Anyone Else still holding Bond Funds?

[f35phixer]

i still have bonds
FAGIX - 251K / FTBFX - 135K
since Jan this has been my reinvested dividends...
1015/912/1061/1045/1136

Actually have thought about withdrawing them, but I don't need $$$ so this let's me buy cheap for when I need to RMD them in 10 years....

 

[mathjak107]

i still have bonds
FAGIX - 251K / FTBFX - 135K
since Jan this has been my reinvested dividends...
1015/912/1061/1045/1136

Actually have thought about withdrawing them, but I don't need $$$ so this let's me buy cheap for when I need to RMD them in 10 years....

Including reinvesting dividends fagix is still down 13% ytd .

Ftbfx down 12% with reinvesting .

So reinvesting helps but it can be like peeing in the ocean.

The higher the dividends go the more nav can fall .

 

[VanWinkle]

Including reinvesting dividends fagix is still down 13% ytd .

Ftbfx down 12% with reinvesting .

So reinvesting helps but it can be like peeing in the ocean.

The higher the dividends go the more nav can fall .

I happen to like peeing in the ocean!!! Where do you think those
warm currents come from......

 

[Eucerin]

Yes I hold bond funds but I don't sell them. I let the interest re-invest which buys new bonds at lower price as interest rates go up. As long as I'm not selling, I am at peace with bond funds.

+ I agree!

I also hold Wellesley and Wellington in my IRA account which also have substantial amount of bond. Wondering if anyone sold these

 

[REWahoo]

Wondering if anyone sold these

No, and I have no plans to sell either of them or any other investment any time soon. Patience in the market is difficult to practice but has an excellent track record.

 

[daylatedollarshort]

1 year Treasuries 2.8% yield, no risk of losing principal. Government guaranteed. Compare that to current bond fund yields and risk of NAV going down even further than the current -12% YTD.

 

[Freedom56]

Y

Just keep in mind they may also try to steer you to a comparable fund or ETF instead because they probably make more money off those with ongoing expenses, but most of those aren't going to have maturity dates.

Also keep in mind that they may steer you to bonds that nobody wants and will try to dump them on you at inflated prices and pocket the spread. I get regular cold calls from Fidelity bond specialists asking if I am interested in buying certain issues. Some are brand new issues that they are having problems selling at the coupon rate and some are issues where they have too much inventory (due to a lack of demand). I see these cold calls as a red flags. These cold calls have become more frequent during the past month.

 

[daylatedollarshort]

Also keep in mind that they may steer you to bonds that nobody wants and will try to dump them on you at inflated prices and pocket the spread. I get regular cold calls from Fidelity bond specialists asking if I am interested in buying certain issues. Some are brand new issues that they are having problems selling at the coupon rate and some are issues where they have too much inventory (due to a lack of demand). I see these cold calls as a red flags. These cold calls have become more frequent during the past month.

A rep from one of the big no load mutual fund companies talked an elderly relative of ours into buying a 2% annuity at the beginning of the year with a cold call. Of course these guys knew rates were going up back then and they would make a lot of money locking elderly investors at 2%. Shameless.

 

[MichaelB]

No, and I have no plans to sell either of them or any other investment any time soon. Patience in the market is difficult to practice but has an excellent track record.

+1

I also think the upcoming decade will be favorable for actively managed mutual funds such as Wellington and Wellesley.

 

[mathjak107]

1 year Treasuries 2.8% yield, no risk of losing principal. Government guaranteed. Compare that to current bond fund yields and risk of NAV going down even further than the current -12% YTD.

Except comparing a 1 year treasury to a bond fund with a 6 year weighted duration isnt the same thing .

Try selling a 6 year individual treasury bought at the same time the bond fund was bought and you will be down about the same …

Hold the bond fund the same 6-7 years as the duration and odds are you will end up with the rate you had the day you bought just like buying an individual bond

 

[daylatedollarshort]

Except comparing a 1 year treasury to a bond fund with a 6 year weighted duration isnt the same thing .

Try selling a 6 year individual treasury bought at the same time the bond fund was bought and you will be down about the same …

Hold the bond fund the same 6-7 years as the duration and odds are you will end up with the rate you had the day you bought just like buying an individual bond

If you had sold your bond fund at the beginning of the year and switched to short term Treasuries, you would be averaging around 2% for the year instead of losing -12% (or possibly more) for the year. Bond math is bond math.

Bond funds can make more or less than individual bonds because they don't have a maturity date. They often do better than individual bonds when rates are going down, like this past decade, and worse when rates are rising. So if you sell when you know with almost 100% certainty, like this year, that rates are going to start to rise, you can come out ahead by selling them before the NAV drops. This is like the Monty Hall problem. The odds between the doors aren't equal, because Monty knows ahead of time which door has the goat.


Related post - Article from back in January saying the worst investments for 2022 will be long term bond funds because of rising interest rates - Why are bond prices and bond fund navs doing this? - Early Retirement & Financial Independence Community (early-retirement.org)

 

[mathjak107]

If you had sold your bond fund at the beginning of the year and switched to short term Treasuries, you would be averaging around 2% for the year instead of losing -12% (or possibly more) for the year. Bond math is bond math.

Bond funds can make more or less than individual bonds because they don't have a maturity date. They often do better than individual bonds when rates are going down, like this past decade, and worse when rates are rising. So if you sell when you know with almost 100% certainty like this year that rates are going to start to rise, you can come out ahead by selling them before the NAV drops.

If only this and only that .

If I sold all my stocks at the high and shorted the market I would be quite wealthy too .

All that counts is what we do

 

[daylatedollarshort]

If only this and only that .

If I sold all my stocks at the high and shorted the market I would be quite wealthy too .

All that counts is what we do

Stocks aren't bonds. With bonds we have a good idea of the direction of interest rates when the Fed tells us ahead of time their plans. This year we knew they were going to have 6 - 7 rate increases because they told us early in the year they were going to do that.

All that counts is what we do? Early in the year I sold all my long term bond funds and moved to short term Treasuries, and posted frequently here about the planned 6 -7 rate increases.

 

[mathjak107]

Not really true …

Take a look at history .

The last 40 years every time the fed raised rates on the short end more than 1% , intermediate term bonds and longer term bonds went up in value , not down after an initial knee jerk reaction that had them fall in reaction to the increases .

They ended the year up

Only one exception , 1994 when the fed raised short term rates and intermediate and longer fell .

So no , we can’t predict and if anything , Peter lynch commented that calling stocks direction is far easier then calling bonds.

The left is the feds increase that year , the right the total retun on intermediate term bonds

 

[aja8888]

Not really true …

Take a look at history .

The last 40 years every time the fed raised rates on the short end more than 1% , intermediate term bonds and longer term bonds went up in value , not down after an initial knee jerk reaction that had them fall in reaction to the increases .

They ended the year up

Only one exception , 1994 when the fed raised short term rates and intermediate and longer fell .

So no , we can’t predict and if anything , Peter lynch commented that calling stocks direction is far easier then calling bonds.

The left is the feds increase that year , the right the total retun on intermediate term bonds

You have to keep an eye on the FED, especially between meetings when they employ Jawboning! And if things get out of control, they can implement a few tools like yield curve control and price controls. They are sneaky and always work from a position of being reactionary to the previous data.

The problem with the FED and other Central Banks is they may have a forward plan (WAG), but it's so flexible that they can change it anytime.

 

[mathjak107]

If the world’s investors disagree with the fed actions in mass they can easily wrestle bond rates away and invert them .

We saw that in 2006 when the fed wanted rates and mortgages higher .

Investors sent bond rates lower as fear , greed and perception of a recession drove rates lower despite the fed trying to raise them .

Investors were correct

 

[Koolau]

If the world’s investors disagree with the fed actions in mass they can easily wrestle bond rates away and invert them .

We saw that in 2006 when the fed wanted rates and mortgages higher .

Investors sent bond rates lower as fear , greed and perception of a recession drove rates lower despite the fed trying to raise them .

Investors were correct

So instead of "Don't fight the Fed" it should be "Don't fight the people."

 

[mathjak107]

Could be ….

fed action vs asset movement depend on more than what the fed does .

The fed cut rates 13 times from 2000 to 2003 and guess what ? Stocks fell

2007 to 2008 fed cut rates 10 times and stocks fell .

The fed raised rates 9x between 2015 and 2018 and stocks WENT UP .

SO there is a lot more that goes into the mix then don’t fight the fed

 

[daylatedollarshort]

Could be ….

fed action vs asset movement depend on more than what the fed does .

The fed cut rates 13 times from 2000 to 2003 and guess what ? Stocks fell

2007 to 2008 fed cut rates 10 times and stocks fell .

The fed raised rates 9x between 2015 and 2018 and stocks WENT UP .

SO there is a lot more that goes into the mix then don’t fight the fed

I am not sure what stock have to do in a bond thread or what 2006 has to do with current high inflation conditions. At this point I don't really have much to add to the previous points myself and others have made regarding the current risk reward of short term Treasuries vs long term bond funds until inflation levels off and/or it looks like the Fed is going to stop raising interest rates.

 

[mathjak107]

The point is no one can predict the direction of bond rates …

The economy can only absorb a slowing to a point and then it spirals down and rates go with it and no one can predict when and at what point .

I don’t believe in timing my bonds anymore then I do trying to time my stocks.

Like stocks , by the time it looks like things are changing the asset prices have already made the juiciest gains and that is true of bonds to , especially the longer you go out .

By the time 2008 scared the masses , bond values were already bid up.

A portfolio is not really diversified if it does not own assets that appear to have no future.

As those are the ones that tend to flip under everyone s nose who thought they were going to time them back in

 

[NW-Bound]

I am just glad I never had much bond. But I am paying more attention now.

I missed previous chances to load up on bonds, and I try to do better now.

The problem with the FED and other Central Banks is they may have a forward plan (WAG), but it's so flexible that they can change it anytime.

Is flexibility a bad thing?

So instead of "Don't fight the Fed" it should be "Don't fight the people."

Heck, you cannot fight the people. All you can do is not to follow them, when they bought dot-coms, and then homes they could not afford in the subprime fiasco, and then crypto thinggies.

People are crazy, and you don't fight crazy people. You can only stay away from them.

 

[Katsmeow]

You can start here: How to Trade Fixed Income Securities in Your Fidelity Account - Fidelity

and here: "Strategically located nationwide, our fixed income specialists work with you and your financial consultant to provide bond strategies and trading expertise when you need it." https://fixedincome.fidelity.com/ftgw/fi/FIServiceSolution

Just keep in mind they may also try to steer you to a comparable fund or ETF instead because they probably make more money off those with ongoing expenses, but most of those aren't going to have maturity dates.

Thanks. This is all helpful.

 

[aja8888]

Is flexibility a bad thing?

Well, in business school, students are taught that businesses are to have solid forward planning to survive. If these FED folks ever were in business, they would all have been fired by now. Flexibility in planning monetary and fiscal policy id done at YOUR expense.

These guys are lawyers and accountants are are charged with running the profitability of the U.S., and they have done it badly.

 

[Bergamo]

The point is no one can predict the direction of bond rates …

The economy can only absorb a slowing to a point and then it spirals down and rates go with it and no one can predict when and at what point .

I don’t believe in timing my bonds anymore then I do trying to time my stocks.

Like stocks , by the time it looks like things are changing the asset prices have already made the juiciest gains and that is true of bonds to , especially the longer you go out .

By the time 2008 scared the masses , bond values were already bid up.

A portfolio is not really diversified if it does not own assets that appear to have no future.

As those are the ones that tend to flip under everyone s nose who thought they were going to time them back in

To your point all assets now appear to "have no future". Stocks, bonds, and now real estate.

 

[NW-Bound]

To your point all assets now appear to "have no future". Stocks, bonds, and now real estate.

Gold, gun powder, and lead?

Old timers on this forum would remember the mention of the above assets in the last economic fiasco of subprime bubble burst.

Are we there at that stage yet? I would say not yet.