Why am I even holding BND? It has only been losing me money.

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Vision
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Why am I even holding BND? It has only been losing me money.

Post by Vision » Fri Apr 13, 2018 6:12 am

So I've been indexing with maintenance of the following proportions:

60% VTI
30% VXUS
10% BND

So 90% stock, 10% bond index portfolio.

For last few years VTI and VXUS have been going fine, but BND is stagnating and even losing me money. Furthermore, bonds are in a bubble.

So...any point even holding on to BND?

Prospectus for the bond ETF I'm holding:
https://personal.vanguard.com/us/funds/ ... irect=true

Any input guys?

livesoft
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Re: Why am I even holding BND? It has only been losing me money.

Post by livesoft » Fri Apr 13, 2018 6:18 am

You were holding BND so you could sell it on April 2 and buy VTI immediately. Then you sold VTI on April 5th and bought back your BND. You made about 4% on your BND in a few days.
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pharmermummles
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Re: Why am I even holding BND? It has only been losing me money.

Post by pharmermummles » Fri Apr 13, 2018 6:25 am

It's all about your asset allocation, i.e ability and need to take on risk. Bond holdings aren't really for making money so much as mitigating risk while fending off inflation. I don't currently own bonds in my retirement accounts, but that has nothing to do with recent performance or a perceived bubble. I am 27, and my ability to take on risk is enormous with a long investment horizon.

You need to decide how much risk you want to take on and hold an asset allocation appropriate to that risk. You may be losing money with BND, but for the most part, bond losses are much less dramatic than stock losses. If you know what holding 100% equities means in terms of risk, and you are comfortable with that, AND if you are capable of maintaining that asset allocation through a true bear market, that's a viable strategy. Adjusting bond allocation due to recent performance is indicative that you may flee equities when the opposite is true, however, so I would caution such an aggressive allocation.

Pick an allocation and stick with it. Don't try to time the market, because you will lose.

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Re: Why am I even holding BND? It has only been losing me money.

Post by 3funder » Fri Apr 13, 2018 6:27 am

You're holding BND, presumably, because it's part of your investing plan. Your allocation is a fine one; no need to change things just because bond prices are headed lower and bond yields are headed higher. Remember -- your portfolio isn't diversified if everything is always going up. BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned. Regarding bubbles, sure, bonds aren't cheap right now, but neither are US stocks, and you have a healthy allocation to those.
Last edited by 3funder on Fri Apr 13, 2018 6:30 am, edited 1 time in total.

rongos
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Re: Why am I even holding BND? It has only been losing me money.

Post by rongos » Fri Apr 13, 2018 6:29 am

Bnd will make money if you hold it through its duration.

Stocks have been losing money last few months, isn't that equally worrisome as the bond's losing periods?

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Re: Why am I even holding BND? It has only been losing me money.

Post by S_Track » Fri Apr 13, 2018 6:41 am

3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks

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Re: Why am I even holding BND? It has only been losing me money.

Post by 3funder » Fri Apr 13, 2018 6:49 am

S_Track wrote:
Fri Apr 13, 2018 6:41 am
3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
What it means, in a nutshell, is that if interest rates were to rise by 1%, the resulting capital depreciation would be approximately 6%. That said, you would get more income via the higher yield. My father is a very bright former CFO with a BS in financial economics and an MBA from UPenn/Wharton. Vanguard's Intermediate-Term Bond Index Fund accounts for 100% of his bond holdings. He's 62 years old, and bonds comprise 40% of his portfolio. The duration of his bond fund is approximately 7 years. He isn't the least bit concerned. Am I saying do what he does just because he is an accomplished Ivy league graduate? No, but knowing this should count for something.
Last edited by 3funder on Fri Apr 13, 2018 12:20 pm, edited 1 time in total.

Dudley
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Re: Why am I even holding BND? It has only been losing me money.

Post by Dudley » Fri Apr 13, 2018 7:12 am

Because when your 90% allocation of stocks eventually go down by 10x more you are going to [lose a lot of money - moderator prudent] and you will have nothing to replenish them with.

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Re: Why am I even holding BND? It has only been losing me money.

Post by jadd806 » Fri Apr 13, 2018 7:14 am

S_Track wrote:
Fri Apr 13, 2018 6:41 am
3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
When a bond is redeemed at maturity, the issuer pays the holder the par value. As the bond moves closer to maturity, the market price of the bond converges with the par value. While a bond that matures 10 years from now may be sold at a discount if market participants expect interest rates to rise, a bond that matures tomorrow would not sell at a discount since the holder could just wait and collect the higher par value.

You may plan to retire in less than 6 years, but how long do you plan to hold the total bond investment? For example, you probably aren't going to sell your entire total bond holdings on the day that you retire.

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Re: Why am I even holding BND? It has only been losing me money.

Post by Vision » Fri Apr 13, 2018 7:20 am

Dudley wrote:
Fri Apr 13, 2018 7:12 am
Because when your 90% allocation of stocks eventually go down by 10x more you are going to get your a$$ handed to you and you will have nothing to replenish them with.
If stock market goes down 90% then it is pretty certain WW3 is ongoing and stocks will be last of worries at that time.

livesoft
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Re: Why am I even holding BND? It has only been losing me money.

Post by livesoft » Fri Apr 13, 2018 7:26 am

This thread is very amusing because BND is the only thing that @Vision has mentioned that has made any money in the past month for the buy-and-hold investor:

Image

VTI is down 4%! VXUS is down about 0.9% BND is UP about 0.4%.

Frankly, I'm surprised the question isn't "Why am I even holding VTI? :twisted:
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Re: Why am I even holding BND? It has only been losing me money.

Post by likegarden » Fri Apr 13, 2018 7:28 am

At the last Great Recession I used bond index funds to rebalance at a low point in the stock market.

Dudley
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Re: Why am I even holding BND? It has only been losing me money.

Post by Dudley » Fri Apr 13, 2018 7:28 am

Vision wrote:
Fri Apr 13, 2018 7:20 am
Dudley wrote:
Fri Apr 13, 2018 7:12 am
Because when your 90% allocation of stocks eventually go down by 10x more you are going to get your a$$ handed to you and you will have nothing to replenish them with.
If stock market goes down 90% then it is pretty certain WW3 is ongoing and stocks will be last of worries at that time.
Reread. I didn't say stock were going down 90%. I said the allocation of stocks - which is at 90% - will feasibly experience future losses tenfold that of which the bond fund has experienced.

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Re: Why am I even holding BND? It has only been losing me money.

Post by ad2007 » Fri Apr 13, 2018 7:40 am

OP,

How did you arrive at your 60/30/10 allocation? And do you think that the 60/30 will always go up?

I've been through a few bear markets and am glad that I have a healthy portion in bonds for the next downturn.

BTW 10% won't make huge impact either way. Go 100% stocks. I've never owned bonds until I was 45, and I'm ready to early retire at 50/50 AA.

Good luck.

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Re: Why am I even holding BND? It has only been losing me money.

Post by grok87 » Fri Apr 13, 2018 7:47 am

3funder wrote:
Fri Apr 13, 2018 6:27 am
Remember -- your portfolio isn't diversified if everything is always going up.
This is the key point.
Keep calm and Boglehead on. KCBO.

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Re: Why am I even holding BND? It has only been losing me money.

Post by nisiprius » Fri Apr 13, 2018 7:56 am

...bonds are in a bubble...
How do you know this? What is your definition of a "bubble?" How high above their proper value do you think intermediate-term bonds are? Eight times as high as they should be? Three times as high they should be? 10% above where they should be?

Can you seriously imagine someone paying $3,000 to receive, let's say, $60 over the next five years and then a final repayment of $1,000?

Do you know anybody who has quit their job to spend all their time trading bonds?
Vision wrote:
Fri Apr 13, 2018 6:12 am
For last few years VTI and VXUS have been going fine, but BND is stagnating and even losing me money.
Have you looked at Vanguard's capsule fund summaries?

1) For BND, it says "Goal is to keep pace with U.S. bond market returns." Do you want to do that? If so, has it failed to meet its goal? If not, why were you holding it in the first place?

2) How long is "the last few years?" Vanguard gives this guidance (click on "How the potential for risk affects your investment" underneath the risk indicator graphic)
Conservative to moderate funds—Risk level 2 Risk level two
Vanguard funds classified as conservative to moderate are subject to low-to-moderate fluctuations in share prices. In general, such funds may be appropriate for investors with medium-term investment horizons (four to ten years).
So, the general idea is that bond funds are for people who are going to hold them at least four to ten years. (Stock funds, longer than that). So perhaps it isn't appropriate to consider less than four years. Here is what BND did including dividends (you shouldn't be looking only at price unless you are throwing away your dividends or donating them all to charity) over the last four years. (One of the dangers of ETFs is that websites customarily display price charts which throw away dividends, and dividends are much more important to bond ETFs and funds than they are to any stock fund, even dividend stock funds).

Source

Image

People seem to apply a double standard for stocks and bonds. For a stock, a chart like that would often be seen as an obvious upward trend, with the normal, expected volatility. For bonds, people seem to expect "all up all the time." No, bonds are risky, too. They are much less risky than stocks, but they aren't bank accounts and they fluctuate in value.

3) Sometimes stocks go up and bonds go down. That's happening right now. Sometimes they both go up. Sometimes they both go down. Sometimes stocks go down and bonds go up. If that isn't what you expect, then you've been reading something misleading. Look at your portfolio as a whole, don't obsess about parts of it, parts of it will always be going down. In 2008 you would have been just as glad to have BND (blue; VTI, orange) are you are sorry to have it now. Gladder.

Image
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Re: Why am I even holding BND? It has only been losing me money.

Post by z3r0c00l » Fri Apr 13, 2018 8:04 am

You probably lost thousands in stocks since the high point in January. Meanwhile, the bond fund monthly dividends are up ca. 15%. It cost you to get here, but the bonds are now paying more and will catch up in due time. A 2.95% yield isn't so bad.

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Re: Why am I even holding BND? It has only been losing me money.

Post by dbr » Fri Apr 13, 2018 8:39 am

The idea that one has to have an investment that can't lose money is not one of the important conditions in selecting assets to hold. Trying to include such a thing in one's portfolio is one of the major sources of consternation and frustration for many investors.

There is, of course, a simple solution, which is to invest only in stocks and not in bonds. On the other hand trying to find an asset that cannot lose value in real dollars after inflation is actually impossible.

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Re: Why am I even holding BND? It has only been losing me money.

Post by MotoTrojan » Fri Apr 13, 2018 8:55 am

S_Track wrote:
Fri Apr 13, 2018 6:41 am
3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
Even 10 years after retiring you may still have a multi-decade horizon. Don’t confuse the two.

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Re: Why am I even holding BND? It has only been losing me money.

Post by dbr » Fri Apr 13, 2018 9:09 am

MotoTrojan wrote:
Fri Apr 13, 2018 8:55 am
S_Track wrote:
Fri Apr 13, 2018 6:41 am
3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
Even 10 years after retiring you may still have a multi-decade horizon. Don’t confuse the two.
More than that, it is entirely possible to retire quite comfortably on assets that vary in value. It takes a lot of proving to show that there is any useful benefit otherwise.

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Re: Why am I even holding BND? It has only been losing me money.

Post by aburntoutcase » Fri Apr 13, 2018 9:37 am

Vision wrote:
Fri Apr 13, 2018 6:12 am
Any input guys?
Yes - you first mistake was to hold things that go down. Always hold positions that go up. It is easy.

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Re: Why am I even holding BND? It has only been losing me money.

Post by triceratop » Fri Apr 13, 2018 10:20 am

You were holding BND so you could sell it on April 2 and buy VTI immediately. Then you sold VTI on April 5th and bought back your BND. You made about 4% on your BND in a few days.
Advocating market timing to beginner investors on bogleheads.org is a new twist. :shock:
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Re: Why am I even holding BND? It has only been losing me money.

Post by Hyperborea » Fri Apr 13, 2018 10:46 am

likegarden wrote:
Fri Apr 13, 2018 7:28 am
At the last Great Recession I used bond index funds to rebalance at a low point in the stock market.
Rebalancing from stocks to bonds over a reasonable length of time doesn't bring any net gains over holding a higher equity allocation. As just one example, over the last 20 years holding an allocation of 100/0 beat an allocation of 90/10 which beat an allocation of 50/50.
https://www.portfoliovisualizer.com/bac ... alBond3=50

You hold bonds because you want a higher guarantee of the money being there "now" at any point in time with at least some return. If you really need the exact amount available then you want to be in even shorter duration government bonds or cash. If you've got a long enough time, have looked after your potential "now" money (emergency fund), and are a deep sleeper then going to a higher equity allocation is the better choice.
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Re: Why am I even holding BND? It has only been losing me money.

Post by peterinjapan » Fri Apr 13, 2018 10:49 am

I'm glad I'm not the only one experiencing this. I held $40k in BND for 3 years and got $200 total in total increase. My new plan is a CD ladder (brokered CD through Fidelity), now that rates are up to 2.6%, with a total return of something like 2.3% for the whole CD ladder (moving up as time progresses). I understand that this doesn't go "up" to balance if stocks crash, but it seems like a sound idea for a portion of my money ($100k, about 5% of my portfolio, inside my IRA).

Am I crazy?

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Re: Why am I even holding BND? It has only been losing me money.

Post by rgs92 » Fri Apr 13, 2018 10:51 am

Beware of recency bias.

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Re: Why am I even holding BND? It has only been losing me money.

Post by dbr » Fri Apr 13, 2018 10:59 am

peterinjapan wrote:
Fri Apr 13, 2018 10:49 am
I'm glad I'm not the only one experiencing this. I held $40k in BND for 3 years and got $200 total in total increase. My new plan is a CD ladder (brokered CD through Fidelity), now that rates are up to 2.6%, with a total return of something like 2.3% for the whole CD ladder (moving up as time progresses). I understand that this doesn't go "up" to balance if stocks crash, but it seems like a sound idea for a portion of my money ($100k, about 5% of my portfolio, inside my IRA).

Am I crazy?
There is nothing crazy about holding CDs instead of bond funds. That idea has been repeated on this forum almost ad nauseum. It is legitimate. For the long term investor there is also no special advantage to CDs either. The idea that a reasonable investment has to generate good performance in each and every short run of time is just wrong, bonds included. You are trying too hard to think that a making a change like that to 5% of your portfolio makes any difference at all other than adding bother, at least inside a long term investment such as an IRA. CDs are an excellent choice for shorter run holdings where one wants stable principal.

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Re: Why am I even holding BND? It has only been losing me money.

Post by hulburt1 » Fri Apr 13, 2018 11:13 am

I'm 65 this week. 93% stock and 3 years living in cash no never bonds. I make $35000 in dividends which I put to cash if I get down to 2 years in cash.. I only want $1800 a month from my funds and cash.. I live on $2500 a month. No SS until 70. Wife has her own spend more then me.

rgs92
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Re: Why am I even holding BND? It has only been losing me money.

Post by rgs92 » Fri Apr 13, 2018 11:23 am

When the next international or financial crisis occurs, if you are out of bonds you will miss the runup from the flight to quality.
I remember in 2000 and 2005 I was told by Fidelity and others to stay short-term in bonds because interest rates are historically low and nowhere near levels of 10-14% like they were in 1981.

Luckily, I didn't take their advice and kept my bond position and will always do so in a 60/40 stock/bond portfolio with frequent rebalancing.
Last edited by rgs92 on Fri Apr 13, 2018 11:26 am, edited 1 time in total.

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Re: Why am I even holding BND? It has only been losing me money.

Post by triceratop » Fri Apr 13, 2018 11:25 am

rgs92 wrote:
Fri Apr 13, 2018 11:23 am
When the next international or financial crisis occurs, if you are out of bonds you will miss the runup from the flight to quality.
I remember in 2000 and 2005 I was told by Fidelity and others to stay short-term in bonds because interest rates are historically low and nowhere near levels of 10-14% like they were in 1981.
BND holds substantial quantity of corporate issues; credit risk may take a hit and not be included in any flight to quality. That's what happened in 2008 anyway.

IT Treasuries definitely got a nice boost in the flight to quality; the phenomena has occurred.
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Re: Why am I even holding BND? It has only been losing me money.

Post by White Coat Investor » Fri Apr 13, 2018 11:26 am

livesoft wrote:
Fri Apr 13, 2018 7:26 am
This thread is very amusing because BND is the only thing that @Vision has mentioned that has made any money in the past month for the buy-and-hold investor:

Image

VTI is down 4%! VXUS is down about 0.9% BND is UP about 0.4%.

Frankly, I'm surprised the question isn't "Why am I even holding VTI? :twisted:
It's because he knows BND is in a bubble, which makes me wonder why he bought it in the first place with a crystal ball like that.

Seriously, this thread is a good demonstration of why Investing 101 is so important. I wrote a post about Investing 101 recently that would be worth reading for the OP.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Why am I even holding BND? It has only been losing me money.

Post by rgs92 » Fri Apr 13, 2018 11:32 am

Good point livesoft and thank you for that, but Total Bond Market as a whole seems to have done well overall in all the different flavors of crisis over the last 20 years. It would take real Armageddon to take down the bulk of major companies' bond portfolios.

But I think protecting against that kind of event is not what the average investor is trying to do (except the Permanent Portfolio advocates).
But again, thanks for the insight.

I don't know if it's even possible to cope with a total meltdown that would take down the corporate bond market with any non-extreme strategy.

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Re: Why am I even holding BND? It has only been losing me money.

Post by Alexa9 » Fri Apr 13, 2018 11:37 am

Why hold BND? Because another 2008 will happen eventually.

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Re: Why am I even holding BND? It has only been losing me money.

Post by cfs » Fri Apr 13, 2018 11:56 am

The BUY signal some have been waiting for !!!!

As soon as "why bonds" conversations make a comeback could be a good time to BUY bonds (however, just say no to drinking the bonds are for safety kool aid . . . that's all bunk). Good luck with your investments, y gracias por leer ~cfs~

p.s. You just don't want to be out of this market for ONE day !!!
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Re: Why am I even holding BND? It has only been losing me money.

Post by WhiteMaxima » Fri Apr 13, 2018 12:09 pm

BND losing -1% a year vs Dow drop -40% in one day and you balanced BND into SPY after the drop. If you don't like BND, exchange it into Money Market Fund. Interest is low but won't leak money like BND.

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Re: Why am I even holding BND? It has only been losing me money.

Post by DaftInvestor » Fri Apr 13, 2018 2:57 pm

If you know for a fact that "bonds are in a bubble" then why are you holding? (this is news to me by-the-way)
Investing in a bubble is very bad.

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Re: Why am I even holding BND? It has only been losing me money.

Post by GAAP » Fri Apr 13, 2018 3:12 pm

Fundamentally, because the OP doesn't understand why the AA was chosen -- or at least hasn't internalized the answer and the corresponding implications.

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Re: Why am I even holding BND? It has only been losing me money.

Post by tesuzuki2002 » Fri Apr 13, 2018 3:16 pm

livesoft wrote:
Fri Apr 13, 2018 6:18 am
You were holding BND so you could sell it on April 2 and buy VTI immediately. Then you sold VTI on April 5th and bought back your BND. You made about 4% on your BND in a few days.
I do like the volatility of the markets much like it was in 2012? down 2 days and Up big the day... A decent way to and a few % points at the end of the year... but you have focus on weekly trades... it's fun to do though...

I'm liking the volatility again...

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Re: Why am I even holding BND? It has only been losing me money.

Post by WhiteMaxima » Fri Apr 13, 2018 3:25 pm

tesuzuki2002 wrote:
Fri Apr 13, 2018 3:16 pm
livesoft wrote:
Fri Apr 13, 2018 6:18 am
You were holding BND so you could sell it on April 2 and buy VTI immediately. Then you sold VTI on April 5th and bought back your BND. You made about 4% on your BND in a few days.
I do like the volatility of the markets much like it was in 2012? down 2 days and Up big the day... A decent way to and a few % points at the end of the year... but you have focus on weekly trades... it's fun to do though...

I'm liking the volatility again...
That's rebalance. whenever market make > +-2 move, do a rebalance. Of course, in a tax deferred or Roth account to avoid short term gain tax.

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Re: Why am I even holding BND? It has only been losing me money.

Post by tesuzuki2002 » Fri Apr 13, 2018 3:28 pm

WhiteMaxima wrote:
Fri Apr 13, 2018 3:25 pm
tesuzuki2002 wrote:
Fri Apr 13, 2018 3:16 pm
livesoft wrote:
Fri Apr 13, 2018 6:18 am
You were holding BND so you could sell it on April 2 and buy VTI immediately. Then you sold VTI on April 5th and bought back your BND. You made about 4% on your BND in a few days.
I do like the volatility of the markets much like it was in 2012? down 2 days and Up big the day... A decent way to and a few % points at the end of the year... but you have focus on weekly trades... it's fun to do though...

I'm liking the volatility again...
That's rebalance. whenever market make > +-2 move, do a rebalance. Of course, in a tax deferred or Roth account to avoid short term gain tax.


Very Ture... but I would argue the show premise of Rebalancing was not intended to be done on a weekly basis... Those kind of trades are supposed to be "in the noise..". At the end of the year. but if you trade on it... that noise can bump you a percent or 2 at year end.

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Re: Why am I even holding BND? It has only been losing me money.

Post by livesoft » Fri Apr 13, 2018 3:30 pm

It was a great day to rebalance. Intraday on April 2, VTI was down a screaming "Buy Me! Buy Me!" -3.3%. That doesn't happen very often and that is definitely not Noise. It was almost pure Signal.

When one rebalanced on April 2, one had no idea that just few days later, they would hit their rebalancing band on the high trigger point because of the 4% gain.
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GibsonL6s
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Re: Why am I even holding BND? It has only been losing me money.

Post by GibsonL6s » Fri Apr 13, 2018 3:38 pm

Vision wrote:
Fri Apr 13, 2018 6:12 am
So I've been indexing with maintenance of the following proportions:

60% VTI
30% VXUS
10% BND

So 90% stock, 10% bond index portfolio.

For last few years VTI and VXUS have been going fine, but BND is stagnating and even losing me money. Furthermore, bonds are in a bubble.

So...any point even holding on to BND?

Prospectus for the bond ETF I'm holding:
https://personal.vanguard.com/us/funds/ ... irect=true

Any input guys?
Simple you need to have the portfolio you feel good about holding for the number of years you need to hold it. I would be more concerned about your attitude toward losses as it relates to equities since the bigger loss potential is there. If VTI and VXUS stop "going fine" are you going to sell them pay the taxes on the gains and figure out when to get back into the market?

With respect to bonds, I mostly hold treasuries for relatively short duration and some short term muni. I am making a making a choice to reduce duration as my FI also is my emergency fund and if things get cheap in the equity markets, I may buy more :D

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Re: Why am I even holding BND? It has only been losing me money.

Post by Clever_Username » Fri Apr 13, 2018 10:23 pm

White Coat Investor wrote:
Fri Apr 13, 2018 11:26 am
Seriously, this thread is a good demonstration of why Investing 101 is so important. I wrote a post about Investing 101 recently that would be worth reading for the OP.
This one? https://www.whitecoatinvestor.com/investing-101/

It's on my to-read list (I'm not OP though).
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Re: Why am I even holding BND? It has only been losing me money.

Post by White Coat Investor » Sat Apr 14, 2018 1:48 am

That's the one. I think we forget sometimes that we all had to learn each of those lessons at some point.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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Re: Why am I even holding BND? It has only been losing me money.

Post by stocknoob4111 » Sat Apr 14, 2018 12:16 pm

S_Track wrote:
Fri Apr 13, 2018 6:41 am
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
When the Dow tanked recently 600 or so points very recently BND actually went up. This is because when capital flows out of equities it finds it's way back into safe assets like bonds. When the demand for bonds is greater yields fall and the NAV rises which is exactly what happened recently.

We also have to remember that despite the Fed raising interest rates long term rates are just going in a circle around 2.75-2.85% for the last few months. My thoughts are it will just remain under 3% for the foreseeable future while the yield curve flattens and eventually inverts.

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Re: Why am I even holding BND? It has only been losing me money.

Post by dbr » Sat Apr 14, 2018 12:53 pm

S_Track wrote:
Fri Apr 13, 2018 6:41 am
3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
No. The rule at all times is to hold a specific asset allocation determined by your need, ability, and willingness to take risk. It may be convenient to use contributions to continue to drive your asset allocation to target if it is off by a bit.

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Re: Why am I even holding BND? It has only been losing me money.

Post by Valuethinker » Sat Apr 14, 2018 3:14 pm

rgs92 wrote:
Fri Apr 13, 2018 11:23 am
When the next international or financial crisis occurs, if you are out of bonds you will miss the runup from the flight to quality.
I remember in 2000 and 2005 I was told by Fidelity and others to stay short-term in bonds because interest rates are historically low and nowhere near levels of 10-14% like they were in 1981.

Luckily, I didn't take their advice and kept my bond position and will always do so in a 60/40 stock/bond portfolio with frequent rebalancing.
it's quite easy to imagine a crisis where bonds drop. For example another 1973 style Oil Crisis.

However, hopefully, they will drop less than stocks. One will wish one had been in cash, but a drop of say 20% in bonds v. 50% in stocks on a 60/40 portfolio would be -38% overall, which is better than -50%.

The argument for holding bonds over cash is that, in the long run, holding cash has really hurt. Bonds say pay 1-2% above inflation, long run, and cash pays 0%-- the yield curve is normally upward sloping . If inflation is significant, the after tax return on cash is negative (since you pay tax on the nominal interest paid). Compound 1-2% over 30 years and that's a decent chunk of return lost.

TIPS bonds are probably safe, but they are also quite volatile. In a scenario like the above, they are likely to lose the least.

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Re: Why am I even holding BND? It has only been losing me money.

Post by grabiner » Sat Apr 14, 2018 3:20 pm

S_Track wrote:
Fri Apr 13, 2018 6:41 am
3funder wrote:
Fri Apr 13, 2018 6:27 am
BND has a duration of approximately 6 years; if your time horizon is longer than 6 years, there's no reason to be concerned.
I read that frequently up and may not understand why. I am guessing a good majority of us here are in the accumulation phase and contributing regular to our retirement accounts. Does that mean if I am less than 6 years away from retirment I should no longer contribute to Total Bond? Thanks
No, it means that if you are less than 6 years away from spending all the money, you should not hold it in Total Bond Market. If you are planning to buy a home next year, the down payment should be in a savings account, a very-short-term bond fund such as Vanguard Short-Term Tax-Exempt, or a one-year CD, as you might lose money in a longer-term bond fund if rates rise. But if you retire at 65 and have a portfolio which will last you to age 95, your duration is still 15 years at the time you retire.
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Re: Why am I even holding BND? It has only been losing me money.

Post by stocknoob4111 » Sat Apr 14, 2018 3:22 pm

if bonds were dropping 20% what would the interest rate have to be? for an intermediate term bond that would mean 10 year rates in the vicinity of 6% or so, long bonds 7% and perhaps 8.5% mortgages? Good luck with that.

If 30 year mortgages go to 8.5% expect a 50% drop in home values. When you have that type of Carnage in the real estate market expect the broader economy to go into total meltdown.

So point is bonds can't do down without severe consequences elsewhere.

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Re: Why am I even holding BND? It has only been losing me money.

Post by PFInterest » Sat Apr 14, 2018 3:25 pm

Vision wrote:
Fri Apr 13, 2018 6:12 am
So I've been indexing with maintenance of the following proportions:

60% VTI
30% VXUS
10% BND

So 90% stock, 10% bond index portfolio.

For last few years VTI and VXUS have been going fine, but BND is stagnating and even losing me money. Furthermore, bonds are in a bubble.

So...any point even holding on to BND?

Prospectus for the bond ETF I'm holding:
https://personal.vanguard.com/us/funds/ ... irect=true

Any input guys?
For someone on bogleheads for 5 years....this is not 101.

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Re: Why am I even holding BND? It has only been losing me money.

Post by Agggm » Sat Apr 14, 2018 6:28 pm

Vision wrote:
Fri Apr 13, 2018 6:12 am
So I've been indexing with maintenance of the following proportions:

60% VTI
30% VXUS
10% BND

So 90% stock, 10% bond index portfolio.

For last few years VTI and VXUS have been going fine, but BND is stagnating and even losing me money. Furthermore, bonds are in a bubble.

So...any point even holding on to BND?

Prospectus for the bond ETF I'm holding:
https://personal.vanguard.com/us/funds/ ... irect=true

Any input guys?
I hold no bonds. No plans to ever hold them.

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