Bonds - Throw it all on the table!!!

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Sandtrap
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap »

TaxingAccount wrote: Sat Jul 27, 2019 8:42 am
abuss368 wrote: Sat Jul 27, 2019 8:35 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
What do you personally do to avoid (or lower) the risk? Invest in TIPS?
Savings account, CDs, money market fund, and floating rate notes.
Treasury floating rate notes vs TIPS ???

j
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

TaxingAccount wrote: Sat Jul 27, 2019 8:41 am
abuss368 wrote: Sat Jul 27, 2019 8:34 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
The answer is yes. I would stay the course and buy more. Over time higher yielding bonds would make their way into the fund. Stay the course investors would not make any change.
Even with the higher yielding bonds, it would take 60 years just to get your principal back.
Ouch! Let’s hope we never experience that!
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Sandtrap wrote: Sat Jul 27, 2019 8:45 am
TaxingAccount wrote: Sat Jul 27, 2019 8:42 am
abuss368 wrote: Sat Jul 27, 2019 8:35 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
What do you personally do to avoid (or lower) the risk? Invest in TIPS?
Savings account, CDs, money market fund, and floating rate notes.
Treasury floating rate notes vs TIPS ???

j
Do you invest in TIPS?
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap »

abuss368 wrote: Sat Jul 27, 2019 8:53 am
Sandtrap wrote: Sat Jul 27, 2019 8:45 am
TaxingAccount wrote: Sat Jul 27, 2019 8:42 am
abuss368 wrote: Sat Jul 27, 2019 8:35 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
What do you personally do to avoid (or lower) the risk? Invest in TIPS?
Savings account, CDs, money market fund, and floating rate notes.
Treasury floating rate notes vs TIPS ???

j
Do you invest in TIPS?
A long time ago. Not now.
DW is not comfortable with TIPS. I am on the fence for no known reason.
j
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TaxingAccount
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Re: Bonds - Throw it all on the table!!!

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Last edited by TaxingAccount on Tue Aug 13, 2019 3:21 pm, edited 4 times in total.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Sandtrap wrote: Sat Jul 27, 2019 9:02 am
abuss368 wrote: Sat Jul 27, 2019 8:53 am
Sandtrap wrote: Sat Jul 27, 2019 8:45 am
TaxingAccount wrote: Sat Jul 27, 2019 8:42 am
abuss368 wrote: Sat Jul 27, 2019 8:35 am

What do you personally do to avoid (or lower) the risk? Invest in TIPS?
Savings account, CDs, money market fund, and floating rate notes.
Treasury floating rate notes vs TIPS ???

j
Do you invest in TIPS?
A long time ago. Not now.
DW is not comfortable with TIPS. I am on the fence for no known reason.
j
Agree. We invested in TIPS over 10 years ago for not long at all. Consolidated with Total Bond as in hindsight it has worked well. TIPS subsequently had a very rough patch. Never got comfortable with them. Prefer our bond funds pay dividends monthly!
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

TaxingAccount wrote: Sat Jul 27, 2019 8:42 am floating rate notes.
Those are new to me so I looked them up. Floating Rate Notes are treasuries that follow 13 week treasury bill discount rate.

https://www.treasurydirect.gov/indiv/pr ... glance.htm
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

hudson wrote: Sat Jul 27, 2019 10:23 am
TaxingAccount wrote: Sat Jul 27, 2019 8:42 am floating rate notes.
Those are new to me so I looked them up. Floating Rate Notes are treasuries that follow 13 week treasury bill discount rate.

https://www.treasurydirect.gov/indiv/pr ... glance.htm
Yes. I am curious if they will ever replace TIPS.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

abuss368 wrote: Sat Jul 27, 2019 8:34 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
The answer is yes. I would stay the course and buy more. Over time higher yielding bonds would make their way into the fund. Stay the course investors would not make any change.
Let's see, if interest rates rise, the bond fund NAV...net asset value...would fall. Then when the fund bought new bonds, the new bonds would have the 15% rate. An intermediate fund with a duration of 5 years would recover in 5 years. Did I get that right?

If I held a total bond fund, and there was a loss in NAV, I might sell at some point depending on my capital gain/tax lost harvest situation. If the interest rates started climbing, I wouldn't hesitate to bail....depending on my situation. I might also cash in my CDs and go with the 15% ones. I don't know that "stay the course" would fit me in this situation. Of course, if bonds had a 15% rate, I would read Bogleheads before I made a move.
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Re: Bonds - Throw it all on the table!!!

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.....
Last edited by TaxingAccount on Tue Aug 13, 2019 3:21 pm, edited 1 time in total.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

TaxingAccount wrote: Sat Jul 27, 2019 10:41 am
hudson wrote: Sat Jul 27, 2019 10:32 am
abuss368 wrote: Sat Jul 27, 2019 8:34 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
The answer is yes. I would stay the course and buy more. Over time higher yielding bonds would make their way into the fund. Stay the course investors would not make any change.
Let's see, if interest rates rise, the bond fund NAV...net asset value...would fall. Then when the fund bought new bonds, the new bonds would have the 15% rate. An intermediate fund with a duration of 5 years would recover in 5 years. Did I get that right?
No, if you put $100k in a 6 year duration bond fund and interest rates rose 15%, the NAV would lose 90% of it's value and your principal would be reduced to 10k. Even at 15% interest, that's only $1500 a year in interest so it would take you 60 years to get back your 90k principal that you lost.
Yes the math makes sense. I would suspect if bonds lost 90% that we would be in a troubling environment.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

TaxingAccount wrote: Sat Jul 27, 2019 10:41 am
No, if you put $100k in a 6 year duration bond fund and interest rates rose 15%, the NAV would lose 90% of it's value and your principal would be reduced to 10k. Even at 15% interest, that's only $1500 a year in interest so it would take you 60 years to get back your 90k principal that you lost.
TaxingAccount, you are making me think.
If interest rates went up to 15%, wouldn't a bond fund manager do something on the way from say 3% to 15%.
I would certainly bail on a 3% CD and pay the penalty once I saw that I could make more money at a higher rate.
Also, the $100K in bonds, held to maturity would still be worth $100K....so no loss when held to maturity. Would a bond fund manager hold on to those bonds to maturity? I would think that a 5 year duration bond fund would turnover about 20% per year.
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Re: Bonds - Throw it all on the table!!!

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Last edited by TaxingAccount on Tue Aug 13, 2019 3:21 pm, edited 1 time in total.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

TaxingAccount wrote: Sun Jul 28, 2019 8:58 am If inflation is 15% a year your 100k bond will be worth 10k after inflation when the bond matures.
Thanks TaxingAccount!

I think that you are saying that the 100K bond would pay off 100K, but the 100K would have less spending power due to inflation.
I remember the high inflation days. I didn't have a dime in investments. I was happy that my mortgage was fixed at 8%. I can't remember if my salary kept with inflation....if so it would have made paying off the mortgage easier.

Back on the subject...In a climbing inflation environment, I know that I would be moving my bond type investments around to get a better deal. I would think that bond fund managers would do the same. I'm not a large total bond owner, and I'm not locked into "stay the course." I follow this forum, especially discussions on my major holding. I watch my funds' NAVs and distributions; I'm ready to move if I can find a better deal.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Really enjoy this thread. Tons of great information and feedback. I look back to when I started the thread and the result has far exceeded my expectation.

Thank you to the Bogleheads!
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Re: Bonds - Throw it all on the table!!!

Post by csage »

Agreed, great thread. I've been meaning to go through it for a while, finally learn a bit more about how to invest in bonds.

Current bond allocation: Total bond fund (401k, 32%), ibonds (39%), ee bonds (17%), Pension cash out value (12%)
Current overall allocation: About age in bonds (35%)
Plans:
- Based on reading here, slowly shift the 32% of bonds in 401k to taxable. Good idea? 29% marginal taxes now, so I'm a bit on the line between munis or a high-yield savings account.
- Continue to purchase IBonds and EEBonds
- Get to 10 years of expenses in bonds and then switch to 100% stocks
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Re: Bonds - Throw it all on the table!!!

Post by Hector »

hudson wrote: Sat Jul 27, 2019 10:32 am
abuss368 wrote: Sat Jul 27, 2019 8:34 am
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
The answer is yes. I would stay the course and buy more. Over time higher yielding bonds would make their way into the fund. Stay the course investors would not make any change.
Let's see, if interest rates rise, the bond fund NAV...net asset value...would fall. Then when the fund bought new bonds, the new bonds would have the 15% rate. An intermediate fund with a duration of 5 years would recover in 5 years. Did I get that right?

If I held a total bond fund, and there was a loss in NAV, I might sell at some point depending on my capital gain/tax lost harvest situation. If the interest rates started climbing, I wouldn't hesitate to bail....depending on my situation. I might also cash in my CDs and go with the 15% ones. I don't know that "stay the course" would fit me in this situation. Of course, if bonds had a 15% rate, I would read Bogleheads before I made a move.
There would be very few scenarios where someone is holding total bond fund in taxable.
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Re: Bonds - Throw it all on the table!!!

Post by Hector »

hudson wrote: Sat Jul 27, 2019 9:22 pm
TaxingAccount wrote: Sat Jul 27, 2019 10:41 am
No, if you put $100k in a 6 year duration bond fund and interest rates rose 15%, the NAV would lose 90% of it's value and your principal would be reduced to 10k. Even at 15% interest, that's only $1500 a year in interest so it would take you 60 years to get back your 90k principal that you lost.
TaxingAccount, you are making me think.
If interest rates went up to 15%, wouldn't a bond fund manager do something on the way from say 3% to 15%.
I would certainly bail on a 3% CD and pay the penalty once I saw that I could make more money at a higher rate.
Also, the $100K in bonds, held to maturity would still be worth $100K....so no loss when held to maturity. Would a bond fund manager hold on to those bonds to maturity? I would think that a 5 year duration bond fund would turnover about 20% per year.
Most bond funds that we talk here are index funds. Index bond fund manager make changes to match index. Interest rate in not a variable for someone managing index bond fund.
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Re: Bonds - Throw it all on the table!!!

Post by Hector »

csage wrote: Mon Jul 29, 2019 11:17 am Agreed, great thread. I've been meaning to go through it for a while, finally learn a bit more about how to invest in bonds.

Current bond allocation: Total bond fund (401k, 32%), ibonds (39%), ee bonds (17%), Pension cash out value (12%)
Current overall allocation: About age in bonds (35%)
Plans:
- Based on reading here, slowly shift the 32% of bonds in 401k to taxable. Good idea? 29% marginal taxes now, so I'm a bit on the line between munis or a high-yield savings account.
- Continue to purchase IBonds and EEBonds
- Get to 10 years of expenses in bonds and then switch to 100% stocks
Why are you shifting bonds from 401k to taxable?
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Re: Bonds - Throw it all on the table!!!

Post by owenmia »

I have half in individual bonds and half in BND because I could not fully understand a bond fun but figured you guys must be on to something.

Individual bonds are

Norse Hydro maturity 2o23 aa2 yield to maturity 2.5%

Altria Group maturity 2024 bbb yield 2.5%

Usd Magna maturity 2024 A- 2.6% callable

Union Pacific maturity 2022 A yield 2.3%
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Re: Bonds - Throw it all on the table!!!

Post by TaxingAccount »

.....
Last edited by TaxingAccount on Tue Aug 13, 2019 3:22 pm, edited 1 time in total.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

Hector wrote: Mon Jul 29, 2019 11:58 am There would be very few scenarios where someone is holding total bond fund in taxable.
I agree.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

Hector wrote: Mon Jul 29, 2019 12:03 pm
Most bond funds that we talk here are index funds. Index bond fund manager make changes to match index. Interest rate in not a variable for someone managing index bond fund.
[/quote]

Hector,
I'm out of my field on the options that bond managers have to prevent losses. I would hope that they had some wiggle room for extreme events.
Is there a list of Vanguard bond funds identified as index and active?
EDIT: I think Vanguard has 71 actively managed funds...at least 71 show on this list: https://investor.vanguard.com/mutual-fu ... ly-managed (Select Actively Managed Funds.
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Re: Bonds - Throw it all on the table!!!

Post by csage »

Hector wrote: Mon Jul 29, 2019 12:06 pm
csage wrote: Mon Jul 29, 2019 11:17 am Agreed, great thread. I've been meaning to go through it for a while, finally learn a bit more about how to invest in bonds.

Current bond allocation: Total bond fund (401k, 32%), ibonds (39%), ee bonds (17%), Pension cash out value (12%)
Current overall allocation: About age in bonds (35%)
Plans:
- Based on reading here, slowly shift the 32% of bonds in 401k to taxable. Good idea? 29% marginal taxes now, so I'm a bit on the line between munis or a high-yield savings account.
- Continue to purchase IBonds and EEBonds
- Get to 10 years of expenses in bonds and then switch to 100% stocks
Why are you shifting bonds from 401k to taxable?
Mainly because rates are so low right now. The dividend yield for stocks is almost higher than the interest on bonds. You need to add quite a bit to cover the expected amount of capital gains you'll eventually pay too.

There are several other considerations, and calculations for the capital gains cost estimations here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

hudson wrote: Tue Jul 30, 2019 6:34 am
Hector wrote: Mon Jul 29, 2019 11:58 am There would be very few scenarios where someone is holding total bond fund in taxable.
I agree.
Correct. If the tax rate was in one of the lower brackets it may make sense.
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Re: Bonds - Throw it all on the table!!!

Post by S_Track »

TaxingAccount wrote: Sat Jul 27, 2019 10:41 am No, if you put $100k in a 6 year duration bond fund and interest rates rose 15%, the NAV would lose 90% of it's value and your principal would be reduced to 10k. Even at 15% interest, that's only $1500 a year in interest so it would take you 60 years to get back your 90k principal that you lost.
The math here make sense but I thought I have read in the forum, (can't find an example) that if dividends are reinvested the bond fund would recover in the number of years equal to the duration. That does not seem to be the case (Although the 1500/year would increase each year due to compounding?) so I must be confusing something. thanks
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Re: Bonds - Throw it all on the table!!!

Post by firebirdparts »

Of course that is true, and in fact dividend reinvestment is irrelevant. The existing bonds themselves don't change, as you know. If the time value of money affects what you'd pay for the bond today, the price drops or increases to the level of indifference vs. fresh bonds today. If the value today drops, then the value will increase as the time to maturity grows shorter, because at the end, it's still a $10,000 bond just like it always was. After the time has passed, the bond pays out what it was supposed to all along.

I started to post that a couple days ago, when hudson posted his question, but honestly, I figured nobody really wanted to talk about that. As you saw from the replies, people don't have a firm grasp of what's going on.

To answer hudson's question, the price of bonds is moving around because it's moving to the level of indifference. Therefore, fundamentally, there's nothing you can do about it. That's the good news/bad news.
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap »

firebirdparts wrote: Thu Aug 01, 2019 8:06 am Of course that is true, and in fact dividend reinvestment is irrelevant. The existing bonds themselves don't change, as you know. If the time value of money affects what you'd pay for the bond today, the price drops or increases to the level of indifference vs. fresh bonds today. If the value today drops, then the value will increase as the time to maturity grows shorter, because at the end, it's still a $10,000 bond just like it always was. After the time has passed, the bond pays out what it was supposed to all along.

I started to post that a couple days ago, when hudson posted his question, but honestly, I figured nobody really wanted to talk about that. As you saw from the replies, people don't have a firm grasp of what's going on.

To answer hudson's question, the price of bonds is moving around because it's moving to the level of indifference. Therefore, fundamentally, there's nothing you can do about it. That's the good news/bad news.
Interesting.

Please explain in detail if you have time.

Explain, "level of indifference".

Thanks,
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

firebirdparts wrote: Thu Aug 01, 2019 8:06 am Of course that is true, and in fact dividend reinvestment is irrelevant. The existing bonds themselves don't change, as you know. If the time value of money affects what you'd pay for the bond today, the price drops or increases to the level of indifference vs. fresh bonds today. If the value today drops, then the value will increase as the time to maturity grows shorter, because at the end, it's still a $10,000 bond just like it always was. After the time has passed, the bond pays out what it was supposed to all along.

I started to post that a couple days ago, when hudson posted his question, but honestly, I figured nobody really wanted to talk about that. As you saw from the replies, people don't have a firm grasp of what's going on.

To answer hudson's question, the price of bonds is moving around because it's moving to the level of indifference. Therefore, fundamentally, there's nothing you can do about it. That's the good news/bad news.
Would you by chance have any examples?
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Re: Bonds - Throw it all on the table!!!

Post by Mike11 »

Re: few having taxable monies in Total Bond. If the vast majority of your investments are in a taxable account what other bond funds would be recommended. Please correct me if I am mistaken, by my figures muni funds do not have higher total returns until you get in a tax bracket above 24% which correlates to an income up to $160,000 per year. If you factor in the graduated income tax rates I suspect Total Bond may even have comparable total returns for investors with a marginal rate of 32%. And, I agree this has been a very informative series of posts.
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Re: Bonds - Throw it all on the table!!!

Post by HawkeyePierce »

1) Vanguard total bond and Vanguard long-term Treasury index. Also a 1-year CD but I don't include it in my portfolio (just using it to park funds for a down payment on a house next year).
2) Traditional 401k and HSA but moving them out of my HSA and entirely into my 401k now that I've got access to a brokerage window in that account.
3) 50/50 total bond and long term Treasury.
4) 30% (age in bonds)
5) I'm considering moving entirely to long-term Treasuries. If I'm ever able to get into TreasuryDirect I'll start maxing out my I-Bond purchases each year as well (it would represent about 10% of my annual portfolio contributions). I like the idea of adding a little bit of inflation protection in a pseudo-tax-advantaged account.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

firebirdparts wrote: Thu Aug 01, 2019 8:06 am The existing bonds themselves don't change, as you know. If the time value of money affects what you'd pay for the bond today, the price drops or increases to the level of indifference vs. fresh bonds today. If the value today drops, then the value will increase as the time to maturity grows shorter, because at the end, it's still a $10,000 bond just like it always was. After the time has passed, the bond pays out what it was supposed to all along.
Thanks firebirdparts! I agree that a 10K bond should pay 10K at maturity. I agree that if you sell early, you'll take a loss. (Indifference?)
firebirdparts wrote: Thu Aug 01, 2019 8:06 am...as you saw from the replies, people don't have a firm grasp of what's going on.
That's me. I've been trying to understand the ins and the outs of bonds: I do not have a handle on the things that move the net asset value up and down. I don't know that I look at the right things when purchasing a fund. That's probably two separate discussions.
firebirdparts wrote: Thu Aug 01, 2019 8:06 am To answer hudson's question, the price of bonds is moving around because it's moving to the level of indifference. Therefore, fundamentally, there's nothing you can do about it. That's the good news/bad news.
So, the future price of bonds is unpredictable? That's what it seems like. I'm out of my field, I can't argue that one way or the other....but I plan to figure it out.
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Re: Bonds - Throw it all on the table!!!

Post by james22 »

35% Cash Value (Pension)
20% Vanguard Stable Value (401k)
55% fixed

I'd prefer less fixed and more dry powder, but it is what it is.

Might add 5-10% Long- or Extended-Term Treasuries in an IRA.
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Re: Bonds - Throw it all on the table!!!

Post by hudson »

james22 wrote: Fri Aug 02, 2019 11:11 am Might add 5-10% Long- or Extended-Term Treasuries in an IRA.
I had to look up the extended-term treasuries. I found Vanguard Extended Duration Treasury ETF (EDV).
It looks like an aggressive fund...Vang. Risk Potential 5....but you already knew that. It's new to me.
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Re: Bonds - Throw it all on the table!!!

Post by BBBob »

Maybe I have been operating with a misunderstanding, but my recollection from postings long ago is that duration only measures the effect of a single interest rate increase, and that the effect of multiple increases is that the break-even point asymptotically approaches "2 x duration". Am i correct?
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Curious how negative interest rates and an inverted yield curve will impact our bond holdings. Many countries have a negative yield curve (i.e. Germany). How will that impact the Total International Bond Index? Or would tat fund be fine as it is hedged to US?
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap »

abuss368 wrote: Tue Aug 20, 2019 8:05 am Curious how negative interest rates and an inverted yield curve will impact our bond holdings. Many countries have a negative yield curve (i.e. Germany). How will that impact the Total International Bond Index? Or would tat fund be fine as it is hedged to US?
This is why I don't include Total International Bond (or equiv).
However, diversifying "fixed" beyond Total Stock and Total Intermediate (or equiv) makes sense going forward.
True?

j :D
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Sandtrap wrote: Tue Aug 20, 2019 8:09 am
abuss368 wrote: Tue Aug 20, 2019 8:05 am Curious how negative interest rates and an inverted yield curve will impact our bond holdings. Many countries have a negative yield curve (i.e. Germany). How will that impact the Total International Bond Index? Or would tat fund be fine as it is hedged to US?
This is why I don't include Total International Bond (or equiv).
However, diversifying "fixed" beyond Total Stock and Total Intermediate (or equiv) makes sense going forward.
True?

j :D
What do you recommend as diversification beyond Total Stock and Total International Stock?
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap »

abuss368 wrote: Tue Aug 20, 2019 8:15 am
Sandtrap wrote: Tue Aug 20, 2019 8:09 am
abuss368 wrote: Tue Aug 20, 2019 8:05 am Curious how negative interest rates and an inverted yield curve will impact our bond holdings. Many countries have a negative yield curve (i.e. Germany). How will that impact the Total International Bond Index? Or would tat fund be fine as it is hedged to US?
This is why I don't include Total International Bond (or equiv).
However, diversifying "fixed" beyond Total Stock and Total Intermediate (or equiv) makes sense going forward.
True?

j :D
What do you recommend as diversification beyond Total Stock and Total International Stock?
Now "that" is a forum quandary guaranteed to generate threads for generations. . . . :)

At my "rudimentary level approach", diversification of both fixed and equities to include: Investment Grade Corporate, REIT's, Munis, physically held mortage free income properties, et al, helps to stabilize things going forward. Results, unknown. Too early to tell.

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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Sandtrap wrote: Tue Aug 20, 2019 8:19 am
abuss368 wrote: Tue Aug 20, 2019 8:15 am
Sandtrap wrote: Tue Aug 20, 2019 8:09 am
abuss368 wrote: Tue Aug 20, 2019 8:05 am Curious how negative interest rates and an inverted yield curve will impact our bond holdings. Many countries have a negative yield curve (i.e. Germany). How will that impact the Total International Bond Index? Or would tat fund be fine as it is hedged to US?
This is why I don't include Total International Bond (or equiv).
However, diversifying "fixed" beyond Total Stock and Total Intermediate (or equiv) makes sense going forward.
True?

j :D
What do you recommend as diversification beyond Total Stock and Total International Stock?
Now "that" is a forum quandary guaranteed to generate threads for generations. . . . :)

At my "rudimentary level approach", diversification of both fixed and equities to include: Investment Grade Corporate, REIT's, Munis, physically held mortage free income properties, et al, helps to stabilize things going forward. Results, unknown. Too early to tell.

j :D
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Re: Bonds - Throw it all on the table!!!

Post by lukestuckenhymer »

TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
Professing ignorance here: What scenario could possibly cause rates to jump to 15% today? It's just hard to imagine with headlines about negative yields around the world.
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Re: Bonds - Throw it all on the table!!!

Post by spdoublebass »

Sandtrap wrote: Tue Aug 20, 2019 8:09 am
abuss368 wrote: Tue Aug 20, 2019 8:05 am Curious how negative interest rates and an inverted yield curve will impact our bond holdings. Many countries have a negative yield curve (i.e. Germany). How will that impact the Total International Bond Index? Or would tat fund be fine as it is hedged to US?
This is why I don't include Total International Bond (or equiv).
However, diversifying "fixed" beyond Total Stock and Total Intermediate (or equiv) makes sense going forward.
True?

j :D
BNDX has been doing just fine when compared to BND. I'm not saying it's a must have in one's portfolio, but if it had been underperforming BND then I would understand the concern. I've said it before, I think most people look at the yield numbers online and don't look at the total return when looking at BNDX.

The BNDX's inception the CAGR has been 1.5% higher.

This year, BND has been great, but BNDX it still 1.1% ahead.
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Re: Bonds - Throw it all on the table!!!

Post by BuddyJet »

In moving from advisor managed muni bonds to self directed, I opened accounts at ME, Fidelity, and TDAmeritrade to see where The best bond options were for me. Fidelity offers the best muni bond search tools by a wide margin andI do all my bonds there.

Bond etf offer a lower bid-ask spread than individual and built in diversification and term balance but yieldson individual bonds are usually better.
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Re: Bonds - Throw it all on the table!!!

Post by Tatala »

IN a taxable account with a 22% tax rate would you buy a total bond fund or muni fund?
Thx
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Re: Bonds - Throw it all on the table!!!

Post by robertmcd »

lukestuckenhymer wrote: Tue Aug 20, 2019 12:28 pm
TaxingAccount wrote: Fri Jul 26, 2019 10:57 pm
abuss368 wrote: Sat Jul 13, 2019 6:30 pm We have invested in Total Bond for a long time and it simply does the job. We sleep well at night.
Would you still sleep well at night if interest rates go to 15% like they did in the 70s? Total bond would lose 90% of it's value and your dividends would be cut in half basically you'd be wiped out.
Professing ignorance here: What scenario could possibly cause rates to jump to 15% today? It's just hard to imagine with headlines about negative yields around the world.
If that happens you won't be worrying about funding your retirement since you will be dead
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Re: Bonds - Throw it all on the table!!!

Post by dknightd »

I've always owned some bonds. Some market rates, some fed inflation linked bonds.
I currently own more short term bonds than I would like, but they will be sold before I'm 70, so it is probably OK.
The inflation linked bonds have never kept up. At least not since I've been tracking them.
But I still hold some in case inflation picks up one day.
I'm 61, probably will live to average age of 85.
My current plan is to keep holding about 50% of my long term bonds in government inflation linked bonds.
Is this stupid, or prudent?
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Tatala wrote: Wed Aug 21, 2019 7:48 am IN a taxable account with a 22% tax rate would you buy a total bond fund or muni fund?
Thx
You are on the boarder. Could use tax exempt and then not have any tax due at federal level.
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Re: Bonds - Throw it all on the table!!!

Post by BuddyJet »

abuss368 wrote: Thu Aug 22, 2019 7:55 pm
Tatala wrote: Wed Aug 21, 2019 7:48 am IN a taxable account with a 22% tax rate would you buy a total bond fund or muni fund?
Thx
You are on the boarder. Could use tax exempt and then not have any tax due at federal level.
At the border, a deciding factor could be you prediction of your future tax rate. If you expect your rate to rise, go muni.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

BuddyJet wrote: Fri Aug 23, 2019 7:02 am
abuss368 wrote: Thu Aug 22, 2019 7:55 pm
Tatala wrote: Wed Aug 21, 2019 7:48 am IN a taxable account with a 22% tax rate would you buy a total bond fund or muni fund?
Thx
You are on the boarder. Could use tax exempt and then not have any tax due at federal level.
At the border, a deciding factor could be you prediction of your future tax rate. If you expect your rate to rise, go muni.
True. It may not make much difference over time.
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Bonds - Throw it all on the table!!!

Post by elainet7 »

do not know where to invest our cds that are getting called; yields of around 3.5%
crazy crazy world nowadays
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