Nice first post.9.0% YTD on my portfolio of short equity and futures options. The short futures options are doing somewhat better. Only 20% in this portfolio, the rest in real estate and index funds.
No, that is in $USD.
+11.99% on a 95/0/5 portfolio.
Nice!+15.2 on 6/7, what a difference a week makes!
+15.2 on 6/7, what a difference a week makes!
Be careful what you say.... that increase could easily unwind in a week too.
.... Higher investment grade bond/notes A- to AAA are still very overpriced relative to CDs and treasuries. Funds holding these low coupon high investment grade notes will continue to under-perform. Who in their right mind would buy Apple's 1.55% 5 year note (rated AA+) other than a bond fund. Lower investment grade short and medium term notes/bonds are starting to become more attractive but still not in the buy range.
So given that current investment grade corporate spreads are so poor, should I sell my target maturity corporate bond funds and reinvest in CDs?
What does it yield and what is it holding? Which fund?
Mostly BSCK (POWERSHARES BULLETSHARES 2020 CORP BOND ETF... 2.99%), BSCM (POWERSHARES BULLETSHARES 2022 CORP BOND ETF... 3.47%) and IBDC (ISHARES IBONDS MARCH 2020 TERM CORP ETF.... 2.79%)
These will distribute liquidation distributions in December of the years' indicated, but I would sell about a year earlier... hold BSCK and IBDC until December 2019 and BSCM until December 2021.
18 month CDs are ~2.55% and 42 month CDs are ~3.06% so I'm getting a 40-55 bp premium to CDs for A-BBB credit.
I took a look at your funds.
BSCK Distribution yield is 2.08% and 1 year return is +0.6%
BSCM Distribution yield is 2.55%, 1 year return +1.0%
IBDC Distribution yield is 2.10%, 1 year return is +.94%
I would not go by SEC yield since it assumes that the bonds would be held to maturity and all income is re-invested. An ETF cannot guarantee that it will hold a bond to maturity due to fund outflows. It's also difficult to compute the liquidation NAV for the same reason.
An 18 month CD yield is about 2.55%, BBB rated corporate is about 3.33%, B
A 3 year CD is now 3.0%, BBB rated corporate is 4.33%,
A 4 year CD is now 3.1% BBB rated corporate is about 4.7%,
You need to look at your entry price for these funds to make an informed decision on what to do.
Well I did ultimately decide to sell, and the returns have been in the mid 2% range.
As background, in 2013/2014 I shifted my bond allocation to some Guggenheim Bulletshares and Powershares I-Bond ETFs to reduce my interest rate risk. At the time that I bought them, the investment grade versions had yields to worst that were about the same as comparable CDs. I unwound that tactic on June 1.
My overall weighted average annual return was 2.63% (vs 1.73% for BND).... for just the investment grade versions the overall weighted average annual return was 2.20% (vs 1.65% for BND). I'm quite happy with 2.63% given BND returns.
Proceeds are now parked in VMMXX at about 2% until I figure out what I want to do going forward for fixed income.... leaning towrds CDs but given likely interest rate increases and how flat the yield curve is I'm just unsure how long I want to go.
..... CEFs that invest in that asset class that were yielding almost 9.6% at that time (PDT, FFC, JPS, HPS, HPI, FPF), and enjoyed an average of 12-14% returns from 2013/14. ...
To be clear, the 2.63% is just domestic bonds...not the total.. the total is ~9% annually.
You claim 12-14% returns for your CEFs from 2013/2014.... wishful thinking.... equal parts of PDT, FFC, JPS, HPS, HPI returned 8.69% since Jan 2013 (to May 2018... I excluded FPF because it did not exist as of the beginning of 2013).
The other issue is that these tickers took a beating in 08/09... worse than Total Stock and they also seem to be pretty volatile. The standard deviation of that group is actually higher than Total Stock for that 5+ year period.... but the total returns have been pretty good.... but they behave more like high dividend equities than bonds.
https://www.portfoliovisualizer.com...bol9=VFIDX&allocation9_2=40&allocation9_3=100
I'm currently undecided on how to redeploy... may just go with a CD ladder but I might wait until the PenFed 3% CDs mature in December.... I'm guessing that rates will be going up but the yield curve is so flat right now I'm having trouble making a decision. I don't mind being on the sidelines parked in at 2% MM at this point. This whole fixed income market is a bit odd to me... I can't ever recall CDs being so competitive with investment grade corporates.
Despite his dweebiness, I may do some research on the tickers Freedom56 mentioned for my high-yield bond allocation.... but to me they are way too volatile to be balllast for my portfolio.
..... The years 2014, 2015, 2016, and 2017 were golden years for fixed income investors (bonds, preferred stocks). This is why I called your 2.63% return pathetic.
You're comparing apples and oranges. Your favorite son, PDT, is 3% bonds.... 59% preferred stock and 36% common stock. FPF is 31% leveraged and mostly fixed to floating or variable rate securities. FFC is 34% leveraged. So for someone who seems dead set against leverage your funds have a lot of leverage. (FWIW, my mortgage is ~5% my portfolio).
OTOH, for 2014 to 2018, the average return of 5 large, well regarded high quality BOND funds was 3.25%.... of the same period BSCK (a bond ETF) was 2.93%... but BSCK had a lower duration and I was looking for less interest rate sensitivity so I'm content with that return. I know.... not only am I pathetic but PIMCO, Dodge & Cox, MetWest et al are pathetic too... but I wasn't trying to beat them... I was trying to be close with less interest rate sensitivity.
You are by far the smartest guy in the room... my hat's off to you.
https://www.portfoliovisualizer.com...allocation8_3=30&symbol9=FFC&allocation9_3=30