Time to sell intermerdiate and long term bonds?

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jdkoerner
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Time to sell intermerdiate and long term bonds?

Post by jdkoerner » Tue Mar 27, 2018 12:59 pm

:confused I have BIV and BLV and VCLT in my taxable brokerage account. Since I purchased them in 2016 I've lost 7.31% of the intermediate bond ETF, 8.66% of the long term and 5.74% of the long term corporate bond ETF. Something on the order of $1600. With interest rates unlikely to go down is it time to sell?

Marketman
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Re: Time to sell intermerdiate and long term bonds?

Post by Marketman » Tue Mar 27, 2018 1:07 pm

Who Knows? I don't. They are a better buy now than when you purchased them so why sell? I would not sell unless your asset allocation has changed for some reason or unless you are tax loss harvesting. In the latter case, you would buy some similar (but not identical) fund to offset the sale.

MotoTrojan
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Re: Time to sell intermerdiate and long term bonds?

Post by MotoTrojan » Tue Mar 27, 2018 1:15 pm

What was your total return including dividends? I’d consider harvesting losses and consolidating into a single fund.

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mhc
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Re: Time to sell intermerdiate and long term bonds?

Post by mhc » Tue Mar 27, 2018 1:16 pm

What tax bracket are you in? Bonds are usually in a pre-tax account. It may make sense to sell the bond funds, move them to a tax advantaged account, sell some equity fund in the tax advantaged account, and buy an equity fund in the taxable account. This would allow you to TLH and optimize your fund placement.

This is just a guess since there is not enough information to know for sure.

inbox788
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Re: Time to sell intermerdiate and long term bonds?

Post by inbox788 » Tue Mar 27, 2018 1:17 pm

How much interest did you receive? And will you receive going forward? Did you pay taxes on it?

livesoft
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Re: Time to sell intermerdiate and long term bonds?

Post by livesoft » Tue Mar 27, 2018 1:27 pm

One should not own LT bond funds to start with unless one was unconcerned over the short and intermediate time frame which your post suggests that you are not.

As for selling intermediate-term bond funds, I rebalance between short-term corporate bond index and total US bond market index funds. Here is a 3-year growth of chart from morningstar.com:

Image

In my opinion, a quick look at the above chart says that it is time to rebalance from short-term corporate bond index fund into total US bond market index fund. That is, it is now time to buy intermediate-term bond funds and not sell them.

BTW, the time to sell intermediate-term bond funds was a few months ago as shown by the chart.
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jdkoerner
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Re: Time to sell intermerdiate and long term bonds?

Post by jdkoerner » Tue Mar 27, 2018 1:39 pm

mhc wrote:
Tue Mar 27, 2018 1:16 pm
What tax bracket are you in? Bonds are usually in a pre-tax account. It may make sense to sell the bond funds, move them to a tax advantaged account, sell some equity fund in the tax advantaged account, and buy an equity fund in the taxable account. This would allow you to TLH and optimize your fund placement.

This is just a guess since there is not enough information to know for sure.
I'm retired living on disability. As long as my capital gains are under $16K I pay no federal taxes. I have $45K in a rollover IRA but nothing can go into that nor can I withdraw without it counting as income.

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jdkoerner
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Re: Time to sell intermerdiate and long term bonds?

Post by jdkoerner » Tue Mar 27, 2018 1:51 pm

MotoTrojan wrote:
Tue Mar 27, 2018 1:15 pm
What was your total return including dividends? I’d consider harvesting losses and consolidating into a single fund.
Ignorance may prevent me from answering correctly:

These ETFs were losses. All the dividends show as losses, with a few minor exceptions that don't add up to more than $2. The intermediate bond ETF shows a short term loss of $11 and a long term loss of $1,070. The long term bond ETF shows a short term loss of $5 and a long term loss of $432. The long term corporate bond ETF lost a combined $455. Finally, my total bond market index fund, purchased in 2011 shows a loss of almost 2%, $226.

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jdkoerner
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Re: Time to sell intermerdiate and long term bonds?

Post by jdkoerner » Tue Mar 27, 2018 1:56 pm

livesoft wrote:
Tue Mar 27, 2018 1:27 pm
One should not own LT bond funds to start with unless one was unconcerned over the short and intermediate time frame which your post suggests that you are not.

As for selling intermediate-term bond funds, I rebalance between short-term corporate bond index and total US bond market index funds. Here is a 3-year growth of chart from morningstar.com:

Image

In my opinion, a quick look at the above chart says that it is time to rebalance from short-term corporate bond index fund into total US bond market index fund. That is, it is now time to buy intermediate-term bond funds and not sell them.

BTW, the time to sell intermediate-term bond funds was a few months ago as shown by the chart.
I have $11K is total bond index fund, which is now down 2% from when I purchased it in 2011. Is your suggestion to buy more? And showing the paper loss on the intermediate bond ETF, I should now buy more of that as well? :?

lack_ey
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Re: Time to sell intermerdiate and long term bonds?

Post by lack_ey » Tue Mar 27, 2018 2:19 pm

You're looking at price return. The Vanguard Total Bond Market Index Fund (admiral shares; non-Vanguard total bond market index funds show similar results) is down $0.21 per share from 2011-05-05 to yesterday, a price return of -1.97%. The total return including reinvested dividends (and including that price decline) would be 19.2% cumulatively since that point.

The bond ETFs you mention are down since mid 2016 (June 27 or so) by the amounts specified in terms of price. The total returns including dividends are still negative but not as bad. Keep in mind, around that time, the 10-year Treasury yield was dipping below 1.50% and the 5-year was at 1.00%. Those rates are more like 2.80% and 2.59% today, so it makes sense to have losses. Even short-term Treasury bills now have yields above 1.7%.

Any time you buy bonds, you could have gains or losses in the short term depending on where yields go. The annualized medium-term return is likely closer to whatever the current yield is (though it could always be higher or lower than that as well). Today's yields are higher than in 2016 and in that sense bonds are better positioned for higher returns than they were in 2016. That said, the shape of the yield curve is not much different; yields overall including on cash are higher now.

rkhusky
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Re: Time to sell intermerdiate and long term bonds?

Post by rkhusky » Tue Mar 27, 2018 2:27 pm

jdkoerner wrote:
Tue Mar 27, 2018 12:59 pm
:confused I have BIV and BLV and VCLT in my taxable brokerage account. Since I purchased them in 2016 I've lost 7.31% of the intermediate bond ETF, 8.66% of the long term and 5.74% of the long term corporate bond ETF. Something on the order of $1600. With interest rates unlikely to go down is it time to sell?
If you still have many years until you need to withdraw these funds, then you actually want interest rates to increase, because, after the drop in price, you will begin to see your dividends increase, eventually surpassing the temporary price drop. If you need to withdraw these funds in the next few years, you probably should have been in a short term bond fund. It's too late at this point, since future interest rate predictions are already baked into the price.

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Re: Time to sell intermerdiate and long term bonds?

Post by MotoTrojan » Tue Mar 27, 2018 2:39 pm

jdkoerner wrote:
Tue Mar 27, 2018 1:51 pm
MotoTrojan wrote:
Tue Mar 27, 2018 1:15 pm
What was your total return including dividends? I’d consider harvesting losses and consolidating into a single fund.
Ignorance may prevent me from answering correctly:

These ETFs were losses. All the dividends show as losses, with a few minor exceptions that don't add up to more than $2. The intermediate bond ETF shows a short term loss of $11 and a long term loss of $1,070. The long term bond ETF shows a short term loss of $5 and a long term loss of $432. The long term corporate bond ETF lost a combined $455. Finally, my total bond market index fund, purchased in 2011 shows a loss of almost 2%, $226.
I assume the dividends you say have losses are tax-lots of auto-reinvested dividends? You didn't directly pay for those lots, your larger original purchase(s) did, so you need to look at those amounts (the current value, not gain/loss) as gains when considering your total return.

As the above poster stated, you came out ahead on Total Bond and have a much smaller loss than you are considering on the other funds. This could still be a good opportunity to tax-loss harvest.

Why are you holding the intermediate and long-term bond funds? Would it still meet your needs if you swapped these out for Total Bond? You could sell both, buy Total Bond, and then write-off your ~$1600 loss on your taxes.

Another matter altogether is what your marginal tax-rate is, and if it makes sense to hold bonds like this in taxable at all.

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munemaker
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Re: Time to sell intermerdiate and long term bonds?

Post by munemaker » Tue Mar 27, 2018 2:42 pm

jdkoerner wrote:
Tue Mar 27, 2018 1:56 pm
Is your suggestion to buy more? And showing the paper loss on the intermediate bond ETF, I should now buy more of that as well? :?
You should buy in accordance with your investment policy statement, not based on daily market fluctuations.

Keep in mind it is not a loss until you sell.

If you think a 2% drop is bad, you are in for future shock in the equity market. Sounds like you should be in CDs which have stable principle.

lahob
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Re: Time to sell intermerdiate and long term bonds?

Post by lahob » Tue Mar 27, 2018 2:50 pm

jdkoerner wrote:
Tue Mar 27, 2018 12:59 pm
:confused I have BIV [...] in my taxable brokerage account. Since I purchased them in 2016 I've lost 7.31% of the intermediate bond ETF
You didn't really lose 7.31%. Over that time the total return of BIV is about -2.5%. You are looking at price only. You need to look at total return, which includes dividends.

The current SEC yield of BIV is about 3.2%, so a year from now you might very well be in the black. (Or not, but I bet you'll be close.) BIV has never had a negative return over a 2 year period in it's history so far. That doesn't mean it can't happen (it can), but it does tell you that BIV isn't going to "lose money" that often over periods of a few years.

livesoft
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Re: Time to sell intermerdiate and long term bonds?

Post by livesoft » Tue Mar 27, 2018 3:11 pm

jdkoerner wrote:
Tue Mar 27, 2018 1:56 pm
I have $11K is total bond index fund, which is now down 2% from when I purchased it in 2011. Is your suggestion to buy more? And showing the paper loss on the intermediate bond ETF, I should now buy more of that as well? :?
I see you are doing this in a taxable account. My suggestion is that you do not have bond funds in a taxable account unless you don't have any tax-deferred accounts.

I bought more shares of a Total US bond market index fund yesterday, so if you can buy more bond fund shares in a tax-deferred account, then Yes, I am saying you should buy more. But I also have to say that I sold shares a few months ago and now I would be rebalancing back into total US bond index fund.

So my recommendation is to figure out how to tax-loss harvest your bond fund losses and buy replacement shares in a tax-deferred account without creating wash sales.
Last edited by livesoft on Tue Mar 27, 2018 3:12 pm, edited 1 time in total.
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PFInterest
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Re: Time to sell intermerdiate and long term bonds?

Post by PFInterest » Tue Mar 27, 2018 3:12 pm

jdkoerner wrote:
Tue Mar 27, 2018 12:59 pm
:confused I have BIV and BLV and VCLT in my taxable brokerage account. Since I purchased them in 2016 I've lost 7.31% of the intermediate bond ETF, 8.66% of the long term and 5.74% of the long term corporate bond ETF. Something on the order of $1600. With interest rates unlikely to go down is it time to sell?
do you know what TLH is?

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Phineas J. Whoopee
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Re: Time to sell intermerdiate and long term bonds?

Post by Phineas J. Whoopee » Tue Mar 27, 2018 4:19 pm

PFInterest wrote:
Tue Mar 27, 2018 3:12 pm
jdkoerner wrote:
Tue Mar 27, 2018 12:59 pm
:confused I have BIV and BLV and VCLT in my taxable brokerage account. Since I purchased them in 2016 I've lost 7.31% of the intermediate bond ETF, 8.66% of the long term and 5.74% of the long term corporate bond ETF. Something on the order of $1600. With interest rates unlikely to go down is it time to sell?
do you know what TLH is?
I'd like to assist. TLH is tax-loss harvesting, and the linked wiki page explains it fairly well.

PJW

livesoft
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Re: Time to sell intermerdiate and long term bonds?

Post by livesoft » Mon Apr 02, 2018 2:11 pm

livesoft wrote:
Tue Mar 27, 2018 1:27 pm
In my opinion, a quick look at the above chart says that it is time to rebalance from short-term corporate bond index fund into total US bond market index fund. That is, it is now time to buy intermediate-term bond funds and not sell them.

BTW, the time to sell intermediate-term bond funds was a few months ago as shown by the chart.
So did anyone buy intermediate-term bond funds back on March 27th? ;)
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bpg1234
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Re: Time to sell intermerdiate and long term bonds?

Post by bpg1234 » Mon Apr 02, 2018 2:26 pm

livesoft wrote:
Mon Apr 02, 2018 2:11 pm
livesoft wrote:
Tue Mar 27, 2018 1:27 pm
In my opinion, a quick look at the above chart says that it is time to rebalance from short-term corporate bond index fund into total US bond market index fund. That is, it is now time to buy intermediate-term bond funds and not sell them.

BTW, the time to sell intermediate-term bond funds was a few months ago as shown by the chart.
So did anyone buy intermediate-term bond funds back on March 27th? ;)
:oops: I didn't although after I saw your post that night I knew I should of! You think it's too late to buy at this point after recent runup?

livesoft
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Re: Time to sell intermerdiate and long term bonds?

Post by livesoft » Mon Apr 02, 2018 2:27 pm

bpg1234 wrote:
Mon Apr 02, 2018 2:26 pm
:oops: I didn't although after I saw your post that night I knew I should of! You think it's too late to buy at this point after recent runup?
Well, today was a bona fide RBD (intraday), so it is time to sell the bond fund shares you bought last week and buy something like Total Stock Market Index fund. :twisted:
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