Are Bonds a safe place anymore?

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Stillwater1971
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Are Bonds a safe place anymore?

Post by Stillwater1971 »

My brother has an equity heavy Portfolio ( 85% VTSAX, and 15% split in International and REITS). He shared that he wants to diversify better since he's in his 50's, but isn't sure about Bonds lately. With the common default that Bonds are always a safe place during market volatility or crashes, it seems currently that Current Bonds are now an exception to that rule thanks to the precarious position the Fed has put us in.

With "expectations" of a rate hike and high yields not favoring Bonds, it seems to be a precarious time in the Stock Market. It seems as the odds favor interest rates going up instead of down. That would not be good for Bonds,right? So some would say put all in Equities. But with many stocks/index funds at all time overvalued highs, it seems all of us are potentially screwed when the next crash comes, whether you are heavy Equity or heavy Bonds.

So what to do for those with just around 7-10 years until my Brother retires? Is there something that provides real protection? Or just keep working until his Portfolio recovers? Let's just hope for his sake we don't become Japan!

Would something like Wellesley and Wellington be a good option? The are considered heavy in Value Stocks and Bonds and contain Corporate Bonds ( higher grade bonds I believe). Wellesley always seems to be the topic of historical safety. But does that not apply anymore with where the Fed has put us??

Or Value Funds such a VTV?

Or International?

It seems hard to find an index fund that is the inverse of VTSAX to provide real diversification.
mikejuss
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Re: Are Bonds a safe place anymore?

Post by mikejuss »

I don't think that you and your brother need to worry too much about the slight drag caused by owning bonds at a time when the stock market is through the roof. You'll be happy that you own bonds during the next recession. You should buy some now.
exodusNH
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Re: Are Bonds a safe place anymore?

Post by exodusNH »

Stillwater1971 wrote: Tue Nov 23, 2021 10:15 am My brother has an equity heavy Portfolio ( 85% VTSAX, and 15% split in International and REITS). He shared that he wants to diversify better since he's in his 50's, but isn't sure about Bonds lately. With the common default that Bonds are always a safe place during market volatility or crashes, it seems currently that Current Bonds are now an exception to that rule thanks to the precarious position the Fed has put us in.

With "expectations" of a rate hike and high yields not favoring Bonds, it seems to be a precarious time in the Stock Market. It seems as the odds favor interest rates going up instead of down. That would not be good for Bonds,right? So some would say put all in Equities. But with many stocks/index funds at all time overvalued highs, it seems all of us are potentially screwed when the next crash comes, whether you are heavy Equity or heavy Bonds.

So what to do for those with just around 7-10 years until my Brother retires? Is there something that provides real protection? Or just keep working until his Portfolio recovers? Let's just hope for his sake we don't become Japan!

Would something like Wellesley and Wellington be a good option? The are considered heavy in Value Stocks and Bonds and contain Corporate Bonds ( higher grade bonds I believe). Wellesley always seems to be the topic of historical safety. But does that not apply anymore with where the Fed has put us??

Or Value Funds such a VTV?

Or International?

It seems hard to find an index fund that is the inverse of VTSAX to provide real diversification.
VTV is no safer than the S&P 500.

https://www.portfoliovisualizer.com/bac ... ion2_2=100

Bonds will eventually have to recover (minus apocalyptic scenarios.) People who aren't obligated to buy them will eventually demand to be compensated for the risk and inflation.
retiredjg
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Re: Are Bonds a safe place anymore?

Post by retiredjg »

A person who is 50 years old needs a significant allocation to some kind of fixed income assets. It does not have to be bonds.

While it is true that bonds are not particularly productive at this time, he is at much greater risk having a 100% stock portfolio than a portfolio with some bonds.

This will sound a bit harsh and I'm sorry for that, but it is completely misguided to be more afraid of bonds than stocks.
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steve r
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Re: Are Bonds a safe place anymore?

Post by steve r »

There is no rule that says bond prices do well when stocks do poorly.

That said, for many decades now, when stocks do poorly bonds, specifically treasury bonds, shine. (Corporate bonds can do poorly).

In addition to the low expected return of bonds, bond naysayers concern is about an event that has not "meaningfully" occurred in over four decades -- a major spike in interest rates that will bring down bond prices and likely bring down stock prices. This may unfold if inflation is persistent. It did occur during the 1973-1974 bear market were U.S. stocks lost 45 percent capped off by 11 straight down days. In the UK, share prices fell 75 percent so international diversification may not help your brother. Bonds also did poorly. To some extent, I share this concern.

The common question then becomes how to modestly "hedge" inflation. I-Bonds seems to be the best suggestion on BH. I would suggest this to him even if it means reducing tax advantage retirement non-matched contributions. I bonds are not taxed until they are redeemed. The amount you can contributed is limited per year and marital status.
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dbr
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Re: Are Bonds a safe place anymore?

Post by dbr »

Stillwater1971 wrote: Tue Nov 23, 2021 10:15 am Bonds.

So what to do for those with just around 7-10 years until my Brother retires? Is there something that provides real protection? Or just keep working until his Portfolio recovers? Let's just hope for his sake we don't become Japan!
Yes, you can provide real protection against volatility in the stock market by not investing in stocks and planning to support your retirement spending according to the investment returns you can expect from less volatile investments.

Groucho Marx:

Groucho was once walking around the New York Stock Exchange when one of the traders on the floor asked him: “Groucho, how do you invest your money?” Groucho answered: “All in bonds.” The trader asked: “But Groucho, they don’t pay much return.” Groucho said: “They do when you have a lot of em!”

Your brother can also not work while his portfolio recovers. The whole idea of safe withdrawal rates is that such a scenario is allowed for. If one is really scared you can become ultra conservative and spend even less than that.

The protection is to have a lot of money and not spend much of it, if you are that scared.
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ruralavalon
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Re: Are Bonds a safe place anymore?

Post by ruralavalon »

Stillwater1971 wrote: Tue Nov 23, 2021 10:15 am My brother has an equity heavy Portfolio ( 85% VTSAX, and 15% split in International and REITS). He shared that he wants to diversify better since he's in his 50's, but isn't sure about Bonds lately. With the common default that Bonds are always a safe place during market volatility or crashes, it seems currently that Current Bonds are now an exception to that rule thanks to the precarious position the Fed has put us in.

With "expectations" of a rate hike and high yields not favoring Bonds, it seems to be a precarious time in the Stock Market. It seems as the odds favor interest rates going up instead of down. That would not be good for Bonds,right? So some would say put all in Equities. But with many stocks/index funds at all time overvalued highs, it seems all of us are potentially screwed when the next crash comes, whether you are heavy Equity or heavy Bonds.

So what to do for those with just around 7-10 years until my Brother retires? Is there something that provides real protection? Or just keep working until his Portfolio recovers? Let's just hope for his sake we don't become Japan!

Would something like Wellesley and Wellington be a good option? The are considered heavy in Value Stocks and Bonds and contain Corporate Bonds ( higher grade bonds I believe). Wellesley always seems to be the topic of historical safety. But does that not apply anymore with where the Fed has put us??

Or Value Funds such a VTV?

Or International?

It seems hard to find an index fund that is the inverse of VTSAX to provide real diversification.
"Safe" compared to what?

Bonds are safer than stocks. In my opinion the function of a fixed income allocation is reduction of portfolio volatility. Almost any short-term or intermediate-term bond fund with good credit quality and low expense ratio can perform that function.

Think in terms of fixed income, not just bonds. That can include:
1) Bonds;
2) Bond funds, either Treasury bond funds or diversified bond funds;
3) I savings bonds, "The composite rate for I bonds issued from November 2021 through April 2022 is 7.12 percent. This rate applies for the first six months you own the bond" , Treasury Direct;
4) Federally insured CDs; and
5) Federally insured savings accounts.

Morningstar (4/13/2021), "Which Bonds Provide the Biggest Diversification Benefits?", link.
Last edited by ruralavalon on Tue Nov 23, 2021 11:41 am, edited 2 times in total.
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Wiggums
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Re: Are Bonds a safe place anymore?

Post by Wiggums »

retiredjg wrote: Tue Nov 23, 2021 11:11 am A person who is 50 years old needs a significant allocation to some kind of fixed income assets. It does not have to be bonds.

While it is true that bonds are not particularly productive at this time, he is at much greater risk having a 100% stock portfolio than a portfolio with some bonds.

This will sound a bit harsh and I'm sorry for that, but it is completely misguided to be more afraid of bonds than stocks.
I agree. Even my DW reminded me that our bonds lost a penny per share recently. She forgets that our bonds made us money on the way down. We hold the bonds long term and monthly dividends.
Last edited by Wiggums on Wed Nov 24, 2021 7:36 pm, edited 1 time in total.
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Robot Monster
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Re: Are Bonds a safe place anymore?

Post by Robot Monster »

steve r wrote: Tue Nov 23, 2021 11:13 am There is no rule that says bond prices do well when stocks do poorly.
Along those lines, there's the article, "Cash Is a Better Hedge Than Bonds, Goldman's Oppenheimer Says". From the article:

“I think as we move forward, given we are at record low bond yields, it is difficult to see the same kind of return,” he said in reference to historical bond performance. “Cash probably represents a much better way of hedging against an increased exposure to risk assets like equities.” link
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mikejuss
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Re: Are Bonds a safe place anymore?

Post by mikejuss »

Robot Monster wrote: Tue Nov 23, 2021 11:54 am
steve r wrote: Tue Nov 23, 2021 11:13 am There is no rule that says bond prices do well when stocks do poorly.
Along those lines, there's the article, "Cash Is a Better Hedge Than Bonds, Goldman's Oppenheimer Says". From the article:

“I think as we move forward, given we are at record low bond yields, it is difficult to see the same kind of return,” he said in reference to historical bond performance. “Cash probably represents a much better way of hedging against an increased exposure to risk assets like equities.” link
Meh--I'll keep buying bonds.
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Re: Are Bonds a safe place anymore?

Post by nisiprius »

Define "safe."

The fundamental things apply as time goes by. Very roughly, a stock is a share in a business. Business does well, you do well. Business does poorly, you do poorly.

A bond is a contract to pay you specific numbers of dollars on specific dates. You don't make a dime more if the business does well, you don't make a dime less if the business does poorly... unless the business literally folds. But if it's investment-grade bond, the ratings agency thinks it's capable of paying its bills, including bond interest, even when business is poor.

Yes, of course, bonds are safer in terms of holding value during a crisis. You say "any more." Is 2020 recent enough? Let's look at three bond funds and a stock fund. Some people like pure Treasurys. I personally use Total Bond. The third is a corporate bond fund, considered to be relatively riskier than Total Bond or Treasurys.

Source

Image

In the first quarter of 2020,
$10,000 in the Treasury fund made money.
$10,000 in Total Bond made money.

$10,000 in the corporate bond fund lost -$372.
$10,000 in stocks lost -$1,863.

If you didn't need money in late March, then, of course, no problem.

If for you "volatility is not risk," then no problem.

If you feel 2020 shouldn't count because of special conditions, look at year-end 2019. If you don't think 2019 should count, look at the last half of 2011. If not 2011, then 2008-2009.

If you don't really mean "safe," but "safe and lucrative," then bonds might not be safe any more.

If you feel that "parachutes are not safe" because people are often injured at landing, jump out of a plane without one. You'll definitely beat the speed of the people with parachutes so maybe the risk is worth it.

By many reasonable definitions of "safe," and by my personal definition of "safe," bonds are still safer than stocks.
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Vulcan
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Re: Are Bonds a safe place anymore?

Post by Vulcan »

nisiprius wrote: Tue Nov 23, 2021 12:22 pm If you feel that "parachutes are not safe" because people are often injured at landing, jump out of a plane without one. You'll definitely beat the speed of the people with parachutes so maybe the risk is worth it.
that. was. just. AWESOME. :D

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Re: Are Bonds a safe place anymore?

Post by mikejuss »

Vulcan wrote: Tue Nov 23, 2021 12:47 pm
nisiprius wrote: Tue Nov 23, 2021 12:22 pm If you feel that "parachutes are not safe" because people are often injured at landing, jump out of a plane without one. You'll definitely beat the speed of the people with parachutes so maybe the risk is worth it.
that. was. just. AWESOME. :D

Nisi just keeps getting better :beer
Agreed. I don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns. People seem to be overthinking things in trying to hedge in every direction.
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steve r
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Re: Are Bonds a safe place anymore?

Post by steve r »

mikejuss wrote: Tue Nov 23, 2021 1:07 pm... I don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns. People seem to be overthinking things in trying to hedge in every direction.
Not sure this helps the OP, but the reason is I believe every asset I (many here) own benefited from interest rates declining (from stocks to real estate to bonds). Is the party over? I do not pretend to know. But it might be. In such a case both stocks and bonds will lose value. Thus such threads. I total get this. This one on safety, others on very low real/nominal expected returns. Treasuries will earn 5 to 6 percent over a five year period.

Can you find a better way to hedge equity allocations? I-Bonds or paying off home while reducing bonds (if you are older with home equity) seem to me a mild way to reduce interest rate risk. A parachute for the safe portion of your portfolio if you will.
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exodusNH
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Re: Are Bonds a safe place anymore?

Post by exodusNH »

nisiprius wrote: Tue Nov 23, 2021 12:22 pm ...

If you feel that "parachutes are not safe" because people are often injured at landing, jump out of a plane without one. You'll definitely beat the speed of the people with parachutes so maybe the risk is worth it.
Thank you for this!
cheapindexer
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Re: Are Bonds a safe place anymore?

Post by cheapindexer »

Nobody knows nothing

I had a similar post to yours recently . After 10 replies - which I found very helpful

I reminded myself “nobody knows “

At age 51 I know I will have at least 25 percent bonds for the rest of my life however . My days of 100/0 are long gone

As if we will predict the next pandemic / 911/ economic crisis

Diversify . Diversify . Diversify
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Re: Are Bonds a safe place anymore?

Post by aristotelian »

"Bonds" are a large category. They are all subject to risk, just different risks from stocks (particularly long duration and high rated bonds, e.g. Treasuries). I would think high rated short duration bonds are still pretty much bullet proof from market risk but also have the lowest expected return over time, thus subject to inflation risk. Long Treasuries are most likely to go up during a market crash itself but could go down just before in a scenario where rising rates triggered a recession, or after during the recovery.
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Re: Are Bonds a safe place anymore?

Post by mikejuss »

steve r wrote: Tue Nov 23, 2021 1:27 pm
mikejuss wrote: Tue Nov 23, 2021 1:07 pm... I don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns. People seem to be overthinking things in trying to hedge in every direction.
Not sure this helps the OP, but the reason is I believe every asset I (many here) own benefited from interest rates declining (from stocks to real estate to bonds). Is the party over? I do not pretend to know. But it might be. In such a case both stocks and bonds will lose value. Thus such threads. I total get this. This one on safety, others on very low real/nominal expected returns. Treasuries will earn 5 to 6 percent over a five year period.

Can you find a better way to hedge equity allocations? I-Bonds or paying off home while reducing bonds (if you are older with home equity) seem to me a mild way to reduce interest rate risk. A parachute for the safe portion of your portfolio if you will.
Yes, it's possible that stocks and bonds will lose value at the same time, but that isn't the case right now. So why are people hyperventilating? Things are good--enjoy. :beer
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steve r
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Re: Are Bonds a safe place anymore?

Post by steve r »

mikejuss wrote: Tue Nov 23, 2021 1:39 pm
steve r wrote: Tue Nov 23, 2021 1:27 pm
mikejuss wrote: Tue Nov 23, 2021 1:07 pm... I don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns. People seem to be overthinking things in trying to hedge in every direction.
Not sure this helps the OP, but the reason is I believe every asset I (many here) own benefited from interest rates declining (from stocks to real estate to bonds). Is the party over? I do not pretend to know. But it might be. In such a case both stocks and bonds will lose value. Thus such threads. I totally get this. This one on safety, others on very low real/nominal expected returns. Treasuries will earn 5 to 6 percent over a five year period.

Can you find a better way to hedge equity allocations? I-Bonds or paying off home while reducing bonds (if you are older with home equity) seem to me a mild way to reduce interest rate risk. A parachute for the safe portion of your portfolio if you will.
Yes, it's possible that stocks and bonds will lose value at the same time, but that isn't the case right now. So why are people hyperventilating? Things are good--enjoy. :beer
Related to this ... CNBC posted a piece titled "Market is ‘one more bad inflation report’ away from a correction, Wharton’s Jeremy Siegel warns"

The title is click bait(ish) as Siegel is historically strongly bullish. His suggestion. Keep going with equities. His logic was that you do not know how high stocks will go before they stop working and stocks are real assets with real holding.
https://www.cnbc.com/2021/11/21/market- ... erm=siegel
Last edited by steve r on Tue Nov 23, 2021 4:37 pm, edited 2 times in total.
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quisp65
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Re: Are Bonds a safe place anymore?

Post by quisp65 »

I believe future investors are going to gravitate to swapping a little safety from bonds & substituting withdrawing a bit less and going more equity. So many factors dependent on situation though. My expenses are 100% covered in 14 years with Social Security and in 10 years my portfolio will likely double due to inheritance.

Still a couple of thoughts....

Around 3% withdraw rate makes it through every investing year since the 1871 at 100% equity.
https://engaging-data.com/visualizing-4-rule/

I think it's better to obtain wealth for safety than thinking having your money out of the market in fixed income will help you. Can you make it to 3% withdraw rate? Lot easier with a high equity.

How long is the market down 50% or some significant large amount in our lifetimes? It's not 1929 anymore and the Fed is better at manipulating the market. I bought my first fixed income in 2019 and retired 1 year later. I'm now spending fixed income that was purchased when the S&P was 2956. Not much difference from selling equity at 37% down.

Since 1949 the S&P has hit a high about every 7 years at least.
https://en.wikipedia.org/wiki/Closing_m ... _S%26P_500

I'm gravitating to 80/20 from 75/25 this balancing year most likely. I'm sticking to the plan though because my allocation was always a work in progress and up for change :P
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Re: Are Bonds a safe place anymore?

Post by willthrill81 »

mikejuss wrote: Tue Nov 23, 2021 1:07 pmI don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns.
Because it's difficult for many investors to hold an asset with a negative expected real return on a pre-tax basis.

To the OP, it all depends on what is meant by 'safe'. There isn't widespread agreement on how to define the term.
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Re: Are Bonds a safe place anymore?

Post by ivgrivchuck »

Stillwater1971 wrote: Tue Nov 23, 2021 10:15 am Would something like Wellesley and Wellington be a good option? The are considered heavy in Value Stocks and Bonds and contain Corporate Bonds ( higher grade bonds I believe). Wellesley always seems to be the topic of historical safety. But does that not apply anymore with where the Fed has put us??

Or Value Funds such a VTV?

Or International?
Cash: I-bonds, EE-bonds, MYGAs, CDs, SPIAs, Stable Value Fund

The details depend on the portfolio, but for almost any portfolio there are decent cash alternatives...
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Re: Are Bonds a safe place anymore?

Post by steve r »

willthrill81 wrote: Tue Nov 23, 2021 3:56 pm
mikejuss wrote: Tue Nov 23, 2021 1:07 pmI don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns.
Because it's difficult for many investors to hold an asset with a negative expected real return on a pre-tax basis.

To the OP, it all depends on what is meant by 'safe'. There isn't widespread agreement on how to define the term.
Willthrill81
What do you suspect happens if "real returns" of 1 or 2 percentage points comes back to markets? (Historic average real returns is 2.5 percentage points).
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Re: Are Bonds a safe place anymore?

Post by willthrill81 »

steve r wrote: Tue Nov 23, 2021 4:49 pm
willthrill81 wrote: Tue Nov 23, 2021 3:56 pm
mikejuss wrote: Tue Nov 23, 2021 1:07 pmI don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns.
Because it's difficult for many investors to hold an asset with a negative expected real return on a pre-tax basis.

To the OP, it all depends on what is meant by 'safe'. There isn't widespread agreement on how to define the term.
Willthrill81
What do you suspect happens if "real returns" of 1 or 2 percentage points comes back to markets? (Historic average real returns is 2.5 percentage points).
That would seem to me to likely put downward pressure on stocks, all else being equal. Many investors would obviously be more willing to hold bonds with an expected real return of +1% than -1%.
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Re: Are Bonds a safe place anymore?

Post by mikeyzito22 »

willthrill81 wrote: Tue Nov 23, 2021 3:56 pm
mikejuss wrote: Tue Nov 23, 2021 1:07 pmI don't really understand why there are so many tortured posts here about bonds losing money when the stock market is providing very handsome returns.
Because it's difficult for many investors to hold an asset with a negative expected real return on a pre-tax basis.

To the OP, it all depends on what is meant by 'safe'. There isn't widespread agreement on how to define the term.
What's the alternative if you have a 20-30 plus year horizon? I bonds? That could be good. I would expect folks just want a little pillow for their holdings not to suffer the entire portfolio in the crash to come. We listen and talk about that all the time here, but it seems like although this is a wise forum, I see folks want to search for yield or trend follow or what have you. It could just be as simple as to have an asset allocation that is appropriate for your age and save and save some more. The three fund, or two fund portfolio is a great place for most people to evaluate.
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Re: Are Bonds a safe place anymore?

Post by Candor »

quisp65 wrote: Tue Nov 23, 2021 3:19 pm


Since 1949 the S&P has hit a high about every 7 years at least.
https://en.wikipedia.org/wiki/Closing_m ... _S%26P_500

Did you mean to say the S&P has doubled every 7 years?
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000
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Re: Are Bonds a safe place anymore?

Post by 000 »

I see TIPS and gold are getting no love in this thread either. Possibly the most underappreciated fixed asset classes out there for a long term hold.
Capitulation of bears is part of the market topping process.
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Re: Are Bonds a safe place anymore?

Post by dkeeney »

If you really desire a fund that is inverse the total stock fund, check the ETF ticker SH. It is short the S&P 500. It has been destroyed since the Q1 2020 COVID crash. For the bears who are sitting on a lot of taxable capital gains and prefer not to sell for that reason, SH is an interesting hedge.

A number of posters have suggested iBonds, but they have a max purchase. One way around that is Vanguard Inflation-Protected Securities Fund Admiral Shares (VAIPX), which may be worth considering. It's probably worth noting that none of these funds have experienced a meaningful period of inflation, so there is no true track record of how they will perform in the event of an inflation surge up to 5% or more.
Last edited by dkeeney on Tue Nov 23, 2021 6:46 pm, edited 2 times in total.
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quisp65
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Re: Are Bonds a safe place anymore?

Post by quisp65 »

Candor wrote: Tue Nov 23, 2021 6:09 pm
quisp65 wrote: Tue Nov 23, 2021 3:19 pm


Since 1949 the S&P has hit a high about every 7 years at least.
https://en.wikipedia.org/wiki/Closing_m ... _S%26P_500

Did you mean to say the S&P has doubled every 7 years?

No. It means at it's worse it has hit a high roughly every 7 years since 1949. That webpage provides comfort to me since I rebalance toward fixed income at market highs. People rebalance different ways though, so that webpage doesn't mean the same thing to others. Also inflation made the 1966 bear market a much longer recovery, but bonds did worse during those years.
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Re: Are Bonds a safe place anymore?

Post by Candor »

quisp65 wrote: Tue Nov 23, 2021 6:34 pm
Candor wrote: Tue Nov 23, 2021 6:09 pm
quisp65 wrote: Tue Nov 23, 2021 3:19 pm


Since 1949 the S&P has hit a high about every 7 years at least.
https://en.wikipedia.org/wiki/Closing_m ... _S%26P_500

Did you mean to say the S&P has doubled every 7 years?

No. It means at it's worse it has hit a high roughly every 7 years since 1949. That webpage provides comfort to me since I rebalance toward fixed income at market highs. People rebalance different ways though, so that webpage doesn't mean the same thing to others. Also inflation made the 1966 bear market a much longer recovery, but bonds did worse during those years.
Ok, so if I understand you and the link properly the longest it took to reach a new high during that period was 7 years.
The fool, with all his other faults, has this also - he is always getting ready to live. - Epicurus (341–270 BC)
Parkinglotracer
Posts: 366
Joined: Fri Dec 20, 2019 3:49 am
Location: Upstate NY

Re: Are Bonds a safe place anymore?

Post by Parkinglotracer »

ivgrivchuck wrote: Tue Nov 23, 2021 4:22 pm
Stillwater1971 wrote: Tue Nov 23, 2021 10:15 am Would something like Wellesley and Wellington be a good option? The are considered heavy in Value Stocks and Bonds and contain Corporate Bonds ( higher grade bonds I believe). Wellesley always seems to be the topic of historical safety. But does that not apply anymore with where the Fed has put us??

Or Value Funds such a VTV?

Or International?
Cash: I-bonds, EE-bonds, MYGAs, CDs, SPIAs, Stable Value Fund

The details depend on the portfolio, but for almost any portfolio there are decent cash alternatives...
And Toyota demand shares (non fdic insured) at 1.35%
ivgrivchuck
Posts: 984
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Re: Are Bonds a safe place anymore?

Post by ivgrivchuck »

Parkinglotracer wrote: Wed Nov 24, 2021 7:07 pm And Toyota demand shares (non fdic insured) at 1.35%
Well, that's a different animal. If you are ready to take credit risk, then the right comparison is short term corporate bonds, like VCSH, current yield to maturity is 1.3%.

Then it is down to what is Toyota's credit rating compared to VCSH, how much diversification helps VCSH, how much duration risk there is in VCSH etc.

1.35% might come slightly ahead compared to what institutional investors get, but it's hardly a great deal...
40% VTI | 40% VXUS | 13% I-bonds | 7% EE-bonds
rosalee
Posts: 63
Joined: Sat Oct 17, 2020 7:17 pm

Re: Are Bonds a safe place anymore?

Post by rosalee »

I compared VCSH to my choice of years ago, SWAGX, also a bond fund. Over the past 3 years the difference is marginal, SWAGX ahead by a few dollars.
But the interesting thing i noticed was the Market Correlation value.

VCSH mrkt corr = 0.55, but SWAGX = 0.05. So to me, a noobie, VCSH is about 10x more subject to stock market variation which is not what i want in a bond fund.
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