Yeah, I just gave up on trying to talk about it. But I guess maybe one last shot. I was doing cash and LTT previously (when I had a higher equities allocation), but now I'm pairing LTT with HY plus Total Bond (40/40/20), and that puts my overall duration at about 10 years. Personally, backtests have nothing to do with it. I was trying to use that as support, but completely failed lol. The point about interest rates having declined is why HY and LTT make sense. If you look at the NAV of VWEHX, you can see that it wasn't the increase in NAV (which has actually declined) that led to the return over the last couple decades. It was the yield. Which admittedly is lower than it used to be (but that's across the board). The performance of LTT is not tied simply to declining interest rates. It has the flight to safety thing plus it's a weird speculative space for short-term leveraged trading of fixed income. It's actually the intermediate term bond funds that benefited most from declining interest rates. They're the ones that have flattened out with sustained low rates. It's like a huge blind spot for some reason. So I'm attempting to balance term/interest rate risk vs credit risk, while reaching for yield, in order to reduce equity risk and still end up with some semblance of some kind of return in 10, 20, and 30 years. And I will ditch Total Bond for small cap in a heart beat once it's time to do that again.grok87 wrote: ↑Sun May 09, 2021 6:31 pmI agree that High Yield bonds are not worth it and you can just increase your equity instead.Beensabu wrote: ↑Sun May 09, 2021 5:59 pmNice! Will you look at that? Indeed you can, and it certainly doesokwriter wrote: ↑Sun May 09, 2021 5:33 pm You could replace HY bonds with Total Bond in portfolio (1) and achieve the same results by increasing the stock allocation a little. This supports vineviz's claim that HY bonds offer no additional benefits to a portfolio.
29% US stock / 29% Intl stock / 25% LTT / 17% Total US Bond
CAGR 7.64% / Stdev 8.86%
Guess that's a pretty good argument for reducing equities and pairing LTT with your Total Bond fund.
but i would be very cautious about the allocation to Long term treasuries (LTT) based on a back test from 1997. Interest rates have declined since then so of course LTT looks good. my advise is to split your bonds 50/50 between tips and treasuries, and to use market duration funds for both. so that would point to intermediate treasuries. or you could barbell your treasury allocation and have some in cash and some in long term treasuries.
Anyway. It doesn't matter. I'm just a person talking.