Am I just experiencing the natural tendency to worry about such things and should I remember I have bonds and TIPS in my AA for their ability to diversify and therefore, in some respects their return, per se, is irrelelevant and simply Stay The Course?
staythecourse wrote:I have said, what seems like hundreds of times, but it is every investors RESPONSIBILITY to understand what each asset and subassets role is in their portfolio.
We have poor economic growth worldwide and from fed comments they seem adamant of keeping inflation low as long as unemployment is above ?6% or so. This means TIPS will do poorly UNLESS unexpected inflation occurs.
Call_Me_Op wrote:I am not familiar with the details of your portfolio. If you can post it here, that would be helpful. For high-quality bonds, the primary factor that determines the risk level is the average duration. If your average duration is 5-6 years or less, I would not worry too much. I seem to recall that Swenson recommends 15% in long bonds. That might get me a little nervous, but in the context of a balanced portfolio it is not too bad.
livesoft wrote:For another article on bonds, you should read the Seeking Alpha interview of Larry Swedroe: http://seekingalpha.com/article/1081411 ... -for-yield
Here's my take which is basically worth as much as any talking head's view: Bonds are not going to do for you what they did in the past 5 years. They will do less. But as long as you expect that, there should be no problem. One's only alternative is bonds and perhaps CDs. "What?", you may ask. "How can bonds be an alternative to bonds?" I leave that for you to ponder.
staythecourse wrote:I have said, what seems like hundreds of times, but it is every investors RESPONSIBILITY to understand what each asset and subassets role is in their portfolio. After weighing the risks and benefits that said asset only then it should be included in your portfolio. The problem with "lazy portfolios" are that folks just like to jump on them because they are simple, but when something doesn't do well they start second guessing because they don't understand how the components work.
If you have TIPS in your portfolio why would you expect them to do well in this economic climate?? We have poor economic growth worldwide and from fed comments they seem adamant of keeping inflation low as long as unemployment is above ?6% or so. This means TIPS will do poorly UNLESS unexpected inflation occurs. Since growth is sluggish the only way that is likely to happens is a decrease is supply of goods, such as as oil supply disruption.
That is not a reason to dump TIPS, but a reason to understand TIPS doing poorly.
heyyou wrote:Your glass is half full.
With a diversified portfolio, there are always some assets that are doing poorly, especially those that did well in the recent past. There is no guarantee that any one will do well in the future either. We live in a tough world. Be thankful that you have investments, even those that perform poorly. Wanting more performance is greed, and I have experienced hard lessons about how my greed blinds me to my risk exposure. YMMV
My Callan Periodic Table shows that every year there are low performing assets, and that they all have taken turns doing poorly over the last twenty years. I mark my Callan P.T. columns at zero return, between the last postive and the first negative assets, to show me how many of those categories were negative for each year.
Many posters read here for the "Stay the Course" encouragement. Many different portfolios will be successful in the long run, especially if rebalanced by buying more of whatever has lost the most. Only one will be optimal and that one will not be the one that was optimal for a previous period.
wrysys wrote:2/3 of your net worth is in a single stock? how's that been working out?