Warren Buffett and Bond Funds

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LXEX55
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Warren Buffett and Bond Funds

Post by LXEX55 » Thu Sep 21, 2017 9:53 am

I read in more than one place that Warren Buffett believes that bond funds are a bad idea in a retirement portfolio and that he is against the traditional 60/40 stock/bond allocation in retirement. He said he tells friends and relatives of moderate income to have about three years of ready case at hand and put the rest in an index fund such as the S&P. I am not one to question Mr. Buffett, but does anyone actually do this and doesn’t it seem rather risky? Mr. Buffett is a genius, so what am I missing here?

livesoft
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Re: Warren Buffett and Bond Funds

Post by livesoft » Thu Sep 21, 2017 9:59 am

You are missing that Mr Buffett has billions of dollars and benefits when people keep their money in the stocks of companies that he owns.
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Svensk Anga
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Re: Warren Buffett and Bond Funds

Post by Svensk Anga » Thu Sep 21, 2017 10:13 am

My late father came close. His plan was to hold a five-year treasury ladder with the balance in equities. (He did hold some foreign equity.) If you do this with a 4% withdrawal rate, it implies an about 80/20 portfolio, or even more aggressive if you spend some dividends and therefore have less than 4% coming from the treasuries.

He did have two pensions and he started SS right after retiring, so he had basic needs well covered before portfolio income. With the aggressive AA and retiring in the early 90's, the early claiming decision may have been the right choice. YMMV.

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Re: Warren Buffett and Bond Funds

Post by Broken Man 1999 » Thu Sep 21, 2017 10:17 am

I think his advice would probably be fine for a great number of people. But those who have to depend on their ready cash for living expenses would lose their opportunity to perhaps buy more equities rebalance when the market crumbles.

I'm more conservative; if I used Mr. Buffett's advice I would probably keep five years vs three years in expenses.

His idea would guard against having to sell depressed equities for living expenses, but at the cost of rebalancing.

Broken Man 1999
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Re: Warren Buffett and Bond Funds

Post by Boglegrappler » Thu Sep 21, 2017 10:24 am

You're missing what you may come to understand if you read pages 17-19 of Buffett's letter to shareholders in 2011. He sees the long term returns on fixed income as likely being negative to zero, as a summation.

http://www.berkshirehathaway.com/letters/2011ltr.pdf

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Re: Warren Buffett and Bond Funds

Post by hulburt1 » Thu Sep 21, 2017 11:00 am

I'm 64.
I have 2 years in cash--take out weekly payments.
Put dividends in cash fund.
Will take SS at 70. But if stock market go's bad will take SS.
I'm 97% in S&P, total, heath fund, and Facebook.
I'm my own advisor, I just read a lot.
I hope that thing keep going up but if I lost 50% I could still leave like I do now.
I will still have stairs of these funds.
Live on $60000 have 2.3m :beer

aj76er
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Re: Warren Buffett and Bond Funds

Post by aj76er » Thu Sep 21, 2017 11:18 am

A common piece of advice (by Larry Swedroe) is to set your AA based on your need, ability, and willingness to take risk. These will vary by individual circumstances, so It's a personal decision on how much percentage is allocated to bonds.

Some things to consider:

* Your fixed living costs + variable spending desires
* Your other sources of income (SS, pension, annuity, etc)
* Your expected longevity (or inversely your age)
* The size of your portfolio relative to your expected liabilities (from first bullet)

My guess is that many of these points are different for you and Mr. Buffet :)
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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FelixTheCat
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Re: Warren Buffett and Bond Funds

Post by FelixTheCat » Thu Sep 21, 2017 1:26 pm

Buffett advocates enough money in fixed income to survive market downturns so you don't withdraw from stocks. How many years of annual expenses do you need to survive a drought?

My reasoning is a little more emotional. I don't handle market downturns well so my percentage of bonds allow me to sleep at night.
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Re: Warren Buffett and Bond Funds

Post by my name » Thu Sep 21, 2017 2:18 pm

Warren Buffett is a ..... don't get me started.

Remember when he bought all that IBM stock? And kept buying, saying when the price went down it was a sale. So I did not sell my ESPP stock as I was going to, thinking this is a smart guy, so .....

I'm sure he pulled out all the marketing tricks to help the stock price rise. And it did. After a rotten February it was getting great in March. And I smiled. About a month later he announced he was selling a third - now that he got the stock above what he paid for it - and what he said publicly was, as Cramer said on CNBC, a major, major slap that devastated IBM. Price is still dropping, worsened after he sold more in summer.

The best I can say about this man is he is irresponsible, and ignorant of technology. He made out well at the expense of those not wealthy who lost a lot of money because they believe in him. Well, my bad, but once burned ...

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JoMoney
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Re: Warren Buffett and Bond Funds

Post by JoMoney » Thu Sep 21, 2017 10:32 pm

LXEX55 wrote:
Thu Sep 21, 2017 9:53 am
I read in more than one place that Warren Buffett believes that bond funds are a bad idea in a retirement portfolio and that he is against the traditional 60/40 stock/bond allocation in retirement. He said he tells friends and relatives of moderate income to have about three years of ready case at hand and put the rest in an index fund such as the S&P. I am not one to question Mr. Buffett, but does anyone actually do this and doesn’t it seem rather risky? Mr. Buffett is a genius, so what am I missing here?
Yes, I'm using the 'Buffett' allocation of keeping enough in cash/bonds that I feel comfortable, putting the rest in a low-cost S&P500 index fund, and not trading.
I am not quite up to 10% in bonds (as he said was the allocation he suggested for the bequest to his wife), but I think that sounds reasonable and will eventually get up to that. If someone was using a 3%-4% withdrawal rate, a 10% allocation to bonds would be 2.5-3 years of expenses.
I'm still younger/prime working years, have a high 'risk' tolerance (with no real liabilities or concerns other than myself).
It seems more 'risky' to me, to have money I may need decades down the road in dollar denominated fixed income. Your opinion, and everyone elses, will likely differ. It's up to you to come up with an allocation for the amount of risk that you're comfortable with. There does seem to be a 'center of gravity' that leads a broad average of people towards a 50/50 allocation, or something very close to that.... but not me, and apparently not Mr.Buffett (at least not at current bond yields).
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Warren Buffett and Bond Funds

Post by indexonlyplease » Fri Sep 22, 2017 6:41 am

I think it is always a big mistake when we try to compare ourselves to the billionaires. Like I hear all the time the rich don't payoff their mortgage because they would lose money.

So each person has to do what is good for them. Not what Mr. Buffet tells them what is good.

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Re: Warren Buffett and Bond Funds

Post by knpstr » Fri Sep 22, 2017 6:51 am

LXEX55 wrote:
Thu Sep 21, 2017 9:53 am
I read in more than one place that Warren Buffett believes that bond funds are a bad idea in a retirement portfolio and that he is against the traditional 60/40 stock/bond allocation in retirement. He said he tells friends and relatives of moderate income to have about three years of ready case at hand and put the rest in an index fund such as the S&P. I am not one to question Mr. Buffett, but does anyone actually do this and doesn’t it seem rather risky? Mr. Buffett is a genius, so what am I missing here?
It seems rather risky because the commonly held notion is that stocks are "risky" and bonds are "safe". So when Buffett suggests people hold less bonds, that "sounds rather risky".

When a person comes to realize the #1 risk to retirement savings is inflation NOT volatility, it is better understood that bonds are actually risky and stocks are safe. It is Buffett's opinion that 3 years of reserves in "cash" (read: short term bonds) is sufficient to whether any bear market on a practical basis.

Of course bear markets can last longer than 3 years, but usually one will not live off of 100% bonds during a bear market, they may still take their stock dividends for example and they won't start consuming more bonds "with perfect timing" read switch over right before the drop and keep it up until full recovery, etc, etc.

A while back a paper wrote how Buffett's 90/10 has just about the same downside protection vs 60/40 but superior upside opportunity.
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Re: Warren Buffett and Bond Funds

Post by Valuethinker » Fri Sep 22, 2017 6:55 am

my name wrote:
Thu Sep 21, 2017 2:18 pm
Warren Buffett is a ..... don't get me started.

Remember when he bought all that IBM stock? And kept buying, saying when the price went down it was a sale. So I did not sell my ESPP stock as I was going to, thinking this is a smart guy, so .....

I'm sure he pulled out all the marketing tricks to help the stock price rise. And it did. After a rotten February it was getting great in March. And I smiled. About a month later he announced he was selling a third - now that he got the stock above what he paid for it - and what he said publicly was, as Cramer said on CNBC, a major, major slap that devastated IBM. Price is still dropping, worsened after he sold more in summer.

The best I can say about this man is he is irresponsible, and ignorant of technology. He made out well at the expense of those not wealthy who lost a lot of money because they believe in him. Well, my bad, but once burned ...
I am sorry that you lost money on your IBM shares.

Buffett however behaved responsibly. As part of a large diversified portfolio of wholly owned businesses and stock, he made an investment in ibm.

He has said many times, and I am sure your have read it, that because of the size of his investments, and the legal requirement to disclose these holdings, he has little room to manoeuvre. Other investors will buy when he is buying, driving up the share price and the low valuation opportunity.

Conversely when he sells they sell before him, thus reducing his sale price. Thus, and again he says this specifically in his shareholder letters, he maintains as much secrecy as possible regarding his quoted stock investing.

Buffett never says to his shareholders ohh sure you can invest like me and pick stocks like me. He *specifically* tells investors to index using an S and P 500 index fund.

So he preaches the virtues of diversification, low cost and indexing. Just like we do here.

He made a bad call on IBM. He is not infallible. The company was very attentive to shareholders, distributing money via share buybacks. It is also the closest thing to a diversified software conglomerate there is.

But he was wrong. Underestimating the titanic forces in technology. Note Bill Gates is his bridge playing partner and he has given tens of billions of dollars to the Gates Foundation.

Yet afaik he has never invested in Microsoft.

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 7:12 am

LXEX55 wrote:
Thu Sep 21, 2017 9:53 am
... so what am I missing here?
This April article addresses the Buffett strategy and explains some. "A stubborn investing rule shared by Jack Bogle and Warren Buffett".

In this century, maybe things are a bit different. "The S&P shortcut doesn't provide exposure to small company stock" .. "If you've been relying on the S&P to capture much of the globe's economic growth ... it could be time to rethink"

"... with good political news priced into this market, having all your equity money in the United States doesn't feel so safe versus having broader direct international diversification".

https://www.cnbc.com/2017/04/17/a-stubb ... ffett.html

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TheTimeLord
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Re: Warren Buffett and Bond Funds

Post by TheTimeLord » Fri Sep 22, 2017 7:18 am

indexonlyplease wrote:
Fri Sep 22, 2017 6:41 am
I think it is always a big mistake when we try to compare ourselves to the billionaires. Like I hear all the time the rich don't payoff their mortgage because they would lose money.

So each person has to do what is good for them. Not what Mr. Buffet tells them what is good.
Why, he is referencing Buffet's advice to the average person not how Buffet manages his wealth which has been mainly through his ownership stake in Berkshire. But of course in the end we have to evaluate the advice we are given and make our own decisions. I assume you would do the same if the advice was from Livesoft or JoMoney, or do you consider their advice better because they are nearer to your financial situation. If that is true people starting out should seek advice from poor people.
Run, You Clever Boy!

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TheTimeLord
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Re: Warren Buffett and Bond Funds

Post by TheTimeLord » Fri Sep 22, 2017 7:33 am

Valuethinker wrote:
Fri Sep 22, 2017 6:55 am
my name wrote:
Thu Sep 21, 2017 2:18 pm
Warren Buffett is a ..... don't get me started.

Remember when he bought all that IBM stock? And kept buying, saying when the price went down it was a sale. So I did not sell my ESPP stock as I was going to, thinking this is a smart guy, so .....

I'm sure he pulled out all the marketing tricks to help the stock price rise. And it did. After a rotten February it was getting great in March. And I smiled. About a month later he announced he was selling a third - now that he got the stock above what he paid for it - and what he said publicly was, as Cramer said on CNBC, a major, major slap that devastated IBM. Price is still dropping, worsened after he sold more in summer.

The best I can say about this man is he is irresponsible, and ignorant of technology. He made out well at the expense of those not wealthy who lost a lot of money because they believe in him. Well, my bad, but once burned ...
I am sorry that you lost money on your IBM shares.

Buffett however behaved responsibly. As part of a large diversified portfolio of wholly owned businesses and stock, he made an investment in ibm.

He has said many times, and I am sure your have read it, that because of the size of his investments, and the legal requirement to disclose these holdings, he has little room to manoeuvre. Other investors will buy when he is buying, driving up the share price and the low valuation opportunity.

Conversely when he sells they sell before him, thus reducing his sale price. Thus, and again he says this specifically in his shareholder letters, he maintains as much secrecy as possible regarding his quoted stock investing.

Buffett never says to his shareholders ohh sure you can invest like me and pick stocks like me. He *specifically* tells investors to index using an S and P 500 index fund.

So he preaches the virtues of diversification, low cost and indexing. Just like we do here.

He made a bad call on IBM. He is not infallible. The company was very attentive to shareholders, distributing money via share buybacks. It is also the closest thing to a diversified software conglomerate there is.

But he was wrong. Underestimating the titanic forces in technology. Note Bill Gates is his bridge playing partner and he has given tens of billions of dollars to the Gates Foundation.

Yet afaik he has never invested in Microsoft.
I think the lesson here is that you can listen to the advice of others (and I don't think Buffet ever recommended buying IBM or any company's stock, others just assumed if Warren is buying it I should too) but ultimately you bear the consequences of your actions so best to make and own your decisions. Also, I believe most of Buffet's really good deals involve specially issued convertible notes which make him a lender until the point he wants to transition to being an owner. Finally, Buffet actually doesn't buy these investments Berkshire does, I believe virtually all his wealth is in Berkshire stock so if you want to invest like Warren Buffet buy Berkshire and you get Charlie Munger for free.
Run, You Clever Boy!

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Re: Warren Buffett and Bond Funds

Post by fantasytensai » Fri Sep 22, 2017 8:46 am

my name wrote:
Thu Sep 21, 2017 2:18 pm
Warren Buffett is a ..... don't get me started.

Remember when he bought all that IBM stock? And kept buying, saying when the price went down it was a sale. So I did not sell my ESPP stock as I was going to, thinking this is a smart guy, so .....

I'm sure he pulled out all the marketing tricks to help the stock price rise. And it did. After a rotten February it was getting great in March. And I smiled. About a month later he announced he was selling a third - now that he got the stock above what he paid for it - and what he said publicly was, as Cramer said on CNBC, a major, major slap that devastated IBM. Price is still dropping, worsened after he sold more in summer.

The best I can say about this man is he is irresponsible, and ignorant of technology. He made out well at the expense of those not wealthy who lost a lot of money because they believe in him. Well, my bad, but once burned ...
I assume you are a fellow IBM employee? Do you still participate in ESPP? The incentives are awful....5% discount, purchase price utilized per paycheck instead of per offering period.....how do you justify it?

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 9:04 am

fantasytensai wrote:
Fri Sep 22, 2017 8:46 am
I assume you are a fellow IBM employee? Do you still participate in ESPP? The incentives are awful....5% discount, purchase price utilized per paycheck instead of per offering period.....how do you justify it?
I would not justify it today (recent years). I have old ESPP when the discount was 15%. I bought around 55 a share, all under 100. If one forgets the brief blip over 200 a share, the ride was still nice getting around $165 until recent years. I was going to sell, as the stock became flat, until Warren opened his mouth. I was ill this past spring and took my eye off the stock, if I had seen the $180 I would have sold, it was just too brief a period as Warren sold right then and gave the worst press coverage anyone could throw at IBM.

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Re: Warren Buffett and Bond Funds

Post by dbr » Fri Sep 22, 2017 9:17 am

You can invest by listening to sound bytes from someone who has been extraordinarily successful building his own fortune or you can invest after building an understanding of investment fundamentals. It is your choice. That is not to say that reading what Mr. Buffett has written over the years about business and investing might not be informative when added to what you can learn from other sources.

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Re: Warren Buffett and Bond Funds

Post by deltaneutral83 » Fri Sep 22, 2017 9:35 am

As mentioned, Buffet has 99% of his wealth in Berkshire, his 90/10 US Equities/Treasury allocation IS for normal people. There are a lot of people who would love to go back 40 years when Bogle started his 500 fund and execute this allocation.

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Re: Warren Buffett and Bond Funds

Post by dbr » Fri Sep 22, 2017 9:54 am

deltaneutral83 wrote:
Fri Sep 22, 2017 9:35 am
As mentioned, Buffet has 99% of his wealth in Berkshire, his 90/10 US Equities/Treasury allocation IS for normal people. There are a lot of people who would love to go back 40 years when Bogle started his 500 fund and execute this allocation.
It is perfectly reasonable to consider investing that way from 40 years ago to today and into the future, but that reason is not because it has been suggested by Mr. Buffett. There is also plenty of reason for any particular person to not follow that advice at any particular point in time. It does seem evident that Mr. Buffett did/does intend that 90/10 advice for anyone. He is adamant that the US economy will flourish and that anyone is advised to participate in that by buying and holding US stocks plus a small amount of safe money for contigencies.

No one should ever invest any way in particular because they think Mr. Buffett or Mr. Bogle or someone else told them to.

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 10:01 am

dbr wrote:
Fri Sep 22, 2017 9:54 am
No one should ever invest any way in particular because they think Mr. Buffett or Mr. Bogle or someone else told them to.
No one suggested that.

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 10:05 am

deltaneutral83 wrote:
Fri Sep 22, 2017 9:35 am
would love to go back 40 years.
The article is about other considerations going forward. What is that phrase I keep hearing ..... ah, "The performance data shown represent past performance, which is not a guarantee of future results".

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Re: Warren Buffett and Bond Funds

Post by ruralavalon » Fri Sep 22, 2017 10:15 am

Boglegrappler wrote:
Thu Sep 21, 2017 10:24 am
You're missing what you may come to understand if you read pages 17-19 of Buffett's letter to shareholders in 2011. He sees the long term returns on fixed income as likely being negative to zero, as a summation.

http://www.berkshirehathaway.com/letters/2011ltr.pdf
That's a very interesting 3 pages. Thank you for the link.

In short historically U.S. Treasury bills have given no real return, net of taxes and inflation.
Last edited by ruralavalon on Fri Sep 22, 2017 10:18 am, edited 1 time in total.
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dbr
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Re: Warren Buffett and Bond Funds

Post by dbr » Fri Sep 22, 2017 10:17 am

my name wrote:
Fri Sep 22, 2017 10:01 am
dbr wrote:
Fri Sep 22, 2017 9:54 am
No one should ever invest any way in particular because they think Mr. Buffett or Mr. Bogle or someone else told them to.
No one suggested that.
The OP clearly asks if one shouldn't do that (implied for that reason) and solicits opinions. I expressed mine.

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Re: Warren Buffett and Bond Funds

Post by dbr » Fri Sep 22, 2017 10:20 am

ruralavalon wrote:
Fri Sep 22, 2017 10:15 am
Boglegrappler wrote:
Thu Sep 21, 2017 10:24 am
You're missing what you may come to understand if you read pages 17-19 of Buffett's letter to shareholders in 2011. He sees the long term returns on fixed income as likely being negative to zero, as a summation.

http://www.berkshirehathaway.com/letters/2011ltr.pdf
That's a very interesting 3 pages. Thank you for the link.

In short, historically Treasury bonds have given no real gain net of taxes and inflation.
Yep, Mr. Buffett makes a good case that if you want to build wealth you don't do it by holding bonds. I wonder who would have thought one would. Maybe there is some other reason one would want to hold bonds.

Mr. Buffet makes a good case that if you want to build wealth a good way to do it is to invest in the stocks of US companies over the long run. A lot of people have agreed with that and done it with good results. Maybe there is some other reason not to do that.

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Re: Warren Buffett and Bond Funds

Post by ruralavalon » Fri Sep 22, 2017 10:46 am

dbr wrote:
Fri Sep 22, 2017 10:20 am
ruralavalon wrote:
Fri Sep 22, 2017 10:15 am
Boglegrappler wrote:
Thu Sep 21, 2017 10:24 am
You're missing what you may come to understand if you read pages 17-19 of Buffett's letter to shareholders in 2011. He sees the long term returns on fixed income as likely being negative to zero, as a summation.

http://www.berkshirehathaway.com/letters/2011ltr.pdf
That's a very interesting 3 pages. Thank you for the link.

In short, historically Treasury bonds have given no real gain net of taxes and inflation.
Yep, Mr. Buffett makes a good case that if you want to build wealth you don't do it by holding bonds. I wonder who would have thought one would. Maybe there is some other reason one would want to hold bonds.

Mr. Buffet makes a good case that if you want to build wealth a good way to do it is to invest in the stocks of US companies over the long run. A lot of people have agreed with that and done it with good results. Maybe there is some other reason not to do that.
Mr. Buffett was using the 25% tax bracket and the historical 4.3% rate of inflation to illustrate his point that U.S. Treasury bills gave a negative real return (pp. 17-18).

Retired I am in the 10% tax bracket, and inflation is well under 2%, and so can make a little money on intermediate-term bond fund returns.

We have about 18 years of living expenses (net of Social Security) in bond funds, longer than our life expectancies. Peace of mind counts for something.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 11:08 am

ruralavalon wrote:
Fri Sep 22, 2017 10:46 am
... so can make a little money on intermediate-term bond fund returns. We have about 18 years of living expenses (net of Social Security) in bond funds, longer than our life expectancies. Peace of mind counts for something.
Yes, peace of mind counts. I am also considering the intermediate term bond fund as one key choice for a bond fund.

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Re: Warren Buffett and Bond Funds

Post by indexonlyplease » Fri Sep 22, 2017 12:23 pm

TheTimeLord wrote:
Fri Sep 22, 2017 7:18 am
indexonlyplease wrote:
Fri Sep 22, 2017 6:41 am
I think it is always a big mistake when we try to compare ourselves to the billionaires. Like I hear all the time the rich don't payoff their mortgage because they would lose money.

So each person has to do what is good for them. Not what Mr. Buffet tells them what is good.
Why, he is referencing Buffet's advice to the average person not how Buffet manages his wealth which has been mainly through his ownership stake in Berkshire. But of course in the end we have to evaluate the advice we are given and make our own decisions. I assume you would do the same if the advice was from Livesoft or JoMoney, or do you consider their advice better because they are nearer to your financial situation. If that is true people starting out should seek advice from poor people.

Livesoft or JoMoney, who are these people? I know nothing about there financial situation. Is JoMoney a rapper??

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Re: Warren Buffett and Bond Funds

Post by fantasytensai » Fri Sep 22, 2017 12:25 pm

my name wrote:
Fri Sep 22, 2017 9:04 am
fantasytensai wrote:
Fri Sep 22, 2017 8:46 am
I assume you are a fellow IBM employee? Do you still participate in ESPP? The incentives are awful....5% discount, purchase price utilized per paycheck instead of per offering period.....how do you justify it?
I would not justify it today (recent years). I have old ESPP when the discount was 15%. I bought around 55 a share, all under 100. If one forgets the brief blip over 200 a share, the ride was still nice getting around $165 until recent years. I was going to sell, as the stock became flat, until Warren opened his mouth. I was ill this past spring and took my eye off the stock, if I had seen the $180 I would have sold, it was just too brief a period as Warren sold right then and gave the worst press coverage anyone could throw at IBM.
So I assume you stopped contributing lately...how have the dividends been?

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 1:00 pm

fantasytensai wrote:
Fri Sep 22, 2017 12:25 pm
So I assume you stopped contributing lately...how have the dividends been?
I stopped contributing to the ESPP years ago, soon after the 15% became 5%. The appreciation was good until one day it wasn't, it was flat, and then I was ready to sell, putting the proceeds into something like the TSM.

The dividends from IBM are great. I began at some point reinvesting and the number of common stock shares ballooned. The reinvesting from ESPP shares are not put back into that, they become normal common shares. If I had sold all IBM when the price went flat, I'd be OK. I'm trying to wrap my head around this Vanguard article. They give examples where share price rises, but not when going down.
https://investor.vanguard.com/taxes/cos ... erformance

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Re: Warren Buffett and Bond Funds

Post by my name » Fri Sep 22, 2017 2:13 pm

fantasytensai wrote:
Fri Sep 22, 2017 12:25 pm
... how have the dividends been?
About dividends of IBM - here is what someone wrote on another forum. I wish it was me writing this.

"Although I sold all my shares of a larger position in IBM early this year, I have started to cautiously and slowly buy back shares- at a lower share price than my sale - because IBM looks undervalued - and I want to see if they can finally get things back on track, hopefully increasing revenues. It is hard to say no to a 4% yield which is well covered."

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midareff
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Location: Biscayne Bay, South Florida

Re: Warren Buffett and Bond Funds

Post by midareff » Fri Sep 22, 2017 2:40 pm

I'm a bit more of the William Bernstein side of the fence. I have 15 years of RMD (start 2018) in FI in my IRA. IRA is roughly 42/58, equities/fixed income and I expect equities to make some contribution to the FI in that account in the next 15 years, which will push my projection of IRA life well past my expectation of my life span. When RMD starts my need for a draw from FI in taxable equates to roughly 17 years of life.. assuming the 46% of taxable that is equities in taxable makes no additional contribution to FI there.

My last assumption is that we will not be taking luxury cruises 6 or more times a year when I reach my 80's so our need to spend the RMD and any draw from taxable will be gone. All in all... DILLIGAS.

sco
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Joined: Thu Sep 24, 2015 2:28 pm

Re: Warren Buffett and Bond Funds

Post by sco » Fri Sep 22, 2017 11:13 pm

my name wrote:
Fri Sep 22, 2017 2:13 pm
fantasytensai wrote:
Fri Sep 22, 2017 12:25 pm
... how have the dividends been?
About dividends of IBM - here is what someone wrote on another forum. I wish it was me writing this.

"Although I sold all my shares of a larger position in IBM early this year, I have started to cautiously and slowly buy back shares- at a lower share price than my sale - because IBM looks undervalued - and I want to see if they can finally get things back on track, hopefully increasing revenues. It is hard to say no to a 4% yield which is well covered."
In 10 years you'll know whether IBM would have been worth buying or not, it could just be the dividend is high because they haven't cut it back yet.

IBM isn't actually cutting edge in much these days..

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