POLL : % of High Yield in your total portfolio ?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.

What % of your total portfolio is in high yield bonds ?

7 - 10 %
14
18%
7 - 10 %
14
18%
11 - 20 %
5
6%
more than 20 %
6
8%
would not own
38
49%
 
Total votes: 77

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jdrmlr
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POLL : % of High Yield in your total portfolio ?

Post by jdrmlr »

Interested to see what % of high yield bonds are in your total portfolio and how that is related to income needed for retirement.
chaz
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Post by chaz »

Zero %.
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Tramper Al
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Post by Tramper Al »

Already, I am shocked by the poll. A lot of Boglehead's are overinvested in High Yield Bonds by several factors. Just amazing. The desire to be smarter than the market is very strong. The levels of magnitude people are off the market is very high, and really is quite risky and not Bogleheaded.

Sorry, just kidding. I did answer 0%, though.
gkaplan
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Post by gkaplan »

I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
Gordon
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paulob
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Post by paulob »

Tramper Al wrote:Already, I am shocked by the poll. A lot of Boglehead's are overinvested in High Yield Bonds by several factors. Just amazing. The desire to be smarter than the market is very strong. The levels of magnitude people are off the market is very high, and really is quite risky and not Bogleheaded.

Sorry, just kidding. I did answer 0%, though.
:lol:
Paul
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fire5soon
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Post by fire5soon »

A follow up question I have is for those who have 10% or more HY... is there a particular reason or rationale you have for an allocation that high? Not looking to bash at all, just curious of the strategy.
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natureexplorer
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Re: POLL : % of High Yield in your total portfolio ?

Post by natureexplorer »

jdrmlr wrote:Interested to see what % of high yield bonds are in your total portfolio
How do you define high yield?
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jdrmlr
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Post by jdrmlr »

High Yield = VWEHX or something similar
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Mel Lindauer
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Post by Mel Lindauer »

gkaplan wrote:I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
Same goes for me.
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natureexplorer
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Post by natureexplorer »

jdrmlr wrote:High Yield = VWEHX or something similar
So someone explicitly owning a high-yield fund, because some of the Vanguard funds contain unrated and low-rated bonds.

Does anyone know what the market weight of high-yield bonds is? I would guess less than 1% in the US. I am wondering though whether we have non-survival bias there though.
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Post by KyleAAA »

I don't hold them separately, but I guess there are probably a few high yield bonds in the short-term bond index, which I do own. So I own a negligible amount.
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Sheepdog
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Post by Sheepdog »

Mel Lindauer wrote:
gkaplan wrote:I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
Same goes for me.
Same goes for me also. And I am taking income for spending in retirement. Hi Yield does not meet my needs.
Jim
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Tall Grass
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Post by Tall Grass »

So it's 74% that hold none or less than 1% so far...not surprised, considering the intelligence displayed at this forum.
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Random Musings
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Post by Random Musings »

Some short-term investment grade that I own has holdings Ba1 and below. However, it's not much, except for the 8.3% that is NR - wonder what that is?

However, the majority of my bond holdings are in TIPS, treasuries and CD's. A touch in I-Bonds.

So, in the 0-1% range. Take risk on the equity side.

RM
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Post by expat »

Doesn't vanguard total bond index fund contain high yield??
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Post by Dude2 »

paulob wrote:
Tramper Al wrote:Already, I am shocked by the poll. A lot of Boglehead's are overinvested in High Yield Bonds by several factors. Just amazing. The desire to be smarter than the market is very strong. The levels of magnitude people are off the market is very high, and really is quite risky and not Bogleheaded.

Sorry, just kidding. I did answer 0%, though.
:lol:
Good post.
They should be made to leave the forum immediately!
Gill
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Post by Gill »

fire5soon wrote:A follow up question I have is for those who have 10% or more HY... is there a particular reason or rationale you have for an allocation that high? Not looking to bash at all, just curious of the strategy.
I'll bite. My allocation is about 14% because it was once over 20% and I've scaled back a bit. That is notwithstanding following and posting on this forum daily for over ten years. Also, nearly half of this allocation is in a deferred annuity and a Roth, neither of which I plan to touch in my lifetime. I've never had the impression the negative feeling toward high yield bonds is unanimous on this forum. I'm retired and quite comfortable with this allocation.
Bruce
Last edited by Gill on Mon Feb 01, 2010 5:26 pm, edited 1 time in total.
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Mel Lindauer
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Post by Mel Lindauer »

expat wrote:Doesn't vanguard total bond index fund contain high yield??
No. It's an investment grade bond fund.
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Post by nisiprius »

Mel Lindauer wrote:
gkaplan wrote:I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
Same goes for me.
Me, too. However, since I did hold a Fidelity Freedom fund with a small "high yield" bond allocation for several years, I have held them so 0-1% seems true enough, since I've never held over 1% and my current allocation, 0, is within the listed range.
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bluto
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Post by bluto »

Maybe high yield bonds will make sense at some point in the future. They don't now. I'll take my risk in equities. I'm at zero and plan to stay there.
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Post by DA »

Would not own. Bonds are for safety.
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Post by allancoleman »

I have 18% High - Yield ( VWEAX ) in my personal Vanguard Roth account along with 81% GNMAs ( VFIJX ) and 1% Prime money market ( VMMXX ) . And in my Total invested portfolio that also includes my personal Roth and company 401(k) accounts , I have 8.4% . And I would like to buy more High - Yield at lower nav prices closer to $5.00 a share .
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woof755
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Post by woof755 »

Mel Lindauer wrote:
gkaplan wrote:I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
Same goes for me.
Ditto.

80% of respondants own none or less than one percent.
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TOM1964
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Post by TOM1964 »

I have some high-yield munis, no great allocation. I'm 35% in bonds, and maybe 3% in muni hi-yield.

"Moderation in all things, including moderation."
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Post by Dale_G »

So it's 74% that hold none or less than 1% so far...not surprised, considering the intelligence displayed at this forum.
:roll:
Already, I am shocked by the poll. A lot of Boglehead's are overinvested in High Yield Bonds by several factors. Just amazing. The desire to be smarter than the market is very strong.
:oops:

The numbers are a little hard to come by, but depending on the source, high yield bonds amount to about 3-4% of the US bond market. That might suggest that those who own no junk are the ones who believe they are "smarter" than the market.

I maintain about 7-1/2% of the portfolio in Junk (VWEAX and VWALX). I am retired, don't need the income, and therefor don't need bonds for safety.

To each his own.

Dale
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Post by joe8d »

1% and contrary to the conventional wisdom hold in taxable.I do so because I'm retired, deacculalteing, in the 15% marginal tax bracket and have the ability to TLH which I've done 3 times so far.
All the Best, | Joe
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Re: POLL : % of High Yield in your total portfolio ?

Post by scrabbler1 »

jdrmlr wrote:Interested to see what % of high yield bonds are in your total portfolio and how that is related to income needed for retirement.
I have about 35% of my total portfolio in Fidelity's Focused High-Income fund (FHIFX), a fund which invests in bonds slightly below investment grade (mostly BB). I bought into the fund in late 2008 when I retired from work at age 45 and when the fund's NAV was very low. It provides me with about 75% of my non-retirement accounts dividend income and more than my current expenses. As a percent of my (low) average cost per share, it is returning about 8%.

The rest of my portfolio is in stock funds and investment grade (or better) bond funds.
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Post by TJAJ9 »

I wouldn't hold junk bonds. I prefer to take risk with my equities.
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Post by bikeguyken »

Follow a Rick Ferri approach of 10% in High Yield~7% of overall portfolio. Treat it as 25% equity per Larry. Yes, many roads to Dublin.
Tramper Al
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Post by Tramper Al »

So, my primary objection to using a product like High Yield Bonds is simply one of location. I have tax-favored locations where total return is tax-free, and then I have the taxable location where capital gains may be deferred but interest is heavily taxed. There is just no location that makes sense for me to put an hybrid equity-FI product like HY bonds, preferred stock, balanced funds, you name it.

To get the most out of limited tax-favored space, I locate "pure" FI there, so that's US Treasuries. If I want corporate exposure, and I do, well I have equities for that.

So while I believe that the corporate exposure does not care (or know) where it is located (with stocks or bonds), the tax man certainly does.
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Hexdump
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I am about to buy a ton of it.

Post by Hexdump »

Fund = VWEAX

At least I think I am, to the extent of 28% of our portfolio.

The reason is that I need a certain level of income from an IRA, with no intention of touching the principle.
This is to be a buy-and-forget and collect the income.
So far I have not seen other options that will provide me this level of income.

I still have time to change my mind if there are other choices you might want to recommend

Invested amount = 250,000
Income based upon 2009 figures is 18,755.
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Post by ohiost90 »

I'm at 3.5% of my portofolio.

I purchased the fund in March of '07, along with Total Bond IDX, Total Market IDX and Total International IDX while doing a roll-over IRA. As a result, I don't have such as disdain for High Yield as others have. I'm however more informed now then when I 1st purchased the fund as a result of this board.
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Post by grayfox »

I have zero percent in junk bond funds. At one point back in 2002 or 2003 I did buy VWEHX and T. Rowe Price High-Yield Bond, PRHYX. But I sold them around 2005 or 2006.

I thought Bernstein's strategy with high yield was to buy it when credit spreads are wide and sell it when credit spreads narrow.

Anyway, over the past ten years, you would have been much better off in Vanguard High-Yield Corporate than in the Total Stock Market. Athough you would have suffered a huge drawdown in 2008.

Image

You gotta market time this junk. Just ask Bernstein or the Nobel Prize winning Market timer Harry Markowitz.
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Post by jms824 »

I have about 12% of my total portfolio in Hi Yield Funds in my IRA. . . .

I have about 15% of my portfolio in High Yield funds in my taxable accounts (11.5% of this amount is in a High Yield Tax Free fund). . .

I have 45% of my total portfolio in Bonds. . . . .and 55% in Stocks.

I have been very pleased with the recent results of my High Yield funds and intend to closely watch them going forward.
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Post by mickeyd »

I voted 0-1% but later saw that the final selection was more accurate. Junk bonds have no place in my bond portfolio. I would rather gather most of my risk in the equity portion of my portfolio.
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Post by Zander »

gkaplan wrote:I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
I did the same thing. DOH!
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high-yield

Post by Buster »

24% of my portolio is vweax(Vanguard's high-yield fund). Bought at good prices in 2008/2009 so there's been a nice runup along with the monthly income. Will probably hang onto it for another 3 or 4 months.
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Post by maxwellthedog »

I put high yield in the "opportunistic" category. When yields were 20%+ and implied default rates were over 50% in early 2009, they were a screaming buy and we bought a 5% position in HYG. Last December, once spreads had tightened in to about 900 over LIBOR and implied default rates were 10-20%, they were a lot closer to fair value so we sold all of our position.

We did the same trade in a Calamos convertible bond fund as well. Both trades worked out quite well.

Historically, through the cycle, both types of bonds have returned less than equities with similar volatility (much higher than for conventional, investment-grade bonds). They are absolutely something that can be bought and sold opportunistically. But historically, returns have not really justified the risk of owning them as a stable asset allocation.
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Post by Eric White »

Sheepdog wrote:
Mel Lindauer wrote:
gkaplan wrote:I voted for the first choice (0-1%). Had I scrolled down the list before casting my vote, however, I would have voted for the last choice (Would not own.)
Same goes for me.
Same goes for me also. And I am taking income for spending in retirement. Hi Yield does not meet my needs.
Jim
Ditto for me. Not in my portfolio but voted too quickly. I expected the choice sequence to logically flow from not own to maximum threshold.
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Post by Beagler »

Tramper Al wrote:Already, I am shocked by the poll. A lot of Boglehead's are overinvested in High Yield Bonds by several factors. Just amazing. The desire to be smarter than the market is very strong. The levels of magnitude people are off the market is very high, and really is quite risky and not Bogleheaded.
They're headed for catastrophic losses! Investing this way is definitely not Bogleheaded! :)
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Dale_G
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Post by Dale_G »

Beagler said:
They're headed for catastrophic losses!
I am glad you are able to predict markets with 100% accuracy.

I am not in that position unfortunately. I do however own bonds across the yield curve and across the credit spectrum. My asset allocation is fixed, which requires that I rebalance into and out of junk bonds as the occasion demands.

My recent exchanges were:

Sell XXX,000 on 06/19/08 @ 5.69
Buy XX,000 on 10/13/08 @ 4.44
Buy XXX,000 on 11/06/08 @ 4.33
Sell XX,000 on 06/01/09 @ 4.86
Sell XX,000 on 07/28/09 @ 5.06
Sell XX,000 on 10/09/09 @ 5.32

This isn't timing, just rebalancing. I am still slightly over-weight junk, but posts such as yours encourage me to hang in there until the next sell trigger.

Dale
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saves nine
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Post by saves nine »

I wonder if some of us might not have more junk in our bond fund portfolios than we think. I just ran a morningstar x-ray of a hypothetical portfolio which was 90% rpsix (trp spectrum income of which about 20% was trp's high yield fund on 12/31/09) and 10% vwehx (vanguard high yield). The x-ray result was: 91% medium quality and 9% low quality. A closer estimate, I think, might have been 28% low quality [(0.9*0.2) + (1.0*.1)]. The source of this understatement, it seems to me, is that rpsix's bond holdings, high & low, are aggregated into a middle range and show up as 100% medium grade.

I don't think that this is a problem exclusive to the Morningstar tool. I was surprised to learn recently in another Boglehead discussion that there is a concept called "overall credit quality" [hope I got that right] that has the same effect. (By its dim light, for example, rpsix's bond holdings with its 20% or more junk holding rate an A.)
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Post by Ron »

1.65%, per M* X-Ray analysis.

Since the poll options don't cover 1-2%, I could not vote :roll: ...

- Ron
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Post by Bluegrass »

I had 3 percent in Vanguard's high yield fund most of last year. Don't have any this year. Most likely will not have any high yield going forward. Like many others, I prefer to take my risk on the equity side.
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Post by Beagler »

Dale_G wrote:Beagler said:
They're headed for catastrophic losses!
I am glad you are able to predict markets with 100% accuracy.
I hope that you realize I was mimicking another poster who's been railing against SCV.

Like you, I have no financial predictive powers. I've owned VWEHX in an IRA for over a decade. I have no plans to sell. I think of this fund the way Jim Lebenthal described muni bonds in his very entertaining book http://tinyurl.com/ykroprl : when I bought the cow, I was thinking about the milk and not hamburger.
“The only place where success come before work is in the dictionary.” Abraham Lincoln. This post does not provide advice for specific individual situations and should not be construed as doing so.
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Post by saves nine »

Ron, disenfranchised but undaunted, writes:
1.65%, per M* X-Ray analysis.
Near as I can figure, that would put you in the 4-6% range. :)
splitatlantic
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Post by splitatlantic »

I had 20% last year and recently reduced it to 10% after moving 1/2 of the investment to TIPS. Both are admiral shares.

I can't help liking the monthly distribution...about 1% per month. I like dividends!
tetric
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Post by tetric »

I purchased some last year when the fund (Vanguard's) was yeilding over 13% as part of my 10% casino money (as Jack Bogle describes).

Sold it few months later after share price appreciated about 40%. (I purchased only the minimum 3k required so I did not make a fortune :lol: )
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Post by Dale_G »

Sorry Beagler, I take everything seriously unless I see a :lol: or somesuch!

Dale
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Post by ohiost90 »

tetric wrote:I purchased some last year when the fund (Vanguard's) was yeilding over 13% as part of my 10% casino money (as Jack Bogle describes).

Sold it few months later after share price appreciated about 40%. (I purchased only the minimum 3k required so I did not make a fortune :lol: )
Thats funny, the fund never had a yield over 13% and share prices never appreciated anywhere near 40%.

The highest yield for the fund was 12.59% on 1/2/2009. The price on that day was $4.28. If one had brought the fund at that date and sold at the years high, (5.47 on 12/31/09) share price would have increased by only 27%.

Even if one had purchased at years low and sold at years high(9 months later), one would had only seen a share price appreciation of 32% while yielding only slightly more than 11%
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