As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stock?

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VartAndelay
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As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stock?

Post by VartAndelay »

I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
000
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 000 »

I am currently holding cash + gold and no bonds.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by VartAndelay »

000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Thank you. I really wish I had done that because I bought the bond fund a few weeks ago I believe. And I check and it seems like almost every day that fund is down meanwhile the stock market is up. I would have been better off if I had stayed in cash instead. I am already down several hundred dollars.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Steve Reading »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
Provided you are saving and accumulating assets, and will be doing so for many years still (you're young), chances are you'll be much better off having few or no bonds at all. Not because "bonds are horrible investments these days". But because your job and salary already act like a bond, providing coupon payments steadily with generally low risk. Since your salary is already such a large bond, it's unlikely you need more bonds on top.
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 000 »

VartAndelay wrote: Tue Aug 25, 2020 5:17 pm
000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Thank you. I really wish I had done that because I bought the bond fund a few weeks ago I believe. And I check and it seems like almost every day that fund is down meanwhile the stock market is up. I would have been better off if I had stayed in cash instead. I am already down several hundred dollars.
I am far from retirement too and I found bond funds more annoying than anything. Seeing that I lost money, etc. versus cash which can't lose in nominal terms. It really didn't provide the ballast/security I was looking for with the "safe" part of my portfolio.

Of course, I haven't gone 100% stock due to my concern we might be in a bubble.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Grt2bOutdoors »

VartAndelay wrote: Tue Aug 25, 2020 5:17 pm
000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Thank you. I really wish I had done that because I bought the bond fund a few weeks ago I believe. And I check and it seems like almost every day that fund is down meanwhile the stock market is up. I would have been better off if I had stayed in cash instead. I am already down several hundred dollars.
In your lifetime you will see swings of thousands and tens of thousands on a daily basis. This is good training for you now. If you think bond funds are bad, just you wait, equities can go down a lot more than that and stay down. Ponder that...
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by hnd »

if you are 30 with a high risk tolerance, i wouldnt' even be thinking about bonds. 100% stock and keep cranking money into it. i didn't begin thinking about bonds until i was 40 which was 1 month ago. lol. I have residual bonds from a few funds and our work 401k but it makes up less than 3% of my portfolio.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by VartAndelay »

Grt2bOutdoors wrote: Tue Aug 25, 2020 5:21 pm
VartAndelay wrote: Tue Aug 25, 2020 5:17 pm
000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Thank you. I really wish I had done that because I bought the bond fund a few weeks ago I believe. And I check and it seems like almost every day that fund is down meanwhile the stock market is up. I would have been better off if I had stayed in cash instead. I am already down several hundred dollars.
In your lifetime you will see swings of thousands and tens of thousands on a daily basis. This is good training for you now. If you think bond funds are bad, just you wait, equities can go down a lot more than that and stay down. Ponder that...
You are right, thank you. But here is the difference. I actually already saw my stock funds go down thousands a day back a few months ago, and it did not bother me at all. The reason it did not bother me is because at least with the stocks I know I am taking a risk but I am also hoping for the possibility of nice returns. Whereas with bonds it seems to me like I only want them in case the stocks crash then I would have more dry powder to buy stocks with, but in that case why should I not just hold cash instead? At least the stocks are high risk high reward. It seems like the bonds are medium risk (because I am already down compared to cash) low reward.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Jags4186 »

+1 no bonds but make sure you have enough cash on hand to avoid any bumps in the road. Don’t put yourself in position to have to sell equities that are down.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Grt2bOutdoors »

VartAndelay wrote: Tue Aug 25, 2020 5:25 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 5:21 pm
VartAndelay wrote: Tue Aug 25, 2020 5:17 pm
000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Thank you. I really wish I had done that because I bought the bond fund a few weeks ago I believe. And I check and it seems like almost every day that fund is down meanwhile the stock market is up. I would have been better off if I had stayed in cash instead. I am already down several hundred dollars.
In your lifetime you will see swings of thousands and tens of thousands on a daily basis. This is good training for you now. If you think bond funds are bad, just you wait, equities can go down a lot more than that and stay down. Ponder that...
You are right, thank you. But here is the difference. I actually already saw my stock funds go down thousands a day back a few months ago, and it did not bother me at all. The reason it did not bother me is because at least with the stocks I know I am taking a risk but I am also hoping for the possibility of nice returns. Whereas with bonds it seems to me like I only want them in case the stocks crash then I would have more dry powder to buy stocks with, but in that case why should I not just hold cash instead? At least the stocks are high risk high reward. It seems like the bonds are medium risk (because I am already down compared to cash) low reward.
You could do that but when stocks tank bonds usually rise in price, people pour into bonds with a known coupon as opposed to cash where the coupon can change willy nilly based on policy making. Bond prices change too but not entirely as there are credit related factors that affect pricing. Cash is cash, doesn’t move, it’s value is fixed.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by justsomeguy2018 »

At 30 with high risk tolerance might as well go 100% stock with a healthy cash reserve on hand....
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by nisiprius »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pm...I have lost money on it... I bought the bond fund a few weeks ago I believe...
It has lost money over a few weeks, and that bothers you? That does not sound like "extremely high risk tolerance" to me.

Bonds are not bank accounts. This is an intermediate-term bond fund with a duration of 6.48 years. As such, you should be looking at holding periods of about that long. Over periods of weeks, months, or a year or two, you should expect it to lose money occasionally.

But a matter of historical fact, so far FUAMX has never lost money when held for 48 months or longer.

In 123 overlapping 48-month periods from 2/2006 through 3/2020, over the full 48 months a $10,000 investment would have earned $1,859, which is $1,581 more than a money market mutual fund would have earned. The very worst period was 2/2015-1/2019, during which it earned only $324.52:

Source

Image

Here's the whole history of the fund.

Source

Image
Last edited by nisiprius on Tue Aug 25, 2020 5:37 pm, edited 1 time in total.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by VartAndelay »

nisiprius wrote: Tue Aug 25, 2020 5:34 pm
VartAndelay wrote: Tue Aug 25, 2020 5:13 pm...I have lost money on it...
Over what time period, exactly, have you lost money on it? (And I hope you are looking at total return and not price per share).

Bonds are not bank accounts. This is an intermediate-term bond fund with a duration of 6.48 years. As such, you should be looking at holding periods of around that long.

As a matter of historical fact, so far FUAMX has never lost money when held for 48 months or longer. If have "extremely high risk tolerance" then you should not have a problem planning for a holding period of at least 48 months and not panic-selling if you experience losses over shorter periods of time.

In 123 overlapping 48-month periods from 2/2006 through 3/2020, over the full 48 months a $10,000 investment would have earned $1,859, which is $1,581 more than a money market mutual fund would have earned. The very worst period was 2/2015-1/2019, during which it earned only $324.52:

Source

Image

Here's the whole history of the fund.

Source

Image
Thank you. I would have to double check on the exact date, but I remember I bought this particular bond fund about 3 or 4 weeks ago. So that is the time period in which I have lost money. I would have been better off in stocks or in cash instead.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by nisiprius »

VartAndelay wrote: Tue Aug 25, 2020 5:36 pm...I remember I bought this particular bond fund about 3 or 4 weeks ago. So that is the time period in which I have lost money. I would have been better off in stocks or in cash instead...
Over periods of weeks, in a bond fund with a duration of 6.48 years, of course you will sometimes lose money... even over periods of months or one or two years. Didn't you understand that?

Since inception, FUAMX has lost money in 2009 and 2013, but it has made money in 2006, 2007, 2008, 2010, 2011, 2012, 2014, 2015, 2016, 2017, 2018, and 2019.

Over any reasonable holding period in the past, you would not have been "better off in cash" (orange line, Fidelity money market fund). Over the life of FUAMX, FUAMX would have doubled your money, while a money market fund would have only added 20% to it.

Image
Last edited by nisiprius on Tue Aug 25, 2020 5:51 pm, edited 1 time in total.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by mptfan »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pmBut now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true?
No, it's not true. Where did you read that bonds are horrible investments? There is nothing unique about this economic situation except that every economic situation is unique.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 260chrisb »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
Wow. There have already been outstanding replies but you my friend need to really take a look at your risk tolerance if you're worried about what has happened with this fund or ANY fund over a few weeks. Some can live with 100% stocks but most will freak out when the market does what it did in the first quarter of this year and the fear of loss made them sell. I'm guessing the folks who freaked and sold wished they had been better diversified in some manner. At your age you have many many years ahead of you to invest and thus the perception of a high risk tolerance. Take another look and don't go to 100%. Ever.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by VartAndelay »

nisiprius wrote: Tue Aug 25, 2020 5:45 pm
VartAndelay wrote: Tue Aug 25, 2020 5:36 pm...I remember I bought this particular bond fund about 3 or 4 weeks ago. So that is the time period in which I have lost money. I would have been better off in stocks or in cash instead...
Over periods of weeks, in a bond fund with a duration of 6.48 years, of course you will sometimes lose money... even over periods of months or one or two years. Didn't you understand that?

But over any reasonable holding period in the past, you would not have been "better off in cash" (orange line, Fidelity money market fund). Over the life of FUAMX, it would have doubled your money, while the money market fund would have only added 20% to it.

Image
Yes, you are right. Here is what I am trying to say though. It's not that I am panicking because I am down a little bit and cannot take the risk. It is that I am questioning if it is even worth the risk of losing money considering it seems to also have almost no upside considering how low the interest rate already is. So basically I see it as holding something with some risk and almost no upside. That is why I am wondering if I should move it to stocks instead which also have risk but at least they have possible upside. What you say is true about the returns of the past for bonds but I am wondering if that is still realistic from now considering the unique situation.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by geerhardusvos »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
100% stock is extremely reasonable for the accumulator who is a decade or more away from retirement. I am in my early 30s and I am 98/2. Bonds only help you sleep at night, they don’t help you achieve your goals in the long run. I sleep well with almost all equities.

80/20 will likely be the new 60/40 for our generation.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by cogito »

We are 31/30 and after holding a few bonds for a couple years, after getting a mortgage decided to go 100% equities with a year expenses in cash. No regrets, rode through the pandemic without capitulating, and plan to stay here until 40 and reassess.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by retired@50 »

VartAndelay wrote: Tue Aug 25, 2020 5:51 pm
nisiprius wrote: Tue Aug 25, 2020 5:45 pm
VartAndelay wrote: Tue Aug 25, 2020 5:36 pm...I remember I bought this particular bond fund about 3 or 4 weeks ago. So that is the time period in which I have lost money. I would have been better off in stocks or in cash instead...
Over periods of weeks, in a bond fund with a duration of 6.48 years, of course you will sometimes lose money... even over periods of months or one or two years. Didn't you understand that?

But over any reasonable holding period in the past, you would not have been "better off in cash" (orange line, Fidelity money market fund). Over the life of FUAMX, it would have doubled your money, while the money market fund would have only added 20% to it.

Image
Yes, you are right. Here is what I am trying to say though. It's not that I am panicking because I am down a little bit and cannot take the risk. It is that I am questioning if it is even worth the risk of losing money considering it seems to also have almost no upside considering how low the interest rate already is. So basically I see it as holding something with some risk and almost no upside. That is why I am wondering if I should move it to stocks instead which also have risk but at least they have possible upside. What you say is true about the returns of the past for bonds but I am wondering if that is still realistic from now considering the unique situation.
Interest rates haven't changed much, if at all, from 4 weeks ago. If you've come to these conclusions now, it sounds like you didn't do adequate research before you purchased the bond fund. Live and learn I guess... Best of luck.

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This is one person's opinion. Nothing more.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by nisiprius »

VartAndelay wrote: Tue Aug 25, 2020 5:51 pmSo basically I see it as holding something with some risk and almost no upside.

That is why I am wondering if I should move it to stocks instead which also have risk but at least they have possible upside. What you say is true about the returns of the past for bonds but I am wondering if that is still realistic from now considering the unique situation.
Why did you decide to buy the fund a few weeks ago? I don't think much has changed in the last few weeks.

Bonds never have any dramatic upside. They are debt. They are contracts to pay specific numbers of dollars on specific days; how exciting can that possibly be? Whoopee, in 2030 I will get every penny of my $1,000 principal back!

How, exactly, do you know that you have "extremely high risk tolerance?" Did you have important money in the stock market during the global financial crisis?

And if you knew a few weeks ago that you have "extremely high risk tolerance" what were your reasons for buying the bond fund, and why don't those reasons still apply?

One final caution. Too many people talk about the bond market as if they knew the future of bond interest rates. Sometimes the prediction is smuggled in, with vague references to "being in a low interest rate environment." In April of 2014, Bloomberg surveyed 68 economists for their forecasts of what the 10-year Treasury rate would be in six months. 68 out of 68 of them, 100% said the rate would go up, the only question being by how much.

It went down.

Currently, some people say that bonds suck because interest rates can only go up, while other people say that bonds suck because interest rates will never go up. This can't possibly make sense.
Last edited by nisiprius on Tue Aug 25, 2020 6:17 pm, edited 1 time in total.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 000 »

nisiprius wrote: Tue Aug 25, 2020 6:11 pm Why did you decide to buy the fund a few weeks ago? I don't think much has changed in the last few weeks.
Most likely because some mainstream investing source like Bogleheads told him bonds would provide ballast.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Grt2bOutdoors »

000 wrote: Tue Aug 25, 2020 6:13 pm
nisiprius wrote: Tue Aug 25, 2020 6:11 pm Why did you decide to buy the fund a few weeks ago? I don't think much has changed in the last few weeks.
Most likely because some mainstream investing source like Bogleheads told him bonds would provide ballast.
And Reddit and Cramer told you to go all-in with 100/0.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by knpstr »

In mid 30s I have never owned any bonds. I only own a stocks and rental real estate.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 000 »

Grt2bOutdoors wrote: Tue Aug 25, 2020 6:20 pm
000 wrote: Tue Aug 25, 2020 6:13 pm
nisiprius wrote: Tue Aug 25, 2020 6:11 pm Why did you decide to buy the fund a few weeks ago? I don't think much has changed in the last few weeks.
Most likely because some mainstream investing source like Bogleheads told him bonds would provide ballast.
And Reddit and Cramer told you to go all-in with 100/0.
Both proposals are bad. Fortunately, reality is not dichotomous.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by nix4me »

Bonds are a terrible investment right now for sure. Bonds are for old retired people who are in de-cumulation phase.

My opinion.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by geerhardusvos »

Grt2bOutdoors wrote: Tue Aug 25, 2020 6:19 pm
geerhardusvos wrote: Tue Aug 25, 2020 5:54 pm
VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
100% stock is extremely reasonable for the accumulator who is a decade or more away from retirement. I am in my early 30s and I am 98/2. Bonds only help you sleep at night, they don’t help you achieve your goals in the long run. I sleep well with almost all equities.

80/20 will likely be the new 60/40 for our generation.
Sure, sure. Let us know when you have a couple of million in the equity market and watch it go down by half. Right now you don’t have enough at stake hence you can make comments like that. When you get to your 50’s and 60’s you’ll come around.
That’s cool that you like to belittle people for their age and experience level. Did you know Jack Bogle and Rick Ferri also recommend 100% stocks for young accumulators? For those of us still accumulating, the recent 35% drop in the S&P 500 was a godsend.

When’s the last time an 80/20 portfolio went down by half or more? (Hint, the great depression)
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Grt2bOutdoors »

geerhardusvos wrote: Tue Aug 25, 2020 6:32 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 6:19 pm
geerhardusvos wrote: Tue Aug 25, 2020 5:54 pm
VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
100% stock is extremely reasonable for the accumulator who is a decade or more away from retirement. I am in my early 30s and I am 98/2. Bonds only help you sleep at night, they don’t help you achieve your goals in the long run. I sleep well with almost all equities.

80/20 will likely be the new 60/40 for our generation.
Sure, sure. Let us know when you have a couple of million in the equity market and watch it go down by half. Right now you don’t have enough at stake hence you can make comments like that. When you get to your 50’s and 60’s you’ll come around.
That’s cool that you like to belittle people for their age and experience level. Did you know Jack Bogle and Rick Ferri also recommend 100% stocks for young accumulators? For those of us still accumulating, the recent 35% drop in the S&P 500 was a godsend.

When’s the last time an 80/20 portfolio went down by half or more? (Hint, the great depression)
It’s not meant to belittle you or anyone else. The intent to drive home the point that the stock market is not a guaranteed store of capital. It can and does flee from time to time. You have yo go through an event where a significant amount of savings that takes you years to accumulate literally evaporates before you to understand there is no free lunch. Yes, I would say at an early age a 90/10 portfolio is appropriate because the magnitude of loss will be minimized while the ability to capture appreciation will be maximized. On the flip side, when your human capital begins to dissipate and your financial capital is large that is when you want that ballast. You know when you’ve won the game stop playing,
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by mortfree »

TL DR

OP I don’t like bonds either because I don’t understand them.

However I believe that Wellesley. Wellington and the balanced index fund do, so I let them invest my bond portion for me at the cost of a few basis points.

YMMV
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by rhoms33 »

33, no bonds, plenty of cash. Will reassess at 40.
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by flaccidsteele »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
I started investing in the 1990s. I’ve never held bonds. I didn’t hold them in the past and I wouldn’t hold them today. Good luck!
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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TechGuy365
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by TechGuy365 »

Early 50s, 100% stocks and never had any bonds. If you can look away and not make any panic moves on big down days then you're good. I look at my portfolio on up days, and don't look at it on terrible down days.

On up days, I feel GREAT because my portfolio is going up.
On down days, I feel GREAT because I'm buying in at a cheaper price per pay check.

There literally is no bad days and it's always a win/win situation. My investment horizon is at least another 30 years. If I die earlier than my wife / kids will enjoy it.
hoffse
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by hoffse »

I don’t think you’ve held it long enough to give it a fair shake. Bond funds do fluctuate, but over time they provide stability.

That being said, I’m 33 - soon to be 34 - and we have been all stock since we started investing, with some decent pots of cash to smooth cash flow along the way. We had originally planned to start adding bonds in small amounts around age 35 but at this point I don’t see us doing it until closer to 40 (if then).

We rode it down in March and back up again (buying in the whole time), and I continued to sleep well.
Trader Joe
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Trader Joe »

VartAndelay wrote: Tue Aug 25, 2020 5:13 pm I recently put my non-stock money into FUAMX. I heard it was a good bond fund. But now I have been reading that some people say bonds are horrible investments these days because of the unique economic situation the world is now in. Is this true? Is FUAMX a good bond fund or not? Is it even worth holding anymore? I have lost money on it and would have been better off holding stocks or even cash instead.
At 30 years old I would never, ever hold any bonds. Zero.

I would (and do) hold 100% VFIAX/VTSAX - or their equivalent.
260chrisb
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 260chrisb »

000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Just curious; where else do you invest your money? Cash isn't an investment but is a good place for an emergency fund, safety, and liquidity be it ever so costly and gold can be if you understand it which I don't. You must invest outside of the equities markets in something yes?
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LilyFleur
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by LilyFleur »

I had mostly stocks and a small percentage in a stable value fund until I was retired and 58 years old.

If I understand you correctly, you are OK with the risk and fluctuation of stocks but dislike the feeling that you are losing money in bonds? That is how I feel, and I am 30 years older than you. I expect stocks to fluctuate and at times dramatically, but it makes me uncomfortable if my ballast is tanking. I did not like it at all earlier this year when bonds began moving down with stocks. I was at ease with my stock index funds dropping but not with my bonds/ballast dropping.

Oh, and I tried a balanced index fund for a while after I retired. It drove me crazy because I like to watch my stocks and bonds/or cash separately.

Were you able to stay the course this year with your stocks/index stock funds? I feel some of the posts in this thread assumed that if you sell bonds in a downturn that you will sell stock in a downturn.

You are not alone in your concern about bonds. Plenty of folks on this forum have been investigating "bond surrogates."
000
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 000 »

260chrisb wrote: Tue Aug 25, 2020 8:09 pm
000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Just curious; where else do you invest your money? Cash isn't an investment but is a good place for an emergency fund, safety, and liquidity be it ever so costly and gold can be if you understand it which I don't. You must invest outside of the equities markets in something yes?
More than 70% of my portfolio is in vanilla stock index funds and REITs.

In my portfolio, "cash + gold" fill the spot held by bonds in common portfolios. I hold cash because there is absolutely no alternative that guarantees nominal principal on demand and I trust the FDIC more than any bond fund. I hold gold because it is a liquid (with an ETF) uncorrelated asset that does not require (and may be inversely correlated with) ongoing perceptions of stability of "the system".

I will note that part of my reason for holding cash and gold is that I may need to spend down from my portfolio sooner than retirement and my withdrawal needs over the intermediate term are unknown to me and may be lumpy.
Last edited by 000 on Tue Aug 25, 2020 9:36 pm, edited 3 times in total.
Dottie57
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Dottie57 »

VartAndelay wrote: Tue Aug 25, 2020 5:25 pm
Grt2bOutdoors wrote: Tue Aug 25, 2020 5:21 pm
VartAndelay wrote: Tue Aug 25, 2020 5:17 pm
000 wrote: Tue Aug 25, 2020 5:14 pm I am currently holding cash + gold and no bonds.
Thank you. I really wish I had done that because I bought the bond fund a few weeks ago I believe. And I check and it seems like almost every day that fund is down meanwhile the stock market is up. I would have been better off if I had stayed in cash instead. I am already down several hundred dollars.
In your lifetime you will see swings of thousands and tens of thousands on a daily basis. This is good training for you now. If you think bond funds are bad, just you wait, equities can go down a lot more than that and stay down. Ponder that...
You are right, thank you. But here is the difference. I actually already saw my stock funds go down thousands a day back a few months ago, and it did not bother me at all. The reason it did not bother me is because at least with the stocks I know I am taking a risk but I am also hoping for the possibility of nice returns. Whereas with bonds it seems to me like I only want them in case the stocks crash then I would have more dry powder to buy stocks with, but in that case why should I not just hold cash instead? At least the stocks are high risk high reward. It seems like the bonds are medium risk (because I am already down compared to cash) low reward.
How would you feel if you drop from 500k to 250k in equities. Yes it can happen.
Remember taking risk does not guarantee you get the reward.
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Chrono Triggered
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Chrono Triggered »

Early 30s here, 100% stocks. The only time I wish I owned bonds is during market plunges.
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calmaniac
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by calmaniac »

I held 100% equities from age 30 to age ≈57. I have a long-term approach, have always had very stable employment, and hence that allocation made the most sense to me. At ≈57 I started moving into bonds, in preparation for going to part time work and minimizing sequence of returns losses. Presently at 30% short-intermediate term bonds, including the TSP G fund. [Probably should have started that process at age 50 :D ]

When you are young (and have years of work ahead of you) you have a lot of human capital and can continue to acquire through ups and downs and bear markets. In contrast, as you get older the money you got is what you got, and you cannot afford to take as much risk.

That said, I think much of the stocks vs. bonds, risk vs. reward discussion is very individualized. Many retired Bogleheads own substantial bonds (≥40%), whereas personally owning more than 30% would make my skin crawl.
62 yo, 1-3y til retire. AA 70/30: 30% S&P, 16% value, 14% intl, 10% EM, 30% short/int govt bonds. My mil pension + DW's now ≈60% of expenses. Taking SS @age 70--> pension+SS ≈100% of expenses.
averagedude
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by averagedude »

I was always a 100% stock guy until just the last couple of years because I am close to retirement. I recommend it only to people who contribute at least monthly, have a long time horizon, and is the type of person who is more happy when stocks are down than when they are up.
Bfwolf
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Bfwolf »

Seeing all the love for 100% stock portfolios makes me nervous. I don't remember anybody pushing those portfolios in 2009.
TimeTheMarket
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by TimeTheMarket »

Bonds are a joke right now. I'm much older than 30 and almost all stocks. What little bonds are just basically laziness not rebalancing out of them at some point back when maybe I was as high as 20% (even years ago I felt the "age in bonds" to be bogus).

Go 100% vtsax and reevaluate when you're 50.
Username is not serious :)
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bligh
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by bligh »

Bfwolf wrote: Tue Aug 25, 2020 9:35 pm Seeing all the love for 100% stock portfolios makes me nervous. I don't remember anybody pushing those portfolios in 2009.
Nothing to be nervous about. It’s like clockwork. Every time the market starts making new highs the “why not 100% stock?” threads start popping up.
novemberrain
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by novemberrain »

I am 40, I am at 90%+ stock as well. The rest is bonds, REIT, cash, some gold, paid off home. 1M annual household income. I identify with and agree with some of the comments above such as

1. My job acts as a sort of bond. Yes, I have been out of a job in the past. But I have a spouse also who works in an unrelated field. The chance of both of us being out of a job simultaneously is possible, but not probable. I work in a top tier tech company in Silicon Valley. Yes, I can be laid off; but my chances of finding another job within a few weeks are high. It might take longer if I insist on getting into another FAANG equivalent. But if I am ready to take a 50% pay cut, I can get a job within a month. I have friends who got awesome (or at least good) offers at the depth of the covid crash as well as in the 2008 crash.

2. Even for someone in their fifties or even sixties, a 90% stock allocation might be ok provided you have several years of expenses saved up. Say a person with $10M assets and annual expenses of $100k. That person can have $1M (10% of portfolio) in bonds and the rest 90% in stocks and would still be ok because they can ride out a 10 year bear market with just the bonds. I am not saying I am expecting to hit $10M in my sixties. I just brought these numbers to prove that a blanket 60%+ bonds allocation need not be the only path for someone in their sixties. Or that a 50% bonds need not be the only path for someone in their fifties.

3. There is a lot of bravado in the above statements from me; as well as in other posters above. The reality I feel is ones risk tolerance might be fully known only when the market tanks. If stocks go down 95% like in 1929, I don't know for sure how I will react. I hope I won't sell ; but I never know. For all my bravado now at the market top, I can't guarantee I won't sell low. As I understand it, this is possibly one advantage of having say 40% in bonds. If I held 40% in bonds today and stocks were to crash 95%, then it would be unlikely that I sell low and also the 40% will serve as a large enough dry powder to buy stocks at 95% off when I rebalance at the low point.
Last edited by novemberrain on Tue Aug 25, 2020 10:44 pm, edited 2 times in total.
Grt2bOutdoors
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Grt2bOutdoors »

bligh wrote: Tue Aug 25, 2020 10:02 pm
Bfwolf wrote: Tue Aug 25, 2020 9:35 pm Seeing all the love for 100% stock portfolios makes me nervous. I don't remember anybody pushing those portfolios in 2009.
Nothing to be nervous about. It’s like clockwork. Every time the market starts making new highs the “why not 100% stock?” threads start popping up.
Yup, it won’t be long now....then they’ll ask when they should get back in.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
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Steve Reading
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by Steve Reading »

bligh wrote: Tue Aug 25, 2020 10:02 pm
Bfwolf wrote: Tue Aug 25, 2020 9:35 pm Seeing all the love for 100% stock portfolios makes me nervous. I don't remember anybody pushing those portfolios in 2009.
Nothing to be nervous about. It’s like clockwork. Every time the market starts making new highs the “why not 100% stock?” threads start popping up.
You must have some selective memory. Plenty of threads of people asking and recommending 100% stocks back in March too. Here's a few I found with 5 min. searching:
viewtopic.php?f=10&t=306651
viewtopic.php?f=10&t=307669
viewtopic.php?f=10&t=306442
viewtopic.php?f=10&t=307446

This might come as a shocker to some of you but: Us folks that recommend 100% stocks to young accumulators do it because, long-term, it tends to be a much better choice, REGARDLESS of what the market is doing right now (gasp!)
"... so high a present discounted value of wealth, it is only prudent for him to put more into common stocks compared to his present tangible wealth, borrowing if necessary" - Paul Samuelson
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happenstance
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by happenstance »

Spouse and I are both 31 and hold 20% in bonds. We take additional risk through a SCV tilt and overweighting EM, rather than being 100% stock. Diversification with uncorrelated risks and sources of return makes sense to us. There are periods where bonds outperform stocks, and while I don’t think that is likely in the short-term, we also don’t plan to shift our AA for decades.
7eight9
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by 7eight9 »

Japanese investors who were 100/0 in the Nikkei circa December 1989 probably wish they had some bonds. :happy
I guess it all could be much worse. | They could be warming up my hearse.
atdharris
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Re: As a 30 year old with extremely high risk tolerance should I even be holding bonds any more or should I go 100% stoc

Post by atdharris »

I'm 31 and am at 90/10, with 10% in long-term treasuries as a market hedge. I am getting somewhat nervous about them right now given how low rates are and if inflation starts to increase.

I think you'd be fine with 100% stock. I think it performs nearly the same as a 90/10 portfolio (albeit with more volatility).
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