Is bond diversification as important as stock diversificatio

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Re: Is bond diversification as important as stock diversific

Postby ihckennedy » Mon Jan 28, 2013 12:34 pm

The answer depends on why you own bonds in the first place.

If the answer is: to serve as a hedge against economic contraction and equity bear markets, then you should stick with Treasuries, because they serve this purpose better than any other bonds.

If the answer is: to reduce total portfolio risk, then a total bond market fund (in tax-deferred accounts) &/or high quality munis should serve the purpose.

If the answer is: to generate postive real returns, then you're in the wrong place! Most people don't realize that historically the bond market has generated negative real returns more often (in 5-, 10-, 20-year periods) than the stock market. And starting from today's yields, negative real returns are a pretty sure bet over the next five and ten years.
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Re: Is bond diversification as important as stock diversific

Postby Doc » Mon Jan 28, 2013 1:04 pm

ihckennedy wrote:The answer depends on why you own bonds in the first place.

If the answer is: ...


And if the answer is "some of each" than break your FI portfolio into "some of each".
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Re: Is bond diversification as important as stock diversific

Postby Bustoff » Mon Jan 28, 2013 1:52 pm

Doesn't this tell all we need to know ?

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Re: Is bond diversification as important as stock diversific

Postby Beagler » Mon Jan 28, 2013 10:09 pm

larryswedroe wrote:You made the mistake of painting all munis with the same brush

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And you made the mistake of attributing Mr. Swensen's statement to me; I simply reported a passage from his book.
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Re: Is bond diversification as important as stock diversific

Postby larryswedroe » Mon Jan 28, 2013 10:28 pm

Beagler
My apologies but my assumption was you agreed which was why you cited it. Might have said, while I don't agree here is what Swensen had to say.
at any rate I think the case is clear, that junk munis should be avoided for same reason Swensen states you should avoid junk bonds
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