and are heading up, why hold the funds when you know you will lose more value as rates increase? I have been buying 3, 6, 9 and 12 month treasuries and rolling them as banking the interest payment.

There is no guarantee that the "market" will go back to the "good old days" anytime in the future. If you think so, go look at Japan's stock and bond market performances over the last 30 years.

Have you created a 3, 6, 9 and 12 month ladder?

 

[N02L84ER]

I still own lots of VBIRX. I sold my tiny position in VWALX early this year.

 

[aja8888]

Have you created a 3, 6, 9 and 12 month ladder?

Yes, I created my own ladder by buying them at auction. As they mature, they will be rolled over again and again until I decide to stop that process.

 

[Kook]

Thank you all for your replies and thank you for keeping me grounded. Seems most of you are holding for the long-haul, which is what I always intended to do. I guess I will hang on for the ride.

I have been planning to retire for several months now and I keep doing the one more month thing. Glad I did, now. Some of this money in the bond funds was intended to be used for spending withdrawals since stocks are declining....but I have a few years worth of cash and a pretty sizable chunk of Stable Value in my 401K, so there's that. As long as dividends are increasing, there is some cash flow.

 

[NW-Bound]

I never had much bond in my portfolio (a fraction of 1%), so I am spared the trouble of deciding what to do with it.

I do keep an eye out for a chance to buy some in the future though. I missed out on the high interest rate periods in the past. Will try not to miss the chance this time.

 

[Bergamo]

Yes, I created my own ladder by buying them at auction. As they mature, they will be rolled over again and again until I decide to stop that process.

Thank you for explaining. I am going to do the same.

If later on you decide to extend the duration to say 2 year or 3 year Treasuries how would you do that? I am wondering how you go about doing that.

 

[aja8888]

Thank you for explaining. I am going to do the same.

If later on you decide to extend the duration to say 2 year or 3 year Treasuries how would you do that? I am wondering how you go about doing that.

Treasury Direct publishes an annual auction calendar so you can see the dates the auctions take place. I buy mine through my Schwab account as they have a page where you can do all this. You can even buy treasuries after market as they are sold through the bond desks at the brokerages.

Here's a link to the current auction schedule:

https://home.treasury.gov/system/files/221/TentativeAuctionScheduleQ22022.pdf

 

[npage]

Basic question, I see those auction dates. Is there a way to know what the coupon rate will be on these issues ahead of time?

 

[aja8888]

Basic question, I see those auction dates. Is there a way to know what the coupon rate will be on these issues ahead of time?

No.

But you can look at past auction results to get an idea.

 

[audreyh1]

Basic question, I see those auction dates. Is there a way to know what the coupon rate will be on these issues ahead of time?

Recent treasury rates will give you an idea. Apps like CNBC app will show current treasury rates more or less real time. Fidelity shows expected yield on their new treasury issues page, but it sometimes seems a bit off.

I like this page from treasury direct in general: https://www.treasurydirect.gov/instit/instit.htm?upcoming and you can click on Auction Results to get the results from the most recent auction.

 

[npage]

Recent treasury rates will give you an idea. Apps like CNBC app will show current treasury rates more or less real time. Fidelity shows expected yield on their new treasury issues page, but it sometimes seems a bit off.

I like this page from treasury direct in general: https://www.treasurydirect.gov/instit/instit.htm?upcoming and you can click on Auction Results to get the results from the most recent auction.

So does the treasury use recent auctions to start the starting bids so to speak? They must have some starting coupon rate right or how would I know what ot bid? I'm picturing a world where we had paper, would they have printed a bunch of notes that said 3.5% on them and said bid away?

 

[steelyman]

I’m not touching my bond funds and still have them set to reinvest all distributions.

I’m far less knowledgeable about bonds and bond funds than many here but my bond allocation has mostly done as I expected/hoped.

[ADDED] I don’t hold individual bonds, only funds. I’m retired (don’t want/like the work!)