Bogle: Too Much In Bonds
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Bogle: Too Much In Bonds
Did anyone see this article? It says that John Bogle is concerned that too many retirees might be overlooking Social Security as an income source in developing allocations. He also is quoted saying that they should pay more attention to dividend paying stocks.The headline implies that he thinks retirees are holding too much in bonds. Has he discussed this before?
http://www.investmentnews.com/article/2 ... /130619939
http://www.investmentnews.com/article/2 ... /130619939
Re: Bogle: Too Much In Bonds
It makes sense, as long as social security will always be there and you won't freak out if your portfolio goes down more than 30%.
As much as I agree and love John Bogle, this seems a little confusing because he is ultra conservative when it comes to his own portfolio and he has always recommended age in bonds, (which has always been the most conservative route).
Warren Buffett has recently been advising the average Joe to have enough cash on hand and the rest should be in stocks.
http://www.usatoday.com/story/money/bus ... z/2138403/
As much as I agree and love John Bogle, this seems a little confusing because he is ultra conservative when it comes to his own portfolio and he has always recommended age in bonds, (which has always been the most conservative route).
Warren Buffett has recently been advising the average Joe to have enough cash on hand and the rest should be in stocks.
http://www.usatoday.com/story/money/bus ... z/2138403/
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Re: Bogle: Too Much In Bonds
Now I've heard everything. It appears that Jack is back-peddling on advice he has given over the years, or at least watering it down. We have gone from age in bonds, to age in (bonds plus social security), and now to age in (bonds plus social security plus dividend-paying stocks). Oh, and even the bonds have been changed from buying the market to over-weighting in corporates. I am almost ready to rescind Jack's membership as a Boglehead.
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Re: Bogle: Too Much In Bonds
Please don't feel that way. I don't see anything wrong with what he is doing. He may see that his old advice has changed and the guy on the street will be better served going this route now. His advice on watching costs still remains the same, he is just seeing what many other pros are and he is being responsible and letting us know. John Bogle is not a fly by night guru and I for one appreciate him letting us know that the old advice might need to change. I agree it may be confusing, but once you make the shift in your own mind, it seems to be the way to go.Call_Me_Op wrote:Now I've heard everything. It appears that Jack is back-peddling on advice he has given over the years, or at least watering it down. We have gone from age in bonds, to age in (bonds plus social security), and now to age in (bonds plus social security plus dividend-paying stocks). Oh, and even the bonds have been changed from buying the market to over-weighting in corporates. I am almost ready to rescind Jack's membership as a Boglehead.
I will have trouble being stock heavy and the change will ultimately be my own decision, but this same advice is coming from Warren Buffett. Between Mr. Bogle and Mr. Buffett I think they have proved that they are men of character above all else.
Choose Simplicity ~ Stay the Course!! ~ Press on Regardless!!!
Re: Bogle: Too Much In Bonds
In Mr.
bogles defense.
the situation has changed-the country is in an extremely low interest environment. maybe he has decided in this environment bonds are not a good deal.
bogles defense.
the situation has changed-the country is in an extremely low interest environment. maybe he has decided in this environment bonds are not a good deal.
Re: Bogle: Too Much In Bonds
I think it's a test and he's counting how many weak hands amongst the Bogleheads get shaken out as a result.
Re: Bogle: Too Much In Bonds
I wonder if the reporter paraphrased a little too much and left out some important comments or qualifications.
I have nothing specific to base this on other than previous experience with published stories being very different from what was actually said...
Billy
I have nothing specific to base this on other than previous experience with published stories being very different from what was actually said...
Billy
Re: Bogle: Too Much In Bonds
"Don't make me come over there...I'm just sayin'..."
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Re: Bogle: Too Much In Bonds
LOL!Blues wrote:I think it's a test and he's counting how many weak hands amongst the Bogleheads get shaken out as a result.
I think we need a little more information. He was interviewed at Morningstar today so let's wait to see the interview before we jump to any conclusions or someone gets worked up into a lather.
There are people in this day and age who are actually trying to live on dividends alone without touching the principal but I can't believe that John Bogle is one of them.
Artsdoctor
Re: Bogle: Too Much In Bonds
Stay the course?
The course is changing an awful lot.
The course is changing an awful lot.
"Optimum est pati quod emendare non possis." |
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Re: Bogle: Too Much In Bonds
"Stay the course?
The course is changing an awful lot."
One does get that impression.
Lev
The course is changing an awful lot."
One does get that impression.
Lev
Re: Bogle: Too Much In Bonds
I agree.gerrym51 wrote:In Mr.
bogles defense.
the situation has changed-the country is in an extremely low interest environment. maybe he has decided in this environment bonds are not a good deal.
All the Best, |
Joe
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Re: Bogle: Too Much In Bonds
[Added]The stuff I've put in grey is wrong. Other posters have made it clear that Bogle has been consistent about counting Social Security and guaranteed income sources as bonds. (I still don't think he makes this clear in The Little Book of Common Sense Investing but I don't have a copy at hand).
Yes, I agree. He's been saying "age in bonds" for a long time, and it's only recently that he's started to say "Oh, but count your Social Security as a bond." Why didn't he say that before?
In The Little Book of Common Sense Investing (2007) he wrote:
I personally feel that the whole "Social Security is a bond" thing is bogus. I'd feel differently if everyone's Social Security statement said on it, "Your future Social Security benefits have a net present value of $X. Retirement savers with additional savings who wish to calculate their asset allocation should consider Social Security as a bond with a value of $X." But they don't.
We have had Social Security since the 1930s, and there is nothing that I know of that would make it appropriate to have a far more aggressive allocation today than thirty years ago. Including Social Security as a bond might mean greater accuracy in accounting for retirement savers who have expect much greater or much less in Social Security benefits than the average, but the average investor should be investing in the same way. If we are going to count Social Security as a bond, then we should adjust the "age in bonds" recommendation at the same time, so that the average investor following the new rule of them gets the same allocation as before.
Yes, I agree. He's been saying "age in bonds" for a long time, and it's only recently that he's started to say "Oh, but count your Social Security as a bond." Why didn't he say that before?
In The Little Book of Common Sense Investing (2007) he wrote:
My favorite rule of thumb is (roughly) to hold a bond position equal to your age--20 percent when you are 20, 70 percent when you're 70, and so on--or maybe even your age minus 10 percent. There are no hard-and-fast rules here. (Most experts think my guidelines are too conservative. But I am conservative). Period. I don't have the book at hand, but I tried a quick search with Amazon Look Inside the Book and Google Books and I can't find any hint that the rule is supposed to assume that Social Security is counted as a bond. For many investors, the effect of including Social Security as a bond would be to make the allocation he recommends in 2013 much more aggressive than the one he recommended in 2007.
I personally feel that the whole "Social Security is a bond" thing is bogus. I'd feel differently if everyone's Social Security statement said on it, "Your future Social Security benefits have a net present value of $X. Retirement savers with additional savings who wish to calculate their asset allocation should consider Social Security as a bond with a value of $X." But they don't.
We have had Social Security since the 1930s, and there is nothing that I know of that would make it appropriate to have a far more aggressive allocation today than thirty years ago. Including Social Security as a bond might mean greater accuracy in accounting for retirement savers who have expect much greater or much less in Social Security benefits than the average, but the average investor should be investing in the same way. If we are going to count Social Security as a bond, then we should adjust the "age in bonds" recommendation at the same time, so that the average investor following the new rule of them gets the same allocation as before.
Last edited by nisiprius on Fri Jun 14, 2013 7:21 am, edited 2 times in total.
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Re: Bogle: Too Much In Bonds
Financial markets are inherently unpredictable, but one thing that is as close to a certainty as one ever gets in discerning the future is that over the next 10 - 15 years, stocks will outperform bonds and probably by a significant margin. Bonds are at the end of a 30 year bull market offering absurdly low interest rates in return for "safety." Bonds are unlikely to produce real inflation-adjusted returns for a decade or more. Intermediate bonds YTD have produced negative nominal, let along inflation-adjusted, returns and this is not an anomaly. It is a harbinger of the future as many, including Bogle, Buffett, Malkeil, etc., see it. If 75% of your portfolio produces no increase in purchasing power in the next 10 - 15 years, will you have adequate funds to satisfy living expenses plus long term care expenses in 20 - 25 years? None of us know how long we're going to live or how much money we'll need for these things. If your portfolio runs out of gas before you do, you're in a lot of trouble and at that point you have no options. Talk about risk? To me, the risk of equity exposure with stock market volatility pales in comparison to that risk. John Bogle sees the writing on the wall and as a well-informed, rational, sentient market observer responding to it rather than being a fundamentalist on "age in bonds" and other bond dominated strategies that worked so well in the 30 year bull market but aren't going to do so going forward. Times change and wise investing advice is not fixed forever in stone.
I agree totally with Bogle and am not sure why so many are upset with him for speaking his mind frankly just as he always has.
Garland Whizzer
I agree totally with Bogle and am not sure why so many are upset with him for speaking his mind frankly just as he always has.
Garland Whizzer
Re: Bogle: Too Much In Bonds
Most of the time, when John Bogle says something, either there's an analysis behind it, such as the impact of fund costs, or other people have come along and done studies or performed analyses that later validate his initial statement.
In the case of "age in bonds" though the support is weak to non-existent. Is there any evidence that "age in bonds" makes it less likely that you'll run out of money in retirement? The safe withdrawal rate studies are no help; they all used fixed allocations throughout retirement. In fact, these studies provide a slight bit of evidence that "age in bonds" might not work; in those studies high bond allocations actually lead to higher risk and "age in bonds" strategies result in high bond allocations.
Another piece of evidence that "age in bonds" strategies might not work is that there is some evidence that "bonds first" withdrawal strategies, which produce an effect completely opposite to "age in bonds" are slightly better than balanced withdrawals.
What I think has happened is that John Bogle still sticks with his basic point of moving to a more conservative asset allocation as you age but he probably now feels that "age in bonds" was far too conservative, since there will be times of very low interest rates, like in the past, like now. "Count Social Security" might be too much of step in the opposite direction, especially since low interest rates have increased the present value of a Social Security annuity, but it at least steps away from a bit of advice that hasn't been otherwise supported.
In the case of "age in bonds" though the support is weak to non-existent. Is there any evidence that "age in bonds" makes it less likely that you'll run out of money in retirement? The safe withdrawal rate studies are no help; they all used fixed allocations throughout retirement. In fact, these studies provide a slight bit of evidence that "age in bonds" might not work; in those studies high bond allocations actually lead to higher risk and "age in bonds" strategies result in high bond allocations.
Another piece of evidence that "age in bonds" strategies might not work is that there is some evidence that "bonds first" withdrawal strategies, which produce an effect completely opposite to "age in bonds" are slightly better than balanced withdrawals.
What I think has happened is that John Bogle still sticks with his basic point of moving to a more conservative asset allocation as you age but he probably now feels that "age in bonds" was far too conservative, since there will be times of very low interest rates, like in the past, like now. "Count Social Security" might be too much of step in the opposite direction, especially since low interest rates have increased the present value of a Social Security annuity, but it at least steps away from a bit of advice that hasn't been otherwise supported.
Re: Bogle: Too Much In Bonds
So if 'stay the course' means 'stay the course unless circumstances change'...why even say it?
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Re: Bogle: Too Much In Bonds
I can't tell if your being humorous or serious, but if it's the latter, you really are substantially misrepresenting his ideas. The age-in-bonds rule-of-thumb is, as he puts it, "a crude starting point" which "clearly must be adjusted to reflect the [investor's] objectives, risk tolerance, and overall financial position." The overall financial position he clarifies to include fixed income sources, and he has done so for quite some time. Age in bonds is an evolution from his earlier rule-of-thumb to essentially center at 50/50 during the first half of retirement and decrease stocks in the latter half. By "centering" he meant start by considering that allocation and make appropriate adjustments for all the same considerations (objectives, risk tolerance, and overall financial situation) Prior to retirement the weighting would tend more towards stocks, notionally 80/20 for a relatively young accumulator.Call_Me_Op wrote:Now I've heard everything. It appears that Jack is back-peddling on advice he has given over the years, or at least watering it down. We have gone from age in bonds, to age in (bonds plus social security), and now to age in (bonds plus social security plus dividend-paying stocks). Oh, and even the bonds have been changed from buying the market to over-weighting in corporates. I am almost ready to rescind Jack's membership as a Boglehead.
These ideas have been in his books for years. The quotes above are from Common Sense on Mutual Funds. The SS as fixed income asset clarification comes from the 2009 edition (which also introduced age-in-bonds), but the original edition (with the "centered on 50/50 in retirement" rule-of-thumb lists SS among the factors for "overall financial situation" adjustments).
Early this year in an interview he said he had his retirement accounts allocated around 50/50 and his other assets were 20/80 (I expect the 80% includes his SS and whatever pension he might have from VG), so he's not mindlessly following age in bonds, nor does he suggest anyone else do so.He's clearly adjusting to reflect his own objectives, risk tolerance, and financial situation.
The guy is actually a very comprehensive and flexible thinker despite some (rightfully) rigid opinions on things like investment costs. He does have an arsenal of simplified one-liners he breaks out for 5-minute interviews, but they're not meant to each be Moses coming down off the mountain stuff.
Last edited by IlliniDave on Thu Jun 13, 2013 8:22 pm, edited 4 times in total.
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Re: Bogle: Too Much In Bonds
Interesting! Very interesting.
Re: Bogle: Too Much In Bonds
You have to pay attention to valuations and you need some flexibility in your investing approach. Markets change and circumstances change.
Mr. Bogle can see that a bear market in bonds is coming (and might be here) and wants people to be prepared. I don't think he is abandoning his philosophy, I think he is making tweeks in response to the situation he sees out there.
If you are driving along a road and see that the bridge is out, it would be prudent to modify your course a bit. Turning around and seeking another way across is not the abandonment of a philosophy but a recognition of the realities of the marketplace.
For myself, I am continuing to buy bonds with 40% plus of my new funds for investment but I have not sold any stocks to buy bonds. Bonds are not a good deal now and the only reason I am buying them is to keep my asset allocation from getting too aggressive. Eating my spinach. So I might be wrong, but I am trying to adjust my plans best I can to the realities of what is out there now.
So I don't think Mr. Bogle has gone off the rails. He simply sees what a lot of other folks sees and has the integrity to speak up.
Mr. Bogle can see that a bear market in bonds is coming (and might be here) and wants people to be prepared. I don't think he is abandoning his philosophy, I think he is making tweeks in response to the situation he sees out there.
If you are driving along a road and see that the bridge is out, it would be prudent to modify your course a bit. Turning around and seeking another way across is not the abandonment of a philosophy but a recognition of the realities of the marketplace.
For myself, I am continuing to buy bonds with 40% plus of my new funds for investment but I have not sold any stocks to buy bonds. Bonds are not a good deal now and the only reason I am buying them is to keep my asset allocation from getting too aggressive. Eating my spinach. So I might be wrong, but I am trying to adjust my plans best I can to the realities of what is out there now.
So I don't think Mr. Bogle has gone off the rails. He simply sees what a lot of other folks sees and has the integrity to speak up.
A fool and his money are good for business.
Including Social Security
Mr. Bogle advocates including the value of pension and Social Security benefits as part of your “bond” holdings - see Bernd’s Sun Dec 07, 2008 5:52 pm post in conversation: http://www.bogleheads.org/forum/viewtopic.php?t=28579, which references a Scott Burns from 2003 which quotes Mr. Bogle on including Social Security.nisiprius wrote:. . .
For many investors, the effect of including Social Security as a bond would be to make the allocation he recommends in 2013 much more aggressive than the one he recommended in 2007. . .
Mr. Bogle sums things up very well in his 10th Anniversary Edition of "Common Sense on Mutual Funds" pages 87-88:
" . . . stock market crash of 2007-2009 . . . Long before the crash, I had fine-tuned my rule-of-thumb asset allocation module, centered at 50/50 for older investors in the distribution phase of their investment plan. Rather, I recommended--as a crude starting point--that an investor's bond position should equal his or her age. . . . Clearly, such a rule must be adjusted to reflect an investor's objectives, risk tolerance, and overall financial position. (For example, pension and Social Security payments would be considered bondlike investments.) But the point is that as we age, we usually have (1) more wealth to protect, (2) less time to recoup severe losses, (3) greater need for investment income, and (4) perhaps an increase nervousness as markets jump around. All four of those factors clearly suggest more bonds as we age."
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Re: Bogle: Too Much In Bonds
Now the student becomes the teacher! When we ignore his advice, maybe that will mean we passed the ultimate bogle test.Call_Me_Op wrote: I am almost ready to rescind Jack's membership as a Boglehead.
70% Global Stocks / 30% Bonds
Re: Bogle: Too Much In Bonds
"A foolish consistency is the hobgoblin of little minds"--Emerson
Intelligent people aren't ashamed to change their opinions in response to new information or increased understanding. Investing isn't physics. It has no immutable laws. The environment keeps changing and those who cling to certainties because it's easier to do that than to keep alertly thinking things through can get squashed.
Bogle has risen in my estimation after giving this evidence that he continues to think and observe rather than resting on his laurels and repeating his greatest hits.
Intelligent people aren't ashamed to change their opinions in response to new information or increased understanding. Investing isn't physics. It has no immutable laws. The environment keeps changing and those who cling to certainties because it's easier to do that than to keep alertly thinking things through can get squashed.
Bogle has risen in my estimation after giving this evidence that he continues to think and observe rather than resting on his laurels and repeating his greatest hits.
Re: Bogle: Too Much In Bonds
Scooter57 wrote:"A foolish consistency is the hobgoblin of little minds"--Emerson
Intelligent people aren't ashamed to change their opinions in response to new information or increased understanding. Investing isn't physics. It has no immutable laws. The environment keeps changing and those who cling to certainties because it's easier to do that than to keep alertly thinking things through can get squashed.
Bogle has risen in my estimation after giving this evidence that he continues to think and observe rather than resting on his laurels and repeating his greatest hits.
All the Best, |
Joe
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Re: Bogle: Too Much In Bonds
Please don't take this post as a reason to question Bogle's integrity, either ethically or intellectually. His record speaks for itself. It makes no sense that he'd suddenly start pandering to prevailing market winds.
The article isn't very informative, but touches on some interesting topics. Again, I'm just wondering if anyone has seen anything more substantive about this from Bogle before. If not, I'll wait until I hear more from him. He has earned my respect and that's why I care about hearing more about his views on bond risks. I don't mean to suppose to put words in his mouth.
The article isn't very informative, but touches on some interesting topics. Again, I'm just wondering if anyone has seen anything more substantive about this from Bogle before. If not, I'll wait until I hear more from him. He has earned my respect and that's why I care about hearing more about his views on bond risks. I don't mean to suppose to put words in his mouth.
Re: Bogle: Too Much In Bonds
Tough to stay the course with bonds when you know you will lose money, especially in real terms. And as far as helping to stay the course being 60/40 vs 70/40 etc. this is not going to make a big difference for me. When the big bear comes, the value of my portfolio will plummet thousands either way.
I did not sell low in 2009 and do not expect to when the next bear comes around. But having a definite loser (bonds) in my portfolio feels worse than having no bonds. On the other hand, as I get closer to my magic number, how else can you dial down risk? Cds, Larry's portfolio? And if you are investing for decades, there will be many more cycles of rising and falling rates which argues for staying the course.
I did not sell low in 2009 and do not expect to when the next bear comes around. But having a definite loser (bonds) in my portfolio feels worse than having no bonds. On the other hand, as I get closer to my magic number, how else can you dial down risk? Cds, Larry's portfolio? And if you are investing for decades, there will be many more cycles of rising and falling rates which argues for staying the course.
Re: Bogle: Too Much In Bonds
I remember reading somewhere "When conditions change,I change my mind, What do you do sir?Maybe It's time. Bob
" When the facts change. I change my mind, what do you do sir? J.M. Keynes
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Re: Bogle: Too Much In Bonds
Perhaps Mr. Bogle will expand on this during the Bogleheads Event.
While Mr. Bogle is on the subject on bonds, I would also be interested in his thoughts on:
1) International Bonds - I would be surprised if he recommended these funds.
2) TIPS - which I believe I already know - he sold them all and does not recommend them any longer.
While Mr. Bogle is on the subject on bonds, I would also be interested in his thoughts on:
1) International Bonds - I would be surprised if he recommended these funds.
2) TIPS - which I believe I already know - he sold them all and does not recommend them any longer.
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Re: Bogle: Too Much In Bonds
Nisipirus,
He has said several times (thanks EyeDee for finding the references) that pensions and SS should be looked at as bond-like investments. There have been several threads/discussions on this forum about how this would/should impact the asset allocation and (which for me is the more difficult part) what "bond value" to put on an income stream such as a pension or SS. If I recall well, when Mr. Bogle was asked this question, he suggested to multiply the annual income stream x 11, but stated that others are making the argument to multiply the annual income stream x14. You are right, this leads to a more aggressive asset allocation in retirement, which at least for me would be uncomfortable, if I was close to retirement.
I think (for me) an easier way to look at it is to subtract pensions and SS from your total retirement income needs and aim for a portfolio size, that can cover the gap and do a traditional asset allocation in that part.
I think he mentions the dividend stock part (IMHO) as an option for people who need a higher income stream than their savings give with current fixed income and tells them that these stocks are an option - as the income stream can be relatively constant regardless of markets up and downs...at least that is how I understood it
So overal not a contradiction to his principles, just an extremely intelligent man trying to help the average investor by adaptiong to the current fixed income problem many retirees face.
Just my 2c
He has said several times (thanks EyeDee for finding the references) that pensions and SS should be looked at as bond-like investments. There have been several threads/discussions on this forum about how this would/should impact the asset allocation and (which for me is the more difficult part) what "bond value" to put on an income stream such as a pension or SS. If I recall well, when Mr. Bogle was asked this question, he suggested to multiply the annual income stream x 11, but stated that others are making the argument to multiply the annual income stream x14. You are right, this leads to a more aggressive asset allocation in retirement, which at least for me would be uncomfortable, if I was close to retirement.
I think (for me) an easier way to look at it is to subtract pensions and SS from your total retirement income needs and aim for a portfolio size, that can cover the gap and do a traditional asset allocation in that part.
I think he mentions the dividend stock part (IMHO) as an option for people who need a higher income stream than their savings give with current fixed income and tells them that these stocks are an option - as the income stream can be relatively constant regardless of markets up and downs...at least that is how I understood it
So overal not a contradiction to his principles, just an extremely intelligent man trying to help the average investor by adaptiong to the current fixed income problem many retirees face.
Just my 2c
Last edited by michaelsieg on Thu Jun 13, 2013 10:01 pm, edited 1 time in total.
Re: Bogle: Too Much In Bonds
Well here's what i think:
1) Social security and pensions should be thought of as bonds
2) dividend paying stocks are stocks not bonds. not now, not ever.
3) it is probably not that bad to overweight short term high quality corporates. but investing in long term corporates is a mugs game
http://www.bogleheads.org/forum/viewtop ... 0&t=116549
i would aproach intermediate term corporates with great caution.
cheers,
1) Social security and pensions should be thought of as bonds
2) dividend paying stocks are stocks not bonds. not now, not ever.
3) it is probably not that bad to overweight short term high quality corporates. but investing in long term corporates is a mugs game
http://www.bogleheads.org/forum/viewtop ... 0&t=116549
i would aproach intermediate term corporates with great caution.
cheers,
RIP Mr. Bogle.
Re: Bogle: Too Much In Bonds
How did stocks do in the couple decades long period of rising rates that ended in 1981? Seems like I recall the financial media talking about the "death of equities" around this time.Financial markets are inherently unpredictable, but one thing that is as close to a certainty as one ever gets in discerning the future is that over the next 10 - 15 years, stocks will outperform bonds and probably by a significant margin.
Over the long haul, declining interest rates tend to be good for stocks; rising interest rates tend to be bad. Obviously correlations are much lower over shorter time horizons, but it seems far far-fetched to me to suggest that long-term rising interest rates increases the odds of stocks beating bonds. I would agree with the statement that stocks are very likely to beat bonds over the next 15 years, but I would say the same thing if the 10-year was at 6% instead of 2%.
Re: Bogle: Too Much In Bonds
His recent suggestion that the TBM should exclude foreign holdings and Government purchases makes a lot of sense to me.abuse 368 wrote:Perhaps Mr. Bogle will expand on this during the Bogleheads Event.
While Mr. Bogle is on the subject on bonds, I would also be interested in his thoughts on:
1) International Bonds - I would be surprised if he recommended these funds.
2) TIPS - which I believe I already know - he sold them all and does not recommend them any longer.
All the Best, |
Joe
Re: Bogle: Too Much In Bonds
I suspect "bonds" may have been taken a tad too literally when one is considering fixed-income investments.
Most of us considered more than one route to Dublin.
PS: To Lady Geek. 680 North from Dublin today was a mess, owing to a bottle-neck on 24. Best to follow 580 east. Many routes "from" Dublin, as it were. Some better than others.
Most of us considered more than one route to Dublin.
PS: To Lady Geek. 680 North from Dublin today was a mess, owing to a bottle-neck on 24. Best to follow 580 east. Many routes "from" Dublin, as it were. Some better than others.
Last edited by john94549 on Thu Jun 13, 2013 10:13 pm, edited 1 time in total.
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Re: Bogle: Too Much In Bonds
Thanks grok87 - I think you are 100% right, but I don't read his comments that he thinks dividend paying stocks are bonds, he says
Agree especially with you caution about longer term bonds
So what I think he is saying, that if you need an additional income stream in retirement, you can use these stocks (in your equity allocation) to help out with the reduced income that bonds currently have.With that in mind, it would behoove retirees to pay more attention to dividend-paying stocks in a retirement account.
Agree especially with you caution about longer term bonds
Re: Bogle: Too Much In Bonds
Personally, that's the way I think makes the most sense to do it and the way I've been doing it myself over the past several years.michaelsieg wrote:I think (for me) an easier way to look at it is to subtract pensions and SS from your total retirement income needs and aim for a portfolio size, that can cover the gap and do a traditional asset allocation in that part.
Calculate the annual shortfall after, (or a desired amount of income over and above), SS, pensions and any other guaranteed streams of income and set an appropriate allocation to equities and fixed income instruments (including SPIA's if necessary).
Re: Bogle: Too Much In Bonds
I have held the garden-variety panacea for dividend paying stocks for ever so long (DVY). Trust me, it goes up and down just like all other stocks. Has it out-performed your garden-variety dividend paying stock index fund? As in VTI?
Pull up a chart.
Pull up a chart.
Last edited by john94549 on Thu Jun 13, 2013 10:20 pm, edited 1 time in total.
Re: Bogle: Too Much In Bonds
FYI John Bogle has stated, clearly, that payments from the social security trust fund and pensions count in retirement income and should be regarded as long term bond returns. Further it should be considered to increase equity holdings in the event either provides substantial income.
He wrote this in his first book circa 1994.
Before accusing Bogle of changing his views it's best to check your sources.
He wrote this in his first book circa 1994.
Before accusing Bogle of changing his views it's best to check your sources.
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Please note: this and all posts by me are for entertainment value only & not as medical / legal / tax / financial or other investment advice. Consult your professional in all matters.
Bogle on Social Security
.BetaBreaker wrote:. . . Again, I'm just wondering if anyone has seen anything more substantive about this from Bogle before. If not, I'll wait until I hear more from him. He has earned my respect and that's why I care about hearing more about his views on bond risks. I don't mean to suppose to put words in his mouth.
How about the Scott Burns article quoted by Bernd (http://www.bogleheads.org/forum/viewtop ... 47#p346747) form 2003 I referenced above.
Or how about this from "Bogle on Mutual Funds" copyright 1994 (mentioned by subrosa above) page 268:" . . . payments from the Social Security Trust fund count--and importantly so--in your retirement income, as do payments from a private or public pension fund. Retirement plan distribution should be regarded as similar to interest payments on a long-term bond. In the case of social security, these interest payments come with an inflation hedge, given the cost-of-living adjustments are made annually. As a result, if you have substantial retirement plan income, you may wish to increase your equity holdings."
Randy |
SCA - Build Savings early by living below one's means, minimize Costs including taxes, and maintain a diverse Allocation.
Re: Bogle: Too Much In Bonds
thanksmichaelsieg wrote:Thanks grok87 - I think you are 100% right, but I don't read his comments that he thinks dividend paying stocks are bonds, he saysSo what I think he is saying, that if you need an additional income stream in retirement, you can use these stocks (in your equity allocation) to help out with the reduced income that bonds currently have.With that in mind, it would behoove retirees to pay more attention to dividend-paying stocks in a retirement account.
Agree especially with you caution about longer term bonds
RIP Mr. Bogle.
Re: Bogle on Social Security
I think the most important term in that quote is "may"...and it should be evaluated in the light of ability, willingness, or need to take additional risk for any additional expected return.EyeDee wrote:As a result, if you have substantial retirement plan income, you may wish to increase your equity holdings."
Last edited by Blues on Thu Jun 13, 2013 10:31 pm, edited 1 time in total.
Re: Bogle: Too Much In Bonds
I prefer not to count S/S as a "bond", any more than I count our rental property as a "bond". Both throw off a monthly cash flow, but neither is a "bond". A "bond" is a debt instrument, with an interest payment (which might, or might not, be fixed). However, it has certain characteristics, indebted amount and interest, which seem unique.
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Re: Bogle: Too Much In Bonds
When I first heard this suggestion from Bogle some years ago, I thought about it and it made good sense to me. My wife and I are in our early 60s, have both always worked at decent paying jobs, and together we can anticipate a tidy SS income. In addition, my wife is already receiving a modest but significant pension, thanks to her retired-Navy ex-husband. Assuming we both live (we both have significant life insurance, in case we don't), we'll have a solid and significant SS + pension base that is on track to provide the majority of our retirement income. Given that, I believe we are being rather conservative by following Boglehead principles (diversifying, indexing, etc.) to invest our 401k/403b retirement savings in 60% stocks/40% bonds. I'm mulling letting the market take that to 65/35--for us, and looking at the big picture, that would still be conservative, I think.grok87 wrote:Well here's what i think:
1) Social security and pensions should be thought of as bonds
Re: Bogle: Too Much In Bonds
Actually, I have a mechanical questions on this issue. How does one one go about counting, say, Social Security as a bond? That is, if I would get $10,000/yr. from SS, does that mean I would value this bond as 10,000/ .02 (the 10 year rate) = $500,000 in bonds? Suppose rates go to 4%. Does that mean my hypothetical "bond" has plummeted 50% in value?
Re: Bogle: Too Much In Bonds
+1grok87 wrote:Well here's what i think:
1) Social security and pensions should be thought of as bonds
2) dividend paying stocks are stocks not bonds. not now, not ever.
3) it is probably not that bad to overweight short term high quality corporates. but investing in long term corporates is a mugs game
http://www.bogleheads.org/forum/viewtop ... 0&t=116549
i would aproach intermediate term corporates with great caution.
cheers,
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Re: Bogle: Too Much In Bonds
"This time it's different"?gerrym51 wrote:the situation has changed-the country is in an extremely low interest environment. maybe he has decided in this environment bonds are not a good deal.
Brian
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Re: Bogle: Too Much In Bonds
As I can't buy, sell, exchange, or otherwise rebalance my Social Security or my pension, I do not include those in my asset allocation. Future income streams are taken into account for retirement planning, but that's not the same thing.
Brian
Brian
Re: Bogle: Too Much In Bonds
bogle seems to change his mind.. not sure why to stick to his bond rules
Re: Bogle: Too Much In Bonds
Bogle is a closet market timer.
This is not the first time he is giving conflicting message. If he preaches "stay the course" then he should stick to that message. Otherwise he is muddling core message to his legions.
This is not the first time he is giving conflicting message. If he preaches "stay the course" then he should stick to that message. Otherwise he is muddling core message to his legions.
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Re: Bogle: Too Much In Bonds
Actually, some of both. It does seem that Jack has modified his views on a number of issues (or at least he has expressed those views differently over time). Come to think of it - I have done the same thing as I have learned more and gained more experience.IlliniDave wrote:I can't tell if your being humorous or serious...Call_Me_Op wrote:Now I've heard everything. It appears that Jack is back-peddling on advice he has given over the years, or at least watering it down. We have gone from age in bonds, to age in (bonds plus social security), and now to age in (bonds plus social security plus dividend-paying stocks). Oh, and even the bonds have been changed from buying the market to over-weighting in corporates. I am almost ready to rescind Jack's membership as a Boglehead.
I think it's important for Bogleheads (and all investors, for that matter) to think for themselves anyway. My comment about rescinding Jack's membership as a Boglehead was a joke, of course, but does highlight my position that being a Boglehead does not mean adopting all of Jack's positions - whether they evolve or not. It means believing in investing simply, broadly, cheaply, and consistently.
And finally, I believe it is folly to follow ANYONE'S advice without fully understanding that advice. If you don't, you will never be able to "stay the course" when the going gets rough, or if you have a large tracking error.
Best regards, -Op |
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"In the middle of difficulty lies opportunity." Einstein
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Re: Bogle: Too Much In Bonds
I'm glad I'm not alone in reading his books I couldn't care less if people disagree with him, but at least "disagree" with a fair representation of what he says, the long version, not the sloganized one.subrosa wrote:FYI John Bogle has stated, clearly, that payments from the social security trust fund and pensions count in retirement income and should be regarded as long term bond returns. Further it should be considered to increase equity holdings in the event either provides substantial income.
He wrote this in his first book circa 1994.
Before accusing Bogle of changing his views it's best to check your sources.
It's too bad we don't have an electronic copy of the "On Asset Allocation" Chapter of Common Sense On Mutual Funds loaded into the wiki. His "advice" is no where near as rigid as some seem to think.
Don't do something. Just stand there!
Re: Bogle: Too Much In Bonds
Exactly.Default User BR wrote:As I can't buy, sell, exchange, or otherwise rebalance my Social Security or my pension, I do not include those in my asset allocation. Future income streams are taken into account for retirement planning, but that's not the same thing.
Brian
In addition, I've never understood how one should value the stream anyway. What discount rate to use, etc. And, keep in mind, this advice is being given for general consumption. How is an investor who knows little more than the names of the fund options in his or her 401(k) supposed to value SS?
And woe to the retiree with $300k in retirement accounts and $300k "worth" of SS but wants a 60/40 portfolio. I guess he or she will need to lever up.
Don't assume I know what I'm talking about.