So, bottom line it for someone who hasn't budged out of SCHO, SCHP, SHY, VCSH...basically ultra short and ST bond funds for, let's say, at least 5 years. What would've been the point of jumping, in and out of (AKA "timing") the market? Y'all have a long term goal don't you
It seems like in these forums many preach that you shouldn't try to time the market, until it becomes too irresistible for those same people to "do something" and they bail on all of that and, "time the market" LOL. And
yeah, I lost NAV to the max, relative to all the averages, by just 'doing nothing.' So then, am I not going to recoup those losses by holding these funds for the purpose they were originally intended to serve in my long-term plan, rather than impulsively giving in to short-term knee-jerk impulsiveness? Will i not recoup my losses despite the NAV drop in any or all of these (in the worst bond year in market history, I might add).
if not, with all due respect please very explicitly elaborate on how and why that won't ?
happen : )
I think to some extent that you are confusing timing the equity markets with timing the fixed income markets.
Timing the equity markets and timing fixed income are two entirely different animals. The former is a fool's errand, the latter is very doable.
And what has been advocated in various fixed income threads is not jumping in and out, but jumping out and using individual bonds instead.
Unlike individual stocks, where your portolio should be diversified across a number of tickers, in fixed income you can use relatively few instruments because if your stick with brokered CDs under the FDIC limits and/or US Treasury securities or even Aaa Agency issues, there is ngligible credit risk to diversify from. You could have a UST rolling ladder with 5 bonds maturing a year apart and be fine.
For bond fund holders, the only way that you will "recoup" your NAV losses is to hang in there for the duration of the portfolio, and that only get you back to even. VSCH's duration is 2.7 years.
VSCH's distribution yield is 2.6% based on the last 3 distributions. The average effective maturity of the portfolio is 2.9 years. 1,2, 3 and 5-year brokered CDs are yielding 5.15%, 5.10% and 5.05% and 5.25%, respectively. For 3 year money, why would anyone stay in VSCH to get for 3 years when they could get out, put the proceeds in a brokered CD ladder and do much better? With NO credit risk compared to some credit risk with VSCH and an ability to hold individual positions to maturity which VSCH doesn't provide?
So using let's say that you bought $100 of VSCH a year ago on 2/1/2022... with dividends reinvested on 1/31/23 your $100 would be worth $97.16 and in 3 years at 3% it would be worth $106.
OTOH, you can redeem VSCH and invet the $97.16 in a 3-year CDs at 5%and in 3 years have $112.
Which would you rather hhave at the end of 3 years... $106 or $112? Of course, YMMV.
