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lawman 03-01-2014 03:03 PM

Balance is overrated
 
Haven't checked in here for quite a while but now that I'm re adjusting my portfolio I'm interested in other points of view..I'm 57, have three pensions, a modest lifestyle and no debt for the last 30 years..I've saved up a sizable amount of money..Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power..The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..Tell me why I'm making a mistake..Thanks

REWahoo 03-01-2014 03:11 PM

You think stock market valuations aren't justified and bond valuations are? You need to read up on the huge decline in bond prices the financial media has been telling us is about to happen - any day now.

Midpack 03-01-2014 03:14 PM

I don't know why anyone would suggest you're "making a mistake." And without specifics, no one could with any credibility whatsoever. Best of luck, really...

marinauser 03-01-2014 03:18 PM

How do you know whether or not the bond market is over-valued? Holding all bonds puts you at risk of rising interest rates and inflation. What is the overall duration of your bond portfolio? Have you calculated what a 1% rise in interest rates would do to your bonds' values? Even if you hold individual bonds and hold to maturity, you won't keep up with inflation if interest rates rise and you receive below market interest therefore not meeting your goal of maintaining the portfolio. More importantly, how do you know the equity market is over-valued and how did you make that determination? I would probably never go past a 50/50 mix and probably will stay closer to 60% equities and I don't need big gains, I just want to guard against guessing wrong on inflation, interest rates and equity prices. People have gotten spoiled by the long term bull bond market and many will be surprised when they have 10 or 20% losses in bonds if interest rates rise. You heard the fears last summer when the 10 yr ticked up and bond prices in the short/intermediate area fell. Ultimately, it is what lets you sleep at night.

LOL! 03-01-2014 03:19 PM

Quote:

Originally Posted by lawman (Post 1421866)
Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power.

Please describe how 90%-95% bond funds preserves this capital and how it helps you with your need to be able to maintain your purchasing power.

Chuckanut 03-01-2014 03:19 PM

Quote:

Originally Posted by lawman (Post 1421866)
The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..


What is your reasoning behind this statement? I think that would make a good discussion and help you figure out how to preserve your capital.

nash031 03-01-2014 03:38 PM

Quote:

Originally Posted by lawman (Post 1421866)
Haven't checked in here for quite a while but now that I'm re adjusting my portfolio I'm interested in other points of view..I'm 57, have three pensions, a modest lifestyle and no debt for the last 30 years..I've saved up a sizable amount of money..Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power..The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..Tell me why I'm making a mistake..Thanks

If preservation of this capital is all that truly matters, why not invest in an inflation-protected security alone, or just stuff it all under a mattress? No matter what you do with stocks or bonds, you are taking some market risk.

Conversely, there are studies out there regarding SWR that show that a portfolio tilted severely towards bonds is less likely to succeed over the course of retirement because of inflation risk.

That said, you didn't give anyone enough information to tell you if you're making a mistake. For me, it'd be a mistake to go 90-95% bonds, but that's just me.

lawman 03-01-2014 03:40 PM

I'm in intermediate term bond funds..( SSIRX, PONAX, PONDX, HSTRX,PTRAX)
..I'm not worried about higher interest rates..I know they will go up. I hope they do..I'm prepared to stay in bond funds forever..I can't time interest rates and I don't think anyone else can either..I expect a real return of 2% - 3% over the next ten years..I'm much less confident that the stock market will provide that..I base most of my opinion on what John Hussman says as..

braumeister 03-01-2014 04:08 PM

1 Attachment(s)
Quote:

Originally Posted by lawman (Post 1421886)
I base most of my opinion on what John Hussman says as..

I guess that's one way to look at it.

Really, you should offer some specific points that we can discuss.

youbet 03-01-2014 04:10 PM

Quote:

Originally Posted by lawman (Post 1421866)
Haven't checked in here for quite a while but now that I'm re adjusting my portfolio I'm interested in other points of view..I'm 57, have three pensions, a modest lifestyle and no debt for the last 30 years..I've saved up a sizable amount of money..Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power..The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..Tell me why I'm making a mistake..Thanks

I can tell you one thing with absolute certainty. This strategy will either work out for you or it won't. Or maybe it will sort of work out for you, but not quite. Or maybe it sort of won't work out for you but close enough.

Hope you sleep better now.......

youbet 03-01-2014 04:13 PM

Quote:

Originally Posted by lawman (Post 1421886)
I expect a real return of 2% - 3% over the next ten years..

I think a intermediate term bond fund 3% real rate of return over the next decade is very optimistic.

lawman 03-01-2014 04:18 PM

"Really, you should offer some specific points that we can discuss."

I don't know how much more specific I can be..I've given you most of the funds I'm in. There is always risks.. The only significant risk I see with my plan is interest rate risk...That's only a risk if need to sell shares while they are down..Barring a complete and total disaster I will not need to do that for at least 20 years...What specifics could I comment on that would give insight?

lawman 03-01-2014 04:24 PM

Quote:

Originally Posted by youbet (Post 1421898)
I think a intermediate term bond fund 3% real rate of return over the next decade is very optimistic.

I agree. That's why I said 2% - 3%..

Also what I did not mention is that my largest investment of all is in I - Bonds that I've owned for many years..I bought them long before they limited the amount one could purchase and when interest rates were much higher..

RenoJay 03-01-2014 04:25 PM

Given a roughly 2% dividend in the stock market I think it makes sense to have at least 20% in equities even if you think the market is overvalued. I tend to agree with your analysis but I still keep 50% in equities.

clifp 03-01-2014 04:26 PM

Quote:

Originally Posted by lawman (Post 1421886)
I'm in intermediate term bond funds..( SSIRX, PONAX, PONDX, HSTRX,PTRAX)
..I'm not worried about higher interest rates..I know they will go up. I hope they do..I'm prepared to stay in bond funds forever..I can't time interest rates and I don't think anyone else can either..I expect a real return of 2% - 3% over the next ten years..I'm much less confident that the stock market will provide that..I base most of my opinion on what John Hussman says as..


Why do you expect that type of real return? Vanguard intermediate bond fund BIV has sec day yield of 2.61%. TIPs bond 5 yields are -.26%, 10 year .47% and the 30 year at 1.28%

The 30 day yields of the funds you own; PTRAX has 1.2% SEC Yield and 2.01% trailing 12 months, PONAX is at 3.51%, PONDA is 3.7%, HSTRX has a 12 month trail return of 1.05%. (I didn't understand SSIRX so I didn't include it) This averages out to 2.1% yield. Last year inflation was 1.5% and has average 1.6% over the last 5 years. So your real return last year was around .6-1% or very similar to TIPs bond

It look like the average bond duration is 6-7 years. This means a 2% rise in interest rate will decrease the value of your bonds by 14% or 1.4% a year over the next 10 years.

I guess my question is what economic and interest rate scenario do you think will occur that would enable a bond portfolio to achieve a 2-3% real return over the next 10 years. Deflation, lower interest rates, a recession ...

I don't disagree that equities are likely overvalued, but it seems to me that bonds are even more so.

youbet 03-01-2014 04:27 PM

Quote:

Originally Posted by lawman (Post 1421905)
I agree. That's why I said 2% - 3%..

Also what I did not mention is that my largest investment of all is in I - Bonds that I've owned for many years..I bought them long before they limited the amount one could purchase and when interest rates were much higher..

This thread makes no sense then. You asked about going to a 90% - 95% bond allocation. You didn't say you already owned most of the bonds and bond funds.

It might work out for you. Or it might not. I say don't worry about any negative comments given here. Jump in with both feet, give it a try and report back annually.

lawman 03-01-2014 04:34 PM

Quote:

Originally Posted by youbet (Post 1421908)
This thread makes no sense then. You asked about going to a 90% - 95% bond allocation. You didn't say you already owned most of the bonds and bond funds.

It might work out for you. Or it might not. I say give it a try and report back annually.

Most of my bond positions have just been taken in the last few days..

youbet 03-01-2014 04:39 PM

Quote:

Originally Posted by lawman (Post 1421909)
Most of my bond positions have just been taken in the last few days..

Sounds like you're all set then. Finish getting up to 95%, sit back and enjoy easy street. It's guaranteed you'll be successful with this strategy!

Texas Proud 03-01-2014 04:46 PM

If you REALLY are concerned with preservation of capital you would not be in bonds at all...

The only investment that will preserve capital are CDs (or cash)... with gvmt insurance in case the bank goes under....

All other investments have a risk of losing capital...

daylatedollarshort 03-01-2014 04:46 PM

I am with you on the capital preservation portfolio, but I am not sure about intermediate bond funds when rates are likely to rise.

karluk 03-01-2014 05:34 PM

Quote:

Originally Posted by lawman (Post 1421886)
I base most of my opinion on what John Hussman says

For a more in depth explanation of what John Hussman thinks, please take a look at

There's A Chance Stocks Will Crash - Business Insider

clifp 03-01-2014 05:45 PM

Quote:

Originally Posted by karluk (Post 1421926)
For a more in depth explanation of what John Hussman thinks, please take a look at

There's A Chance Stocks Will Crash - Business Insider


I've subscribed to Hussman email newsletter for sometime, and generally make a point of reading it. He is basically a permabear, (I think having predicted 12 of the last 3 bear markets) but what he says is generally sensible.

Still this to me is the money quote regarding Lawman's decision to go 95% bonds.

Quote:

I also explained why, even without a crash, I think it's likely that stocks will deliver poor returns from today's level over the next 10 years. Not negative returns, but poor returns — average annual returns (including dividends) of only about 3% per year. Given that stocks are usually expected to return about 10% per year, that's pretty crappy.
Lastly, I explained why, even though these expected returns are pretty crappy, I'm not dumping my stocks: I expect bonds and cash to deliver lousy returns over the next 10 years, too — maybe even worse than stocks. And I'm also scared we'll eventually get some rapid inflation, which stocks should provide some protection from (unlike bonds). But I'm not expecting the double-digit gains we've had from stocks over the last few years to continue much longer.


lawman 03-01-2014 05:56 PM

Quote:

Originally Posted by karluk (Post 1421926)
For a more in depth explanation of what John Hussman thinks, please take a look at

There's A Chance Stocks Will Crash - Business Insider

Had not seen that...Thanks..He is very difficult to understand but my guess is that in the end he will be vindicated..

I just know I just took a huge profit from the stock market and sleep well at night having put that money into funds that are managed by some of the best bond managers in the world that have a tremendous amount of flexibility to manage their funds ..That's not so say I'm sure my portfolio will be worth more next year than this year but at this stage of life and with valuations where they are today I'll take my chances with bonds..I'll bet you a Coke I get an opportunity to go back into stocks at much lower levels and if I'm wrong well that's okay too..

redduck 03-01-2014 07:22 PM

Quote:

Originally Posted by lawman (Post 1421934)
I'll take my chances with bonds..I'll bet you a Coke I get an opportunity to go back into stocks at much lower levels and if I'm wrong well that's okay too..

lawman, could you instead make that bet for a 12-pack of Coke? I would appreciate it.

[QUOTE=karluk;1417300]Hi redduck, I suppose you saw that one of your dividend stocks, KO, lost nearly 4% today after releasing a disappointing earnings report...

ERD50 03-01-2014 10:47 PM

Quote:

Originally Posted by lawman (Post 1421934)
Had not seen that...Thanks..He is very difficult to understand but my guess is that in the end he will be vindicated. ....

:laugh: I suppose the harder he is to understand, the easier it will be for him to claim he has been vindicated!

Quote:

I just know I just took a huge profit from the stock market and sleep well at night having put that money into funds that are managed by some of the best bond managers in the world that have a tremendous amount of flexibility to manage their funds ..That's not so say I'm sure my portfolio will be worth more next year than this year but at this stage of life and with valuations where they are today I'll take my chances with bonds..I'll bet you a Coke I get an opportunity to go back into stocks at much lower levels and if I'm wrong well that's okay too..
Someone could have said that in 1997, and they still haven't been able to get back in at a lower level.

It could work out for you, or maybe not, or it might end up not making much difference either way. It might take many years to even sort it out in hindsight. I'm more comfortable maintaining an AA that has worked out reasonably well historically.

Quote:

Tell me why I'm making a mistake.
I can't, I have no crystal ball. We each need to decide for ourselves.

-ERD50

pb4uski 03-01-2014 10:57 PM

Quote:

Originally Posted by lawman (Post 1421886)
..I expect a real return of 2% - 3% over the next ten years..I'm much less confident that the stock market will provide that..I base most of my opinion on what John Hussman says as..

Per Vanguard's 2014 economic and investment outlook:

Quote:

....the expected ten-year median return of the broad taxable U.S. fixed income market is centered in the 1.5%–3.0% range...
Quote:

For the next ten years, our VCMM simulations project a median inflation rate averaging close to 2.0%–2.5% per year for the U.S. Consumer Price Index.... This is roughly consistent with the Federal Reserve’s long-term goal of inflation stability and is also near longer-term break-even rates in the Treasury Inflation-Protected Securities (TIPS) market.
So it looks to me as if real returns for bonds will be minimal, and not anywhere near 2-3% which seems to be wishful thinking.

https://personal.vanguard.com/pdf/ICREIO.pdf

samclem 03-01-2014 10:59 PM

Quote:

Originally Posted by lawman (Post 1421934)
I'll bet you a Coke I get an opportunity to go back into stocks at much lower levels and if I'm wrong well that's okay too..

If you are just waiting for a chance to buy back into stocks at a lower level, there are places to store your "winnings" that are a lot less volatile than intermediate term bond funds.

If you are being 100% accurate in your OP, that you don't need any growth and that safety of principal and maintaining purchasing power is all that matters, then consider TIPS (held to maturity) or I-Bonds. They are much less volatile than the bonds you have chosen, your principal is guaranteed against loss, and the products are specifically designed to preserve purchasing power (not counting the effects of taxes).

panhead 03-02-2014 02:46 AM

3 Pensions? Do they (and SS if you are eligible, but I bet not) cover all of your living expenses and then some? Are they COLA'd? Have access to reasonable cost Health care coverage which your pensions also cover? If the answer to these questions is a strong "YES" then what you do with the rest of your investments is somewhat irrelevant. You would be in a position to take more risk to keep up with inflation in maybe a 50/50 balanced portfolio, but if you have COLA'd pensions (and all those I bonds you mention) then you can pretty much do what you want, congrats! (if this is the case....)

phil1ben 03-02-2014 05:53 AM

In a similar position. I am now 54. Have achieved FI but not RE yet. I am in 50% individual muni bonds spread over duration, credit quality and geographically. Lately I have been buying A- to A+ grade muni-bonds having a 12-15 year duration paying between 4-5% tax free. I do not like bond funds because I can't control maturity. Also, when I buy an individual bond I know I will get my full principal back at maturity--regardless of interest rates (borrowing a default which has not occurred in my portfolio in the 20 years I have been doing this--naysayers aside). Fidelity has a good platform for buying individual bonds. Good Luck.

target2019 03-02-2014 06:25 AM

Quote:

Originally Posted by lawman (Post 1421866)
Haven't checked in here for quite a while but now that I'm re adjusting my portfolio I'm interested in other points of view..I'm 57, have three pensions, a modest lifestyle and no debt for the last 30 years..I've saved up a sizable amount of money..Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power..The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..Tell me why I'm making a mistake..Thanks

In your situation, that is what many would prescribe, but I think most would advise maintaining 20-35% in equity, so that you can maintain purchasing power.

Quote:

Originally Posted by lawman (Post 1421934)
I just know I just took a huge profit from the stock market and sleep well at night having put that money into funds that are managed by some of the best bond managers in the world that have a tremendous amount of flexibility to manage their funds ..That's not so say I'm sure my portfolio will be worth more next year than this year but at this stage of life and with valuations where they are today I'll take my chances with bonds..I'll bet you a Coke I get an opportunity to go back into stocks at much lower levels and if I'm wrong well that's okay too..

Since you are going to look for opportunities to get back into stocks at some time, it may have worked better to allocate something to dividend paying stocks now. I know you think valuations are at unsustainable levels, but what if they aren't? If the economy continues to grow, then it could be a long time before the buying opportunities come along.

lawman 03-02-2014 07:33 AM

I'm wondering if there has ever been a 5 year period when bond returns have not exceeded inflation...Anyone know??

lawman 03-02-2014 09:02 AM

Looking here
https://www.crestmontresearch.com/doc...lationship.pdf

It looks like that since 1960 there is a period from about 1972 - 1976 where the rate of inflation was higher than the rate of return on 20 year and 1 year treasuries..I would expect that good bond funds performed better but that is just a guess..

lawman 03-02-2014 09:09 AM

"Climb the Ladder
Fixed-income investors have been paralyzed by the fear of rising interest rates. Many investors have elected to hold cash rather than to reinvest farther out on the yield curve in maturities that offer higher interest rates. Bond market pundits are calling for higher interest rates in the near future (keep in mind that most are providing perspectives consistent with the past twenty years, when inflation was being controlled downward by the Fed, rather than in an environment characterized by the conditions that exist today). Although an immediate rise in interest rates does cause a decline in the value of bonds, the loss of higher yields investors incur while they wait for better prices can be significant. This analysis of historical interest rates shows that simple bond ladders, particularly maturities of 10 years and less, did not experience annual losses any time over the past century. A simple bond ladder may be one of the best approaches for fixed-income investing as the potential for rising rates looms. A bond ladder is a portfolio of bonds with a portion of the portfolio maturing each year (often equal amounts across each annual maturity). A bond ladder can be as short as two years or as long as 30 years or more."

https://www.crestmontresearch.com/interest-rates/

pb4uski 03-02-2014 09:32 AM

Quote:

Originally Posted by phil1ben (Post 1422071)
...I do not like bond funds because I can't control maturity. ...

Another way to control maturity other than buying individual bonds are the target maturity bond funds. IIRC there is a tax-exempt version of these. You get the control of the maturity, liquidity and diversification for a modest cost.

galeno 03-02-2014 09:52 AM

IMHO capital preservation means a minimum of 20% equities. You focus too much on volatility risk and not enough on inflation risk.

At 57 you are looking at possibly 38 more years of retirement. With pension money coming in you have the luxury of being financially sloppy. It really doesn't matter if you go 100% equities, 100% bonds, or somewhere in between.

daylatedollarshort 03-02-2014 10:06 AM

Quote:

Originally Posted by lawman (Post 1422135)
Looking here
https://www.crestmontresearch.com/doc...lationship.pdf

It looks like that since 1960 there is a period from about 1972 - 1976 where the rate of inflation was higher than the rate of return on 20 year and 1 year treasuries..I would expect that good bond funds performed better but that is just a guess..

Can you buy individual, positive yield TIPS at auction? Bond funds never mature and the intermediate funds will take a big hit when rates rise.

Personally I like ladders or DCA purchases better than funds for fixed income investments. Stable value funds often keep up with inflation or do slightly better, if you have access to those in any retirement accounts.

jerome len 03-02-2014 11:59 AM

Real return, to me, is after taxes and investment fees. And, I don't want to risk the next major downturn with a ton in stocks at my age. So, since I think interest rates will go up and we'll have a stock downturn in the not too distant future and I hate taxes, I put a bunch of my money in short term Vanguard muni market bond funds. I take half of my earned interest each month and re-invest them in dividend stock funds that will grow with inflation over the years. So, I think my portfolio is relatively safe, I'm getting more interst than money market funds, my tax bill is lower and I'm not paying a lot of fees. Now, if the market goes up a bunch I'll gain a little, if the market goes down a lot, I'll lose a little. Since I'm FI under this plan, living only on SS, interest and dividends I don't think I can lose. On the other hand I couldn't brag as much as others when the market went up so much last year. This works for me.....over all I'm 76%bonds, 21% stocks and 3% cash. Anybody think I'm nuts?

daylatedollarshort 03-02-2014 12:38 PM

Quote:

Originally Posted by jerome len (Post 1422242)
Since I'm FI under this plan, living only on SS, interest and dividends I don't think I can lose. On the other hand I couldn't brag as much as others when the market went up so much last year. This works for me.....over all I'm 76%bonds, 21% stocks and 3% cash. Anybody think I'm nuts?

I do not think you are nuts at all. I am also okay with not having bragging rights. We feel we're comfortable as it stands and my only financial goal is to not screw that up.

There is a good section in the book Against the Gods that sums up my feelings:

"If the satisfaction to be derived from each successive increase in wealth is smaller that the satisfaction derived from the previous increase in wealth, then the disutility caused by a loss will always exceed the positive utility provided by a gain of equal size."

DFW_M5 03-02-2014 01:20 PM

When I saw the thread topic, I thought you might be advocating toward a 90% equity position. Any way, if it were me, I would never reduce my equity stake below 20-25% regardless of what the market is doing or might do in the future.

braumeister 03-02-2014 01:46 PM

1 Attachment(s)
Quote:

Originally Posted by lawman (Post 1421886)
I base most of my opinion on what John Hussman says as..

If you have good reason for listening to the guy, I'd be interested to hear it.

But on the surface, the performance of his namesake fund has been so abysmal that I don't understand the fascination.

utrecht 03-02-2014 01:49 PM

Quote:

Originally Posted by lawman (Post 1422098)
I'm wondering if there has ever been a 5 year period when bond returns have not exceeded inflation...Anyone know??

I think since you said you don't need to sell shares when they are down for 20 years, the more important question is: Has there even been a 20 year period where stocks did not out perform bonds?

lawman 03-02-2014 03:29 PM

Quote:

Originally Posted by braumeister (Post 1422315)
If you have good reason for listening to the guy, I'd be interested to hear it.

But on the surface, the performance of his namesake fund has been so abysmal that I don't understand the fascination.

I have not owned his stock fund for many years but my respect for his opinion stems from the fact that my views very closely parallel his and he is able to articulate those views in a way that I can't..Market cycles are not comprised of just a few years so his lackluster performance proves little..Here is his latest commentary which consists of Letter to Shareholders..I think he is spot on...Time will tell..

"From the inception of Strategic Growth Fund on July 24, 2000 through
December 31, 2013, the Fund achieved an average annual total return of 3.94%,
compared with an average annual total return of 3.73% for the S&P 500 Index"

Not only did he outperform the S & P during that time period but he avoided most of the disaster of 2008..

https://www.hussmanfunds.com/pdf/sar1213.pdf

braumeister 03-02-2014 04:21 PM

Quote:

Originally Posted by lawman (Post 1422367)
"From the inception of Strategic Growth Fund on July 24, 2000 through
December 31, 2013, the Fund achieved an average annual total return of 3.94%,
compared with an average annual total return of 3.73% for the S&P 500 Index"


More to the point, the S&P's TR has been 7.16% for the past ten years.
Hussman's fund was -1.29% for the same period. Pretty tough to put a positive spin on that.

lawman 03-02-2014 04:37 PM

Quote:

Originally Posted by braumeister (Post 1422384)
More to the point, the S&P's TR has been 7.16% for the past ten years.
Hussman's fund was -1.29% for the same period. Pretty tough to put a positive spin on that.

I don't need to put a positive spin on it. I never touted his performance. You asked about why I was "fascinated" with him which seems to be a bit of an exaggeration of my statement. To have outperformed the S&P during that time period and avoided the catastrophe of 2008 is enough spin for me..

braumeister 03-02-2014 04:57 PM

I apologize.
I guess I was the one who was fascinated by what I thought was your reliance on the advice of an expert I would not have had much confidence in.
If you're convinced of the value of his guidance, that's all that matters.

youbet 03-02-2014 05:01 PM

Quote:

Originally Posted by lawman (Post 1422388)
To have outperformed the S&P during that time period and avoided the catastrophe of 2008 is enough spin for me..

Yet you seem to have lingering doubt......... What's keeping you from jumping in with both feet? Or, if you feel you have made the total commitment, why do you seek consensual validation?

youbet 03-02-2014 05:03 PM

Quote:

Originally Posted by braumeister (Post 1422392)
If you're convinced of the value of his guidance, that's all that matters.

+1

lawman - Go for it! Jump in! There is no reason to hold back.

Options 03-02-2014 05:03 PM

Quote:

Originally Posted by galeno (Post 1422166)
IMHO capital preservation means a minimumit w of 20% equities. You focus too much on volatility risk and not enough on inflation risk.

At 57 you are looking at possibly 38 more years of retirement. With pension money coming in you have the luxury of being financially sloppy. It really doesn't matter if you go 100% equities, 100% bonds, or somewhere in between.


Yea, with pensions coming in you're all set. But I do have what I believe would be a much better idea on what to do with the rest of your gambling money. Instead of spinning the roulette wheel by market timing and playing the craps tables by reading the "financial" business press/newsletters, why don't you just throw it all my way. Everybody wins once in a great, great, great while in The Wall Street Casino, but why not blow it all on me instead? :coolsmiley:

samclem 03-02-2014 05:18 PM

(Looking up at the guy way up on the ledge)- "Jump! Jump!":)

FIRE'd@51 03-02-2014 05:22 PM

Quote:

Originally Posted by lawman (Post 1422098)
i'm wondering if there has ever been a 5 year period when bond returns have not exceeded inflation...anyone know??

1975-1980

braumeister 03-02-2014 05:29 PM

1 Attachment(s)
Quote:

Originally Posted by lawman (Post 1422388)
To have outperformed the S&P during that time period and avoided the catastrophe of 2008 is enough spin for me..

Avoided?

lawman 03-02-2014 05:59 PM

Quote:

Originally Posted by Options (Post 1422397)
Yea, with pensions coming in you're all set. But I do have what I believe would be a much better idea on what to do with the rest of your gambling money. Instead of spinning the roulette wheel by market timing and playing the craps tables by reading the "financial" business press/newsletters, why don't you just throw it all my way. Everybody wins once in a great, great, great while in The Wall Street Casino, but why not blow it all on me instead? :coolsmiley:

LOL....That's funny...I'll gamble on bond funds while others place their bets on the surety of the stock market..:facepalm:

ERD50 03-02-2014 06:22 PM

Quote:

Originally Posted by lawman (Post 1422424)
LOL....That's funny...I'll gamble on bond funds while others place their bets on the surety of the stock market..:facepalm:

I don't think too many here 'place their bets on the surety of the stock market.' Most keep a balanced approach, and the few with a very high weighting in equities have ways to deal with the volatility.

-ERD50

samclem 03-02-2014 06:28 PM

Quote:

Originally Posted by utrecht (Post 1422317)
I think since you said you don't need to sell shares when they are down for 20 years, the more important question is: Has there even been a 20 year period where stocks did not out perform bonds?

Or, since lawman says he's most worried about protecting his spending power, and he won't need to sell for 20 years, how well have stocks and bonds done against inflation?

Per this article (emphasis added)

Quote:

Stocks beat inflation during each and every overlapping 20-year period between 1950 and 2005, but bonds beat inflation only 70% of the time. Second, bonds return far less than stocks -- on average, just 2.3% a year after inflation between 1987 and 2006, compared with 7.4% for stocks. Even in bad times, stocks tend to beat bonds. Between 1967 and 1986, bonds actually lost an annualized 0.5% after inflation; stocks gained 2.1%. The tax treatment of bond income (except for municipals, which have very low yields) is unfavorable compared with that of capital gains and dividends on stocks. For tax-deferred accounts, this deficiency can be overlooked, but most of us also have taxable savings for retirement.
Now, that was a 2007 article, but as we know unless an investor entirely bailed out of the market in the aftermath of 2007-2008, he has done pretty darn well despite the "crash".

Quote:

Originally Posted by lawman (Post 1422424)
LOL....That's funny...I'll gamble on bond funds while others place their bets on the surety of the stock market..:facepalm:

Laugh it up. Which approach provided more historical "surety"? You've got a long time horizon, and year-to-year volatility is not your biggest risk.

lawman 03-02-2014 06:30 PM

Slightly switching gears here ...Without regard to the disadvantages of bond funds vs. individual bonds doesn't a bond fund offer the same advantage that bond ladders do?

lawman 03-02-2014 06:41 PM

I'm somewhat skeptical of cherry picked data one uses to try to prove a point. As shown by using this chart CAGR of the Stock Market: Annualized Returns of the S&P 500

If one had invested in the S&P on Jan 1 2000 and remained invested through Dec. 31, 2008 he would have realized an annual rate of return of -3.7%.

samclem 03-02-2014 06:52 PM

Quote:

Originally Posted by lawman (Post 1422446)
I'm somewhat skeptical of cherry picked data one uses to try to prove a point. As shown by using this chart CAGR of the Stock Market: Annualized Returns of the S&P 500

If one had invested in the S&P on Jan 1 2000 and remained invested through Dec. 31, 2008 he would have realized an annual rate of return of -3.7%.

Are you 9 years from needing the money? Who cherry-picked that single 9 year period:coolsmiley:? I used the 20 year window you specified earlier.

Do 20 year overlapping periods, compare the performance of stocks (with dividends re-invested) and bonds. Be surprised.

lawman 03-02-2014 07:17 PM

Quote:

Originally Posted by samclem (Post 1422449)
Are you 9 years from needing the money? Who cherry-picked that single 9 year period:coolsmiley:? I used the 20 year window you specified earlier.

Do 20 year overlapping periods, compare the performance of stocks (with dividends re-invested) and bonds. Be surprised.


good point

dtbach 03-02-2014 07:47 PM

We seem to be beating a dead horse here.

Ready 03-02-2014 07:50 PM

Quote:

Originally Posted by lawman (Post 1422440)
Slightly switching gears here ...Without regard to the disadvantages of bond funds vs. individual bonds doesn't a bond fund offer the same advantage that bond ladders do?

Yes. And bond funds typically have more than 1,000 bonds in them. So unless you have a very large bond portfolio, it is difficult to achieve the same level of diversification achieved by a bond fund versus building your own bond ladder.

As mentioned earlier, target date bond funds can also reduce the volatility associated with bond funds by limiting the bonds to only those with the same maturity date within the fund and not reinvesting them once they are due.

lawman 03-02-2014 08:04 PM

I may be wrong but I'm more concerned about inflation than I am about rising rates. I would actually like to see rates rise as I believe the market has already priced in some amount of rate hike..The sooner rates go up the sooner my dividends will increase..And if I understand correctly inflation or perceived inflation largely dictates interest rates required by lenders so even though there may be somewhat of a lag I think interest rates do and will exceed inflation over the long term..The big unknown for me is to what extent the Fed's purchases are distorting the market and to what extent and for how long it will interfere with the free market..

samclem 03-02-2014 08:36 PM

Quote:

Originally Posted by lawman (Post 1422465)
The sooner rates go up the sooner my dividends will increase.

The OP said you are going to 90-95% bond funds, so these dividends are coming from the whopping 5-10% equity allocation remaining? And you are hoping that rates rise, and you believe the Fed is suppressing them (I agree)--so you put most of your money into intermediate bond funds?

Lawman, put your funds into a well chosen target-date fund, or just park it in a 1 year CD or a MM fund while you do some research. There are lots of good resources here. You don't need Hussman or any other guru, but you also don't need to be making allocation decisions on your own without a bit more background. I think that would be your best long-term course of action.

brewer12345 03-02-2014 08:47 PM

Quote:

Originally Posted by lawman (Post 1422465)
I may be wrong but I'm more concerned about inflation than I am about rising rates.

And you want to go heavily into bond funds? You don't happen to live in Colorado or Washington state, do you?

lawman 03-02-2014 09:00 PM

Quote:

Originally Posted by samclem (Post 1422476)
The OP said you are going to 90-95% bond funds, so these dividends are coming from the whopping 5-10% equity allocation remaining? And you are hoping that rates rise, and you believe the Fed is suppressing them (I agree)--so you put most of your money into intermediate bond funds?

Lawman, put your funds into a well chosen target-date fund, or just park it in a 1 year CD or a MM fund while you do some research. There are lots of good resources here. You don't need Hussman or any other guru, but you also don't need to be making allocation decisions on your own without a bit more background. I think that would be your best long-term course of action.

You lost me..Bonds pay dividends..:(

brewer12345 03-02-2014 09:03 PM

Quote:

Originally Posted by lawman (Post 1422485)
You lost me..Bonds pay dividends..:(

Nope. Stocks pay dividends. Bonds pay interest.

lawman 03-02-2014 09:05 PM

I guess I must be a contrarian but that's okay.. The last time I was subjected to so much ridicule was many years ago when I invested in gold and I bonds which I still own.. ;)

lawman 03-02-2014 09:08 PM

Quote:

Originally Posted by brewer12345 (Post 1422487)
Nope. Stocks pay dividends. Bonds pay interest.

You're right..I stand corrected...

samclem 03-02-2014 09:31 PM

I guess this would be a good time for me not to make a wisecrack.

Really, just park your money in a safe place (it's not there now), and read up on this stuff a bit. It will be well worth your time.

brewer12345 03-02-2014 09:33 PM

Quote:

Originally Posted by lawman (Post 1422488)
I guess I must be a contrarian but that's okay.. The last time I was subjected to so much ridicule was many years ago when I invested in gold and I bonds which I still own.. ;)

Then it is time to "nut up or shut up." If you have the courage of your convictions then buy with both hands, damn the torpedoes and don't even bother asking anyone else's opinions. If not, them perhaps you should not be making big bets.

lawman 03-02-2014 09:48 PM

Quote:

Originally Posted by brewer12345 (Post 1422497)
Then it is time to "nut up or shut up." If you have the courage of your convictions then buy with both hands, damn the torpedoes and don't even bother asking anyone else's opinions. If not, them perhaps you should not be making big bets.

Thanks for your help.

samclem 03-02-2014 09:57 PM

This board would be perfect if somehow we could short sell the portfolios of other posters. The quality of the advice might go down, but the entertainment value would go up.

brewer12345 03-02-2014 10:29 PM

Quote:

Originally Posted by lawman (Post 1422498)
Thanks for your help.

Any time.

Seriously, I do not worship at the altar of St. Bogle the Indexer. What kind of reception do you think most of my schemes would get here? I don't bother asking. If I have the courage of my convictions I invest, if not I wait a while and think about it.

daylatedollarshort 03-03-2014 12:05 AM

Quote:

Originally Posted by lawman (Post 1422440)
Slightly switching gears here ...Without regard to the disadvantages of bond funds vs. individual bonds doesn't a bond fund offer the same advantage that bond ladders do?

The problem with bond funds is they never mature. In most years, this isn't as big an issue because some years rates go down, some years they go up so you just get a rolling average. But right now there is very little room for rates to go down and a lot of space as well as a high probability rates will increase over the next couple of years, and if that happens you may never get your principal back.

You might want to check into a TIPS ladder if you can buy TIPS within a retirement account. There is relatively little risk of default with TIPS, so you don't really need to pay for ongoing fund management fees. With a ladder you get a rolling average of yields, though for our portfolio we aren't buying the maturities with negative yields right now.

There is a book by Annette Thau called The Bond Book that has pretty good explanations of the pros and cons of bond funds.

lawman 03-03-2014 07:42 AM

This time may be different.....Most seem to think it will be..Myself, I dunno..:(

Hussman Funds - Weekly Market Comment: Do Foreign Profits Explain Elevated Profit Margins? No. - March 3, 2014

EastWest Gal 03-03-2014 07:54 AM

Bonds aren't all that great right now IMO
 
Quote:

Originally Posted by lawman (Post 1421866)
Haven't checked in here for quite a while but now that I'm re adjusting my portfolio I'm interested in other points of view..I'm 57, have three pensions, a modest lifestyle and no debt for the last 30 years..I've saved up a sizable amount of money..Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power..The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..Tell me why I'm making a mistake..Thanks

Bond funds have risk too. Also with interest rates insanely low for years, annual inflation means you lose money every year. Be sure to include inflation risk in your calculations.

lawman 03-03-2014 08:06 AM

Some here have suggested the certainty of rising interest rates is a good reason to avoid bond funds..I'll continue to show my ignorance but my logic for hoping for higher rates is best explained by example..If 10 year Treasuries are now set to return 2.6% interest as Hussman claims, I can certainly see how the value of that bond will decrease if rates rise rapidly but if that bond is held until maturity the value of that bond will steadily increase as the maturity date approaches. As long as one is willing to remain in the fund until that bond matures I don't see how there could be much risk. I also understand that as bonds in that fund mature the capital will be invested in other bonds at higher rates and the whole thing starts over again.. I suppose if one sold his positions during a time of rapidly rising rates he could lose principal but I don't see myself having to do that..Sitting on the sidelines with cash waiting for rates to go up seems like a losing proposition to me...If my logic is flawed I'm sure some here will be happy to tell me why and I appreciate your help...

daylatedollarshort 03-03-2014 08:38 AM

Quote:

Originally Posted by lawman (Post 1422597)
As long as one is willing to remain in the fund until that bond matures I don't see how there could be much risk.

From: Sometimes You Should Buy The Bonds Directly - Sun Sentinel

"...in bond funds, share price volatility doesn't change no matter how long you hold the shares. That's because the fund manager tries to keep the portfolio at the same average maturity -- typically, less than three years for a short-term bond fund, between three and 10 years for an intermediate-term fund, and as long as 20 or more years for a long-term bond fund.

Therefore, your risk of having to sell your fund shares at a loss does not diminish with time. The way to minimize share price swings with bond funds is to buy those with short maturities."

Lawman, it sounds like you won't go broke either way, so if you want to buy your intermediate bond funds, go ahead. But this article may explain better why some people here are holding off on your strategy, or else buying bonds funds where all the bonds mature as of a set target date.

samclem 03-03-2014 08:44 AM

Quote:

Originally Posted by lawman (Post 1422597)
As long as one is willing to remain in the fund until that bond matures I don't see how there could be much risk.

If rates go to 5% (and inflation might be 4% at that point, a normal spread), then by holding that 2.6% Treasury the bond fund (and you) will be missing out on an additional 2.4% of interest they could be making, and in real terms you will losing spending power at a rate of 1.4% per year. That's a loss. That's some of the risk you are taking by being "safe". Sure, they'll buy more bonds at higher rates, but as long as they hold that Treasury it is a drag on your performance. And they will sell the 10 year treasury, because the bond manager needs to maintain the maturity he promised, so you'll lose more money when that happens.

You have a 20 year time horizon. Over that timeframe, stocks have historically done a much better record of protecting your spending power than bonds do. And a balanced portfolio of stocks and bonds, rebalanced mechanically without any reference to Mr Hussman's musings and often-wrong predictions, did better still (and much better than his fund--how does he stay in business? He's like Radio Shack.). Forget about short-term volatility until it's much closer to the time you need the money, the annual gyrations of the market (stocks and bonds) should be of only passing interest.

lawman 03-03-2014 09:04 AM

Quote:

Originally Posted by samclem (Post 1422607)
If rates go to 5% (and inflation might be 4% at that point, a normal spread), then by holding that 2.6% Treasury the bond fund (and you) will be missing out on an additional 2.4% of interest they could be making, and the in real terms you will losing spending power at a rate of 1.4% per year. That's a loss. That's some of the risk you are taking buy being "safe". Sure, they'll buy more bonds at higher rates, but as long as they hold that Treasury it is a drag on your performance. And they will sell the 10 year treasury, because the bond manager needs to maintain the maturity he promised, so you'll lose more money when that happens.

You have a 20 year time horizon. Over that timeframe, stocks have historically done a much better record of protecting your spending power than bonds do. And a balanced portfolio of stocks and bonds, rebalanced mechanically without any reference to Mr Hussman's musings and often-wrong predictions, did better still (and much better than his fund--how does he stay in business? He's like Radio Shack.). Forget about short-term volatility until it's much closer to the time you need the money, the annual gyrations of the market (stocks and bonds) should be of only passing interest.

I agree with you. However of course there are always exceptions as is shown here..
https://www2.troweprice.com/iws/wps/...58dfe7296ee75c

I just am not willing to experience the volatility and uncertainty that goes with stocks. Also, I want to be in a position to withdraw my dividends on a regular basis if I want to.. My logic is that I'm much less likely to experience loss over the next 20 years in good bond funds as opposed to good stock funds..I know many think I'm wrong that's just my thinking..

REWahoo 03-03-2014 09:18 AM

Quote:

Originally Posted by lawman (Post 1422616)
My logic is that I'm much less likely to experience loss over the next 20 years in good bond funds as opposed to good stock funds..I know many think I'm wrong that's just my thinking..

It isn't so much that "many" think you are wrong - it's the fact that history says you are.

Quote:

Originally Posted by lawman (Post 1422616)
I just am not willing to experience the volatility and uncertainty that goes with stocks.

I can understand where you are coming from here. Each of us has our own risk tolerance and limits on how comfortable we are in riding the equity rollercoaster.

Still, I have to ask the question: if this is the bottom line - my mind is made up, I'm sticking with bonds no matter what - why did you start this thread?

Quote:

Originally Posted by lawman (Post 1421866)
I'm interested in other points of view..

It doesn't appear that this is the case.

Ready 03-03-2014 09:22 AM

Quote:

Originally Posted by REWahoo (Post 1422622)

Still, I have to ask the question: if this is the bottom line - my mind is made up, I'm sticking with bonds no matter what - why did you start this thread?

It doesn't appear that this is the case.

Well...some people perceive arguing to be a valid form of discussion. I've had many "discussions" with friends where I finally ask them "why are you arguing so much with me?" And their response is "whose arguing, we're just having a discussion!"

lawman 03-03-2014 09:24 AM

Quote:

Originally Posted by REWahoo (Post 1422622)
It isn't so much that "many" think you are wrong - it's the fact that history says you are.


I can understand where you are coming from here. Each of us has our own risk tolerance and limits on how comfortable we are in riding the equity rollercoaster.

Still, I have to ask the question: if this is the bottom line - my mind is made up, I'm sticking with bonds no matter what - why did you start this thread?

It doesn't appear that this is the case.

I don't understand why you feel that way..Some good counterpoints have been made and I have acknowledged that..The fact that I seek advice from others and don't immediately change my position doesn't mean I'm not interested..

karluk 03-03-2014 09:24 AM

Lawman, the fact that you have a secure source of income in your three pensions means that you can do whatever you want with your money. If you want 95% allocated to bonds or CDs, I say, "Go for it." But I'm really wondering why you started this thread in the first place. Your OP says "The stock market valuations are not justified at these levels" and that we should tell you why you're wrong. Now it develops that you have a 20 year time horizon. All right then. Current valuations aren't that significant over such a long time frame and bonds are MUCH less likely to keep up or beat inflation over a 20 year holding period. Those are terrific reasons to believe you're wrong, but I don't detect any change in your underlying determination to move to bonds. So you seem to have started this thread just to argue a point that you had already decided in your own mind was non-negotiable.

If your holding period were shorter, say five years instead of 20, then I think you could make a better case for bonds. You are probably much less likely to suffer large outright losses in intermediate term bonds than in stocks over the next five years. But your posts in this thread don't support the position that your holding period is that short.

lawman 03-03-2014 09:29 AM

Quote:

Originally Posted by karluk (Post 1422627)
Lawman, the fact that you have a secure source of income in your three pensions means that you can do whatever you want with your money. If you want 95% allocated to bonds or CDs, I say, "Go for it." But I'm really wondering why you started this thread in the first place. Your OP says "The stock market valuations are not justified at these levels" and that we should tell you why you're wrong. Now it develops that you have a 20 year time horizon. All right then. Current valuations aren't that significant over such a long time frame and bonds are MUCH less likely to keep up or beat inflation over a 20 year holding period. Those are terrific reasons to believe you're wrong, but I don't detect any change in your underlying determination to move to bonds. So you seem to have started this thread just to argue a point that you had already decided in your own mind was non-negotiable.

If your holding period were shorter, say five years instead of 20, then I think you could make a better case for bonds. You are probably much less likely to suffer large outright losses in intermediate term bonds than in stocks over the next five years. But your posts in this thread don't support the position that your holding period is that short.

Once again I agree.. I remember how I felt in 2008..I don't want to go there again..My primary goal is preservation..Some good arguments have been made for owning stocks to achieve that goal..

lawman 03-03-2014 09:32 AM

Quote:

Originally Posted by karluk (Post 1422627)
You are probably much less likely to suffer large outright losses in intermediate term bonds than in stocks over the next five years.

I think you have really nailed down here what is driving me...:flowers:

audreyh1 03-03-2014 09:50 AM

Quote:

Originally Posted by braumeister (Post 1422410)
Avoided?

For the record, braumeister, your graph must be of NAV only which is not an accurate view of the fund return over the period. Reinvested dividends must be included. M* gives an accurate picture compared with S&P 500 Total Return.

HSGFX Chart Hussman Strategic Growth Fund Chart

Interesting - the S&P and Hussman funded started and ended at about the same spot since the fund opened - but took wildly different paths.

brewer12345 03-03-2014 09:54 AM

Quote:

Originally Posted by audreyh1 (Post 1422639)
For the record, braumeister, your graph must be of NAV only which is not an accurate view of the fund return over the period. Reinvested dividends must be included.

HSGFX Chart Hussman Strategic Growth Fund Chart

So it is a growth fund that hasn't grown since 2004? No wonder it has one start from Morningstar.

sengsational 03-03-2014 10:34 AM

Quote:

Originally Posted by audreyh1 (Post 1422639)
For the record, braumeister, your graph must be of NAV only which is not an accurate view of the fund return over the period. Reinvested dividends must be included. M* gives an accurate picture compared with S&P 500 Total Return.

HSGFX Chart Hussman Strategic Growth Fund Chart

Interesting - the S&P and Hussman funded started and ended at about the same spot since the fund opened - but took wildly different paths.

Nice chart. Thanks for that. But yeah, like Brewer says, one star!

redduck 03-03-2014 10:37 AM

I think the chart audreyh1 brought up depicted a time period that covers about 14 years (the maximum). If you look at the charts that depict 3, 5, 10 year results I think it shows much different results. If not, let me know and at least I will learn something more about chart reading.

lawman 03-03-2014 01:19 PM

Quote:

Originally Posted by redduck (Post 1422669)
I think the chart audreyh1 brought up depicted a time period that covers about 14 years (the maximum). If you look at the charts that depict 3, 5, 10 year results I think it shows much different results. If not, let me know and at least I will learn something more about chart reading.


Hussman's claim to fame is to protect investors from from steep losses while beating the S&P over a complete market cycle (whatever that is). From fund inception through 2013 he has done that..Should the market drop another 35% as it did in 2008 he'll be considered a financial genius. If there is no big drop in the next few years he'll be considered and idiot..He may not be a genius but I don't think he's an idiot just because he has missed out on this rally which most agree may well be over extended..

Walt34 03-03-2014 03:41 PM

Quote:

Originally Posted by lawman (Post 1422616)
I just am not willing to experience the volatility and uncertainty that goes with stocks.

That's an issue that I had for a very long time. Too long. But it is an emotional reaction to what should be a mathematics-driven decision. And the hard part is convincing yourself to take the emotions out of the decisions.

You have to think like Mr. Potter in the movie "It's a Wonderful Life" and Montgomery Burns on "The Simpsons".

The three books that finally made it all sink in for me were A Random Walk Down Wall Street, The Millionaire Teacher, and How a 2nd Grader Beats Wall Street. I highly recommend them to anyone.

With a 20-year horizon you are almost certain to lose out on substantial gains by being too conservative. I say "almost" because the future is uncertain and unknowable. But history also says that anyone who claims to know what the future will be is almost always wrong.

nash031 03-03-2014 03:41 PM

Quote:

Originally Posted by lawman (Post 1422616)
I just am not willing to experience the volatility and uncertainty that goes with stocks. Also, I want to be in a position to withdraw my dividends on a regular basis if I want to.. My logic is that I'm much less likely to experience loss over the next 20 years in good bond funds as opposed to good stock funds..I know many think I'm wrong that's just my thinking..

The first part of your sentence is really what sells your opinion.

You are not the least bit concerned with performance. You are concerned with volatility.

In that respect, your strategy is perfectly fine for you.

Your second statement may also be true. You are less likely to experience "loss" over that 20 year period in bond funds. In exchange for that "no loss" (which is really a misnomer), you will also receive much, much less gain and could very well lose purchasing power to inflation... which is a LOSS no matter how you cut it.

The bottom line is your risk tolerance is very, very low. So do what you will knowing that.

But don't expect everyone to agree with you when you open the thread with "tell me why I am wrong." That's what trips me out... you asked for people to tell you why you are wrong, and now appear preturbed that many have.

Texas Proud 03-03-2014 03:48 PM

Quote:

Originally Posted by lawman (Post 1422616)
I agree with you. However of course there are always exceptions as is shown here..
https://www2.troweprice.com/iws/wps/...58dfe7296ee75c

I just am not willing to experience the volatility and uncertainty that goes with stocks. Also, I want to be in a position to withdraw my dividends on a regular basis if I want to.. My logic is that I'm much less likely to experience loss over the next 20 years in good bond funds as opposed to good stock funds..I know many think I'm wrong that's just my thinking..



I will say it again since nobody has made much of a comment to my other post...

Bonds funds have volatility also... maybe not to the same degree, but it is there... we also know that the chance of rates going down to have gains is much less than rates going up and losing capital...

So why not CDs?????? That takes all your capital loss risk out of your equation... You can buy 3 and 5 year CDs and lock the current rates...

This removes all the problems that you state you want to get rid of...

lawman 03-03-2014 04:00 PM

Quote:

Originally Posted by Walt34 (Post 1422840)
That's an issue that I had for a very long time. Too long. But it is an emotional reaction to what should be a mathematics-driven decision. And the hard part is convincing yourself to take the emotions out of the decisions.

You have to think like Mr. Potter in the movie "It's a Wonderful Life" and Montgomery Burns on "The Simpsons".

The three books that finally made it all sink in for me were A Random Walk Down Wall Street, The Millionaire Teacher, and How a 2nd Grader Beats Wall Street. I highly recommend them to anyone.

With a 20-year horizon you are almost certain to lose out on substantial gains by being too conservative. I say "almost" because the future is uncertain and unknowable. But history also says that anyone who claims to know what the future will be is almost always wrong.

Absolutely!

lawman 03-03-2014 04:06 PM

Quote:

Originally Posted by Texas Proud (Post 1422847)
I will say it again since nobody has made much of a comment to my other post...

Bonds funds have volatility also... maybe not to the same degree, but it is there... we also know that the chance of rates going down to have gains is much less than rates going up and losing capital...

So why not CDs?????? That takes all your capital loss risk out of your equation... You can buy 3 and 5 year CDs and lock the current rates...

This removes all the problems that you state you want to get rid of...

I guess the answer to that question is that I expect to do better than 1% per year for the next 5 years in PONDX. My tolerance for risk is low but not that low..I believe the managers of that fund are good enough and have enough latitude in that fund to do better...

Katsmeow 03-03-2014 04:17 PM

Quote:

Originally Posted by Ready (Post 1422625)
Well...some people perceive arguing to be a valid form of discussion. I've had many "discussions" with friends where I finally ask them "why are you arguing so much with me?" And their response is "whose arguing, we're just having a discussion!"

That would be me. DH does sometimes say that to me. I'm usually surprised to hear it because I thought we were just discussing/debating the issue.... I was open to changing my mind....

lawman 03-03-2014 04:45 PM

Quote:

Originally Posted by Katsmeow (Post 1422875)
That would be me. DH does sometimes say that to me. I'm usually surprised to hear it because I thought we were just discussing/debating the issue.... I was open to changing my mind....

Bingo!

braumeister 03-03-2014 05:23 PM

Cue Monty Python...
Argument Clinic - YouTube

redduck 03-03-2014 05:51 PM

Quote:

Originally Posted by lawman (Post 1421866)
Haven't checked in here for quite a while but now that I'm re adjusting my portfolio I'm interested in other points of view..I'm 57, have three pensions, a modest lifestyle and no debt for the last 30 years..I've saved up a sizable amount of money..Preservation of this capital is all that matters..I don't need more money I just need to be able to maintain my purchasing power..The stock market valuations are not justified at these levels... .I'm going to a 90 - 95 % bond funds position..Tell me why I'm making a mistake..Thanks



Well, if you’ve forgotten why you haven’t checked in for awhile, I guess this thread has refreshed your memory.

It sounds as if you’ve been financially conservative/cautious/careful these last 30 years. Now you plan to become what seems to be ultra financially conservative/cautious/careful. Anyhow, I have no idea where you should place 90-95% of this money that is headed for the bond funds. (Actually, I have some ideas, but I can’t justify them). In your posts you talk of your “logic”. However, your logic doesn’t seem to have really persuaded even a few (so far) that your logic is sound logic--and you are dealing with some very logical people (I guess). Now, even I know that putting 90-95% of your money into a fund—or the same kind of funds—is not considered wise. However, you have explained what you want to accomplish (maintain your purchasing power) and how you plan on going about achieving this goal (going into a 90-95% bond funds position). Do you have any idea what you may need to hear to dissuade you from your plan?

Have you considered hiring a financial planner? :)


Texas Proud 03-03-2014 11:19 PM

Quote:

Originally Posted by lawman (Post 1422865)
I guess the answer to that question is that I expect to do better than 1% per year for the next 5 years in PONDX. My tolerance for risk is low but not that low..I believe the managers of that fund are good enough and have enough latitude in that fund to do better...


Heck, you can get over 2% on 5 year jumbo CDs....

Yes, you can do better (maybe) with a bond fund, but if interest rates go up to say 6%, I bet you will not...


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