WSJ - Avoid Vanguard Total Bond Fund ?
WSJ - Avoid Vanguard Total Bond Fund ?
This recent WSJ article titled, "The Risk of Safety", is annoying. First, they suggest avoiding the Vanguard Total Bond Market Index Fund. Their justification is the risk rising of interest rates. They suggest instead of investing in the Vanguard Total Bond Market Index, investors should switch to the Vanguard Short-Term Bond ETF, which has a shorter duration and a 1.6% yield.
Is the author deliberately misleading people or just lousy at giving advice ?
If the entire premise of avoiding the Vanguard Total Bond Market Fund is that it's future is risky and we should not rely on it's previous performance, then why mislead readers by advising them to jump into Vanguard Short-Term Bond ETF using the prior 12 month returns of 1.6%.
If he's so concerned about future rates, he should not use the funds TTM (trailing twelve months) return.
The Short-Term Bond ETF current SEC yield of 0.53% is the less "risky" indicator.
http://online.wsj.com/article/SB1000142 ... 91140.html
Is the author deliberately misleading people or just lousy at giving advice ?
If the entire premise of avoiding the Vanguard Total Bond Market Fund is that it's future is risky and we should not rely on it's previous performance, then why mislead readers by advising them to jump into Vanguard Short-Term Bond ETF using the prior 12 month returns of 1.6%.
If he's so concerned about future rates, he should not use the funds TTM (trailing twelve months) return.
The Short-Term Bond ETF current SEC yield of 0.53% is the less "risky" indicator.
http://online.wsj.com/article/SB1000142 ... 91140.html
Last edited by Bustoff on Sun Jan 27, 2013 2:15 pm, edited 4 times in total.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
For a very short horizon, say a few years, or the typical attention span of investors, I tend to agree with them. People are largely incapable of properly buying and holding mutual funds. Total bond works well, even in a lost decade, because if you hold it you are buying more shares at a lower price. (Although I would question the tax efficiency of this.) But it does not work when people sell it at the worst times.
70% Global Stocks / 30% Bonds
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Re: WSJ - Avoid Vanguard Total Bond Fund ?
Your link requires a subscription to read the article.
“Speak only if it improves upon the silence." Mahatma Gandhi
- Taylor Larimore
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Re: WSJ - Avoid Vanguard Total Bond Fund ?
Google: "The Risk of Safety"Don Christy wrote:Your link requires a subscription to read the article.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: WSJ - Avoid Vanguard Total Bond Fund ?
You're rightDon Christy wrote:Your link requires a subscription to read the article.
Now I can't retrieve the article any longer either. . . that's weird.
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Re: WSJ - Avoid Vanguard Total Bond Fund ?
The author isn't misleading people. Shorter duration bond funds will not drop as much when interest rates rise because the bonds will mature much faster. The longer the duration, the more susceptible it is to decline when/if interest rates rise.
And in all honesty, I find the title "The risk of safety" to be on the mark. Bond funds have experienced excellent TOTAL RETURNS for the past ~30 years because they started out with very high interest rates and as rates have come down the prices/NAVs have risen. With only so much room to go down further, it looks like the return for the next few years will be from interest alone.
If you're getting 2% annually and inflation is running at 2%, and you have little prospects of price appreciation, you are treading water. Too frequently people confuse nominal gains with real gains. Just because the dollar amount rises does not mean you have gained anything in purchasing power.
And in all honesty, I find the title "The risk of safety" to be on the mark. Bond funds have experienced excellent TOTAL RETURNS for the past ~30 years because they started out with very high interest rates and as rates have come down the prices/NAVs have risen. With only so much room to go down further, it looks like the return for the next few years will be from interest alone.
If you're getting 2% annually and inflation is running at 2%, and you have little prospects of price appreciation, you are treading water. Too frequently people confuse nominal gains with real gains. Just because the dollar amount rises does not mean you have gained anything in purchasing power.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Please send Mr Light an e-mail. I'm sure he will update his article with the proper information.Bustoff wrote:If he's so concerned about the future, he should not use the funds TTM yield.
The current SEC yield of 0.53% is the less "risky" indicator.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I feel like this is good advise. I avoided this ETF for the same concerns. Long term bonds have interest rate risk that I didn't need, or want in my portfolio. I choose both short, and intermediate term bond ETF instead. If I was younger, I might not concern myself with this risk, but at my age, the bond portion of my investments, is to stabilize the investment portfolio.
If I'd have owned this fund for long period, I'd have kept it with my written plan. But I didn't, and sure wouldn't buy into it at this point.
If I'd have owned this fund for long period, I'd have kept it with my written plan. But I didn't, and sure wouldn't buy into it at this point.
Even educators need education. And some can be hard headed to the point of needing time out.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
For reference, some 3-month returns of some bond funds commonly mentioned on this forum:
It seems like no return in 3-months in getting some people's attention.
It seems like no return in 3-months in getting some people's attention.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
If your only goal is to dampen the volatility of a 60/40 portfolio, why not just use short term bond ETF, especially in the current environment? How much in return would you really give up?
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Here is another 3-month growth-of chart for the same funds as in the chart I previously posted:
All the funds had a negative total-return over the 3-months. I don't recall so much gnashing of teeth a couple years ago about all this, so I expect I won't recall any of this next year at this time either.
All the funds had a negative total-return over the 3-months. I don't recall so much gnashing of teeth a couple years ago about all this, so I expect I won't recall any of this next year at this time either.
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Re: WSJ - Avoid Vanguard Total Bond Fund ?
Well it's still better than "Money Under Mattress' where you are losing 2%, and better than Stocks where you could lose 50% or more.NYBoglehead wrote:The author isn't misleading people. Shorter duration bond funds will not drop as much when interest rates rise because the bonds will mature much faster. The longer the duration, the more susceptible it is to decline when/if interest rates rise.
And in all honesty, I find the title "The risk of safety" to be on the mark. Bond funds have experienced excellent TOTAL RETURNS for the past ~30 years because they started out with very high interest rates and as rates have come down the prices/NAVs have risen. With only so much room to go down further, it looks like the return for the next few years will be from interest alone.
If you're getting 2% annually and inflation is running at 2%, and you have little prospects of price appreciation, you are treading water. Too frequently people confuse nominal gains with real gains. Just because the dollar amount rises does not mean you have gained anything in purchasing power.
So, what do you recommend for the Bond portion of a portfolio, if not bonds?
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I think you're missing the point.
My gripe isn't with the premise of the article regarding the risks of longer duration, but rather his use of TTM returns rather than current yield to maturity.
My gripe isn't with the premise of the article regarding the risks of longer duration, but rather his use of TTM returns rather than current yield to maturity.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
The next flight to safety will lead to higher prices and even lower yields. Still got a long way to 0.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Why not just buy CDs instead of ST bond fund? That's what I did.
We don't know where we are, or where we're going -- but we're making good time.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I didn't read the link - perhaps the author improperly said "Yield" instead of "Distribution Yield." Although, even Distribution Yield dropped from 1.80% in July 2011 to 1.29% in January 2013.Bustoff wrote:This recent WSJ article titled, "The Risk of Safety", is annoying. First, they suggest avoiding the Vanguard Total Bond Market Index Fund. Their justification is the risk rising of interest rates. They suggest instead of investing in the Vanguard Total Bond Market Index, investors should switch to the Vanguard Short-Term Bond ETF, which has a shorter duration and a 1.6% yield.
Anyhow, suggesting Vanguard ST Bond IF based on need for the money..... no problem, man!
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Let's see. Not quite yet to retirement. Possibility of one of us living until 90 - 95 about 50%. So, that's at least another 35 years. Hmmm....no we'll stay put.
"..the cavalry ain't comin' kid, you're on your own..."
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I could not read the article, no subscription, and google points me at the same link. What ETF are they suggesting? Vanguard has many short term bond ETFs. Does the short term corporate, VCSH, make sense if one already owns VFSUX, the short term investment grade actively managed fund? BSV is the ETF version of VBIRX short term index, so no need to use an ETF for that. In general, I am not a fan of bond ETFs. Their monthly dividends are slower to reinvest than that of open ended mutual funds.
Best Wishes, SpringMan
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Link below,then first link that comes up works for me
http://news.google.com/news/story?rlz=1 ... CDoQqgIwAA
Or
http://lmgtfy.com/?q=The+Risk+Of+Safety
http://news.google.com/news/story?rlz=1 ... CDoQqgIwAA
Or
http://lmgtfy.com/?q=The+Risk+Of+Safety
Last edited by Toons on Sun Jan 27, 2013 9:58 am, edited 1 time in total.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Balanced Portfolios Shrug Off Bond-phobia
By the looks of the chart a few posts up, we've seen interest rates rise a bit and bond prices fall. This would be problematic for someone who needs to liquidate their portfolio in a matter of weeks or months and has allocated everything to longer-dated bonds. But that should never happen.
Instead, long-term investors should start with a diversified equity allocation and dilute the risk according to their needs and preferences by adding high quality bonds. And then realize, neither stocks nor bonds always go up. The goal is to have your bonds holding value or appreciating when stocks are declining, while allowing for bonds to disappoint during strong periods for equities. The last 3 months is a great example of this: disappointing returns for bonds but a spike for stocks as a balanced US equity split (20% S&P 500, 30% US large value, 50% mid/small value) has appreciated by almost 11%, or over 50% on an annualized basis. With a balanced portfolio somewhere between 50% and 70% in stocks, this gain more than offsets a setback in bonds.
It is important to always consider the whole picture, because salesman (brokers selling high cost bond separate accounts or tactical management schemes to quell investor fears about bonds) and the financial media will do whatever it takes to get you to focus on the trees instead of the forest.
Eric
Instead, long-term investors should start with a diversified equity allocation and dilute the risk according to their needs and preferences by adding high quality bonds. And then realize, neither stocks nor bonds always go up. The goal is to have your bonds holding value or appreciating when stocks are declining, while allowing for bonds to disappoint during strong periods for equities. The last 3 months is a great example of this: disappointing returns for bonds but a spike for stocks as a balanced US equity split (20% S&P 500, 30% US large value, 50% mid/small value) has appreciated by almost 11%, or over 50% on an annualized basis. With a balanced portfolio somewhere between 50% and 70% in stocks, this gain more than offsets a setback in bonds.
It is important to always consider the whole picture, because salesman (brokers selling high cost bond separate accounts or tactical management schemes to quell investor fears about bonds) and the financial media will do whatever it takes to get you to focus on the trees instead of the forest.
Eric
Re: Balanced Portfolios Shrug Off Bond-phobia
This advice is nuts because it presumes people invest with a thoughtful long term plan. Our interest is trying to figure out how everything we buy can be protected from the critical crises of the day, any one of which could cost us everything in an instant.EDN wrote:By the looks of the chart a few posts up, we've seen interest rates rise a bit and bond prices fall. This would be problematic for someone who needs to liquidate their portfolio in a matter of weeks or months and has allocated everything to longer-dated bonds. But that should never happen.
Instead, long-term investors should start with a diversified equity allocation and dilute the risk according to their needs and preferences by adding high quality bonds. And then realize, neither stocks nor bonds always go up. The goal is to have your bonds holding value or appreciating when stocks are declining, while allowing for bonds to disappoint during strong periods for equities. The last 3 months is a great example of this: disappointing returns for bonds but a spike for stocks as a balanced US equity split (20% S&P 500, 30% US large value, 50% mid/small value) has appreciated by almost 11%, or over 50% on an annualized basis. With a balanced portfolio somewhere between 50% and 70% in stocks, this gain more than offsets a setback in bonds.
It is important to always consider the whole picture, because salesman (brokers selling high cost bond separate accounts to quell investor fears about bonds) and the financial media will do whatever it takes to get you to focus on the trees instead of the forest.
Eric
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I gave up on the Wall Street Journal after Fox News bought them.
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Re: WSJ - Avoid Vanguard Total Bond Fund ?
Three years ago people were telling you to avoid intermediate-term bond funds. I'm glad I stayed the course.
Rick Ferri
Rick Ferri
Last edited by Rick Ferri on Sun Jan 27, 2013 10:20 am, edited 1 time in total.
The Education of an Index Investor: born in darkness, finds indexing enlightenment, overcomplicates everything, embraces simplicity.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Isn't investing fun these days? We have the choice between safe investments with negative real returns or plunging deeper into risky investments and having our heads handed to us again.
We don't know where we are, or where we're going -- but we're making good time.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I guess it's a bond picker's market.
Most of my posts assume no behavioral errors.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
I know some folks regard CD ladders as stuff for grandmas and grandpas, however, a CD ladder might be one thing to consider. It's one thing to think intellectually about duration, points of indifference, yield curves, etc. It's another, I guess, to actually see your bond fund holding(s) flat-line (or, gasp, go down) for a few months. Maybe longer.
Last edited by john94549 on Sun Jan 27, 2013 10:20 am, edited 1 time in total.
Re: Balanced Portfolios Shrug Off Bond-phobia
I'm not quite sure what your point is here.dbr wrote: This advice is nuts because it presumes people invest with a thoughtful long term plan. Our interest is trying to figure out how everything we buy can be protected from the critical crises of the day, any one of which could cost us everything in an instant.
If you have a 60/40 portfolio and you want to rebalance into a 50% overnight drop in the equity market you only need 30% of you original FI portfolio to get you back to your 60/40 AA. That means only 30% of your FI portfolio in very low risk FI like short Treasuries and the other 70% to chase yield if thats what you want to do.
You don't have to have all of your FI in one pot. Diversify.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Exactly my thinking FWIW. Interest rates on intermediate bonds are so low, cutting them to zero has a negligible effect on my overall return, especially on an after-tax basis. I just don't see a sufficient reward to undertake the risk - but then, I haven't for some time, during which bond investors have eked out those gains while I haven't.am wrote:If your only goal is to dampen the volatility of a 60/40 portfolio, why not just use short term bond ETF, especially in the current environment? How much in return would you really give up?
I've asked bond investors to consider a thought experiment wherein the yield on the 10-year treasury was X%, where X is some arbitrary low number. The question I pose is: is there no rate below which you'd reconsider your allocation to that asset? Suppose it dropped to 1% i.e. Japanese levels. Suppose it's 0.1%. Is there not any rate at which you'd throw in the towel? If you cannot imagine a rate at which you'd stand down, I submit to you that you are being dogmatic. But if there's some level where you'd exit, then can you say why? After all, that absurdly low rate is a "market" rate, right? My answer FWIW: below 2-3% there is, for me, insufficient return to cover the opportunity cost of locking up the cash for that time period.
Last edited by dmcmahon on Sun Jan 27, 2013 10:27 am, edited 1 time in total.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Thanks, your link worked. The answer to my question about what Vanguard ETF was recommended instead of Total Bond Index was BSV. VBIRX would be the mutual fund version and I would use that, if I were following their advice which I am not.Toons wrote:Link below,then first link that comes up works for me
http://news.google.com/news/story?rlz=1 ... CDoQqgIwAA
Or
http://lmgtfy.com/?q=The+Risk+Of+Safety
Last edited by SpringMan on Sun Jan 27, 2013 10:22 am, edited 1 time in total.
Best Wishes, SpringMan
Re: WSJ - Avoid Vanguard Total Bond Fund ?
"I guess it's a bond picker's market."
That's a good one.
Where's the smiley?!
Lev
That's a good one.
Where's the smiley?!
Lev
Re: WSJ - Avoid Vanguard Total Bond Fund ?
+1 AgreeSpringMan wrote:Thanks, your linked worked. The answer to my question about what Vanguard ETF was recommended instead of Total Bond Index was BSV. VBIRX would be the mutual fund version and I would use that, if I were following their advice which I am not.Toons wrote:Link below,then first link that comes up works for me
http://news.google.com/news/story?rlz=1 ... CDoQqgIwAA
Or
http://lmgtfy.com/?q=The+Risk+Of+Safety
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Re: Balanced Portfolios Shrug Off Bond-phobia
I think dbr was being funny. Hopefully I'm right. Or maybe he was just reflecting on his 100x's leveraged investments aka long term capital management style investing.Doc wrote:I'm not quite sure what your point is here.dbr wrote: This advice is nuts because it presumes people invest with a thoughtful long term plan. Our interest is trying to figure out how everything we buy can be protected from the critical crises of the day, any one of which could cost us everything in an instant.
If you have a 60/40 portfolio and you want to rebalance into a 50% overnight drop in the equity market you only need 30% of you original FI portfolio to get you back to your 60/40 AA. That means only 30% of your FI portfolio in very low risk FI like short Treasuries and the other 70% to chase yield if thats what you want to do.
You don't have to have all of your FI in one pot. Diversify.
Never underestimate the power of the force of low cost index funds.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
OP, I agree with your point. Would be much more helpful if the writer used SEC yield when comparing and talking about bond funds.
Never underestimate the power of the force of low cost index funds.
Re: Balanced Portfolios Shrug Off Bond-phobia
I thought he was being funny also. It was just a good foil to emphasize that all you FI does not need to go into one pot and that it really takes a lot less FI to rebalance than a quick look might indicate.ofcmetz wrote: I think dbr was being funny. Hopefully I'm right. Or maybe he was just reflecting on his 100x's leveraged investments aka long term capital management style investing.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
Re: Balanced Portfolios Shrug Off Bond-phobia
I don't think it is funny at all when people abandon well thought out long term plans that make sense based on investment fundamentals to chase every worry, panic, trend, guess, headline, etc. in making investment decisions.Doc wrote:I thought he was being funny also. It was just a good foil to emphasize that all you FI does not need to go into one pot and that it really takes a lot less FI to rebalance than a quick look might indicate.ofcmetz wrote: I think dbr was being funny. Hopefully I'm right. Or maybe he was just reflecting on his 100x's leveraged investments aka long term capital management style investing.
Obviously I am fully in support of the the post by Eric (EDN).
- Taylor Larimore
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Two good posts
DBR wrote:
I am fully in support of the post by Eric AND the post by DBR.
Best wishes.
Taylor
Bogleheads:I don't think it is funny at all when people abandon well thought out long term plans that make sense based on investment fundamentals to chase every worry, panic, trend, guess, headline, etc. in making investment decisions.
Obviously I am fully in support of the the post by Eric (EDN).
I am fully in support of the post by Eric AND the post by DBR.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: Balanced Portfolios Shrug Off Bond-phobia
dbr wrote:This advice is nuts because it presumes people invest with a thoughtful long term plan. Our interest is trying to figure out how everything we buy can be protected from the critical crises of the day, any one of which could cost us everything in an instant.EDN wrote:By the looks of the chart a few posts up, we've seen interest rates rise a bit and bond prices fall. This would be problematic for someone who needs to liquidate their portfolio in a matter of weeks or months and has allocated everything to longer-dated bonds. But that should never happen.
Instead, long-term investors should start with a diversified equity allocation and dilute the risk according to their needs and preferences by adding high quality bonds. And then realize, neither stocks nor bonds always go up. The goal is to have your bonds holding value or appreciating when stocks are declining, while allowing for bonds to disappoint during strong periods for equities. The last 3 months is a great example of this: disappointing returns for bonds but a spike for stocks as a balanced US equity split (20% S&P 500, 30% US large value, 50% mid/small value) has appreciated by almost 11%, or over 50% on an annualized basis. With a balanced portfolio somewhere between 50% and 70% in stocks, this gain more than offsets a setback in bonds.
It is important to always consider the whole picture, because salesman (brokers selling high cost bond separate accounts to quell investor fears about bonds) and the financial media will do whatever it takes to get you to focus on the trees instead of the forest.
Eric
Doc in response to dbr wrote:I'm not quite sure what your point is here.
Docdbr wrote:Obviously I am fully in support of the the post by Eric (EDN).
I guess that "nuts" was in reference to the "well thought out plan". That "well thought out plan" with regard to FI seems to come down to invest in TBM and diversified equities. The problem is that so many people think that you don't need to diversify FI in more than one fund because VBMFX happens to hold some 15000 different securities.
I think we may be having a problem with English rather than investing philosophy. Maybe we should switch to "bond speak".
Re: Balanced Portfolios Shrug Off Bond-phobia
It's all about having a rational, fundamentally based long term plan and not making investment decisions based on panic about some current condition or another.Doc wrote: I guess that "nuts" was in reference to the "well thought out plan". That "well thought out plan" with regard to FI seems to come down to invest in TBM and diversified equities. The problem is that so many people think that you don't need to diversify FI in more than one fund because VBMFX happens to hold some 15000 different securities.
I think we may be having a problem with English rather than investing philosophy. Maybe we should switch to "bond speak".
I couldn't care less exactly what bonds people think they should invest in. There are just a very few really stupid things one might do in bonds, and those don't come up here, mostly.
My resolution for today is that from now on I am not participating in any threads on bonds.
Re: Two good posts
I am in fully in support of Eric and DBR but, Taylor, aren't you the advocate of the three fund, keep it simple, portfolio which uses TBM FI fund which it seem that Eric, DBR (maybe) and I are questioning?Taylor Larimore wrote:DBR wrote:Bogleheads:I don't think it is funny at all when people abandon well thought out long term plans that make sense based on investment fundamentals to chase every worry, panic, trend, guess, headline, etc. in making investment decisions.
Obviously I am fully in support of the the post by Eric (EDN).
I am fully in support of the post by Eric AND the post by DBR.
Best wishes.
Taylor
I agree. The question is does a single TBM fund meet that objective? I think not and I think Eric agrees.dbr wrote:It's all about having a rational, fundamentally based long term plan and not making investment decisions based on panic about some current condition or another.
If a single TBM fund was that "rational, fundamentally based long term plan" we would have a lot fewer of these bond threads.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Good pointLevett wrote:"I guess it's a bond picker's market."
That's a good one.
Where's the smiley?!
Lev
Most of my posts assume no behavioral errors.
- Don Christy
- Posts: 391
- Joined: Sun Oct 11, 2009 10:33 pm
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Thanks Toons and Taylor.Toons wrote:Link below,then first link that comes up works for me
http://news.google.com/news/story?rlz=1 ... CDoQqgIwAA
Or
http://lmgtfy.com/?q=The+Risk+Of+Safety
Very strange, it works now, but not earlier. I first followed the OP link and couldn't access w/o subscription. So I googled, and the first link was the story, but the link took me to same subscription block.
I wonder if it takes a while before the google link accesses a sub-free version?
“Speak only if it improves upon the silence." Mahatma Gandhi
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Reality is even worse than that.NYBoglehead wrote:If you're getting 2% annually and inflation is running at 2%, and you have little prospects of price appreciation, you are treading water.
Total Bond Admiral is yielding 1.60%. Take off the income taxes owed on that yield and it becomes even more pathetic. Sounds more like slowly drowning rather than merely treading water.
-
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- Joined: Mon Dec 17, 2007 6:32 pm
Re: WSJ - Avoid Vanguard Total Bond Fund ?
When I set up the portfolio in 2007, I decided on 50/50 aggregate bond and stable-value, specifically so I wouldn't have to think about bonds. A central tenet of my investing philosophy is that I don't know enough to market time anything.
Brian
Brian
Re: WSJ - Avoid Vanguard Total Bond Fund ?
livesoft wrote:Here is another 3-month growth-of chart for the same funds as in the chart I previously posted:
All the funds had a negative total-return over the 3-months.
The same referenced chart shows Vanguard's Corporate VWEAX returning 3.23% over the same short 3 month time frame. VWEAX has been a FI diversifier that has been helpful for over a decade. Will it continue? Are the spreads becoming too thin to continue holding? Is it a suitable choice for other investors? Where is Carnac the Magnificent when we need him?
Bradley
You can sum up any active fund manager’s presentation at an investor conference in one sentence: “We’re doing well, all things considered.”
High Yield Continues to Disappoint
That is almost 70% less than a diversified portfolio of US stocks* (+11%) and about 50% less than a 60/40 mix of that diversified stock portfolio and high-quality bonds** (+6.5%). For the risk (HY was -20%+ in 2008, more than the 60/40 decline), that ain't so hot.Bradley wrote:livesoft wrote:Here is another 3-month growth-of chart for the same funds as in the chart I previously posted:
All the funds had a negative total-return over the 3-months.
The same referenced chart shows Vanguard's Corporate VWEAX returning 3.23% over the same short 3 month time frame. VWEAX has been a FI diversifier that has been helpful for over a decade. Will it continue? Are the spreads becoming too thin to continue holding? Is it a suitable choice for other investors? Where is Carnac the Magnificent when we need him?
Bradley
Eric
*20% S&P 500, 30% US large value, 50% US small value
** 12% S&P 500, 18% US large value, 30% US small value, 40% Int'd Government
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Browser wrote:Why not just buy CDs instead of ST bond fund? That's what I did.
BSV did better last year than any CD I could have purchased.
Even educators need education. And some can be hard headed to the point of needing time out.
Is TBM Optimal
If I can understand this recent back-and-forth, the question is if everyone should have everything in TBM?Doc wrote:I am in fully in support of Eric and DBR but, Taylor, aren't you the advocate of the three fund, keep it simple, portfolio which uses TBM FI fund which it seem that Eric, DBR (maybe) and I are questioning?Taylor Larimore wrote:DBR wrote:Bogleheads:I don't think it is funny at all when people abandon well thought out long term plans that make sense based on investment fundamentals to chase every worry, panic, trend, guess, headline, etc. in making investment decisions.
Obviously I am fully in support of the the post by Eric (EDN).
I am fully in support of the post by Eric AND the post by DBR.
Best wishes.
Taylor
I agree. The question is does a single TBM fund meet that objective? I think not and I think Eric agrees.dbr wrote:It's all about having a rational, fundamentally based long term plan and not making investment decisions based on panic about some current condition or another.
If a single TBM fund was that "rational, fundamentally based long term plan" we would have a lot fewer of these bond threads.
My answer would be no, but I'm not sure there is a single bond holding everyone should have everything in. TBM is good (about 5yr maturity, relatively high quality holdings) and will work well for many--clearly it is the default choice for a "total market" allocation. Some prefer less interest rate risk (and will opt for ST Bond Index), others prefer less credit risk (and will opt for Int'd Government funds), still others want/need more protection from unexpected inflation (will use TIPS).
With bonds, it's easier to discuss what almost no one should own: below investment grade bonds, preferred stocks, convertible bonds, any bonds of long-term maturity.
And, of course, no one should be altering their bond allocation based on media chatter or crystal ball gazing about the future of interest rates or credit spreads unless you hold a fund that is employing some sort of disciplined "variable" maturity or credit approach (under which case you aren't making changes, the fund is).
Eric
- Taylor Larimore
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"Abandoning well thought out long term plans."
DBR wrote:
If investors think that adding additional bond funds to already diversified Total Bond Market Index Fund is worth the complexity, they could be right (or wrong). I don't know.
There is more than one road to Dublin.
Best wishes.
Taylor
I wrote:I don't think it is funny at all when people abandon well thought out long term plans that make sense based on investment fundamentals to chase every worry, panic, trend, guess, headline, etc. in making investment decisions.
Obviously I am fully in support of the the post by Eric (EDN).
Doc wrote:I am fully in support of the post by Eric AND the post by DBR.
Doc: I was agreeing with the above quote by DBR which is not "funny." It is fundamental to the Boglehead Philosophy of stay-the-course.Taylor, aren't you the advocate of the three fund, keep it simple, portfolio which uses TBM FI fund which it seem that Eric, DBR (maybe) and I are questioning?
If investors think that adding additional bond funds to already diversified Total Bond Market Index Fund is worth the complexity, they could be right (or wrong). I don't know.
There is more than one road to Dublin.
Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Anecdotal evidence and colloquialisms aside, is there any real evidence to support the notion that there is a significant advantage to diversifying FI beyond Total Bond Fund ?
From what I've read on this forum and in the two Boglehead books, I got the impression that the TBM was a perfectly safe port for all storms.
From what I've read on this forum and in the two Boglehead books, I got the impression that the TBM was a perfectly safe port for all storms.
Re: WSJ - Avoid Vanguard Total Bond Fund ?
Who knows? Maybe this time it's different?