Bonds - Throw it all on the table!!!

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

Post by tibbitts »

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.
A few months ago we couldn't envision a scenario in which U.S. interest rates would fall either. There were so many posts here that rates couldn't go lower, etc. etc.
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Re: Bonds - Throw it all on the table!!!

Post by longinvest »

tibbitts wrote: Sat Aug 24, 2019 12:02 pm
lukestuckenhymer wrote: Tue Aug 20, 2019 12:28 pm [...deleted...]
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.
A few months ago we couldn't envision a scenario in which U.S. interest rates would fall either. There were so many posts here that rates couldn't go lower, etc. etc.
Forum member TaxingAccount has erased his post where he claimed that "Total bond would lose 90% of it's value". In invite other forum members to imitate me by not quoting the erased post.

Let's look at what happened to an intermediate-term bond fund during the 1970s:
longinvest wrote: Fri Aug 26, 2016 8:46 am Just for reference, here's a total-return chart I made, on another thread, to show the comparative growth of an intermediate-duration ladder-like bond fund and the S&P 500 in the worst high-inflation part of the 1970s to mid-1980s:

viewtopic.php?f=10&t=198104#p3027801
Image

By looking at a nominal chart, we can clearly see that at all along, the bond fund had positive annual total returns. The S&P 500 (with dividends reinvested), on the other hand, did as it always does, it fluctuated. In 1973-1975, it had a big down fluctuation, losing 30% while inflation was going up 20%, for example.

We're almost never shown such charts. Usually, the nominal fund returns are combined with the impact of inflation and we're shown inflation-adjusted charts, leading to the impression that bonds are volatile. This impression is compounded, of course, when long-term bonds (which are volatile) are used to represent bond returns.

People invested in intermediate bonds, during the above period, just saw an increasing portfolio balance on their annual statements, unlike stock investors who didn't fare much better, in the end, over that period.
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap »

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
Total Bond depending on how close you are to exceeding the tax bracket.
You can also have both depending on the above.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Let's see how bonds respond as we move into an interest rate easing cycle.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

tibbitts wrote: Sat Aug 24, 2019 12:02 pm A few months ago we couldn't envision a scenario in which U.S. interest rates would fall either. There were so many posts here that rates couldn't go lower, etc. etc.
Incredible how much rates have moved in a short period of time.
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Re: Bonds - Throw it all on the table!!!

Post by sergeant »

abuss368 wrote: Thu Oct 03, 2019 8:54 pm
tibbitts wrote: Sat Aug 24, 2019 12:02 pm A few months ago we couldn't envision a scenario in which U.S. interest rates would fall either. There were so many posts here that rates couldn't go lower, etc. etc.
Incredible how much rates have moved in a short period of time.
A few months? I've been thinking rates can't possibly go lower for about a decade. :shock:
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

sergeant wrote: Fri Oct 04, 2019 4:50 pm
abuss368 wrote: Thu Oct 03, 2019 8:54 pm
tibbitts wrote: Sat Aug 24, 2019 12:02 pm A few months ago we couldn't envision a scenario in which U.S. interest rates would fall either. There were so many posts here that rates couldn't go lower, etc. etc.
Incredible how much rates have moved in a short period of time.
A few months? I've been thinking rates can't possibly go lower for about a decade. :shock:
Good point. I recall right after the financial crisis, a decade ago, the concern was a bond bubble and the next crash. So much information and education was put out by Vanguard (and others) to stay the course, maintain a diversified portfolio, and tune out the market noise. In hindsight this was good advice.

And just when rates could only go up (and no chance to go lower)......hmmmmm!
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Re: Bonds - Throw it all on the table!!!

Post by Carol88888 »

Zero bonds. I am intent on building up a position in S&P 500 as quickly as I can.

Tried owning Vanguard Short Term Corporate ETF but didn't last long in it even though I think it's an easy ETF to hold. It doesn't fit with my main idea of building up wealth to pass along. But maybe when I have the S&P holdings where I want them, I'll return to it or maybe the muni intermediate ETF, VTEB.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

I am curious how many Bogleheads are investing in TIPS? Inflation is expected to be low. Not much income from TIPS at the moment.

Thoughts appreciated.
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Re: Bonds - Throw it all on the table!!!

Post by BigJohn »

abuss368 wrote: Fri Nov 01, 2019 8:27 am I am curious how many Bogleheads are investing in TIPS? Inflation is expected to be low. Not much income from TIPS at the moment.

Thoughts appreciated.
TIPS protect against unexpected inflation so to me inflation expectations are immaterial. TIPS are also not really designed to generate steady income if by that you mean a monthly dividend.

However, as a retiree with a high bond allocation (35/65), no pension and seven more years until SS, I consider unexpected inflation to be one of my more significant risks. To manage that risk, I'm buying inflation insurance and am targeting ~50% of my bond allocation to be in TIPS mutual funds. I'm not there yet, doing a sort of a DCA over time. Just like all insurance, there is a cost vs nominal treasuries but paying that insurance premium makes sense to me. I look at my portfolio on a total return basis so lack of a monthly dividend doesn't bother me in the least.
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Re: Bonds - Throw it all on the table!!!

Post by protagonist »

1) List the bond funds, individual bonds, CD's, etc. that you invest in
Corporate: only those that are part of FFNOX. The bond portion accounts for about 7% of my total portfolio
I-bonds: As many as I can legally buy. About 5.5% of my total portfolio
CDs: about 41% of my total portfolio
2) In which account what fixed income securities are held
FFNOX, I-bonds and some CDs in taxable. Tax-deferred is all CDs.
3) Allocation as a percentage of Fixed Income
See above
4) Allocation to bonds overall (i.e. age in bonds, etc.)
See above. Note: I don't rebalance or invest with AA in mind...rather I keep what I think I might need in fixed income and leave the rest in stocks.
5) Any other plans such as adding more bonds funds, consolidating and merging, etc.
No. But mainly because of the large tax burden involved in selling any FFNOX. I am retired.
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Re: Bonds - Throw it all on the table!!!

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abuss368 wrote: Fri Nov 01, 2019 8:27 am I am curious how many Bogleheads are investing in TIPS? Inflation is expected to be low. Not much income from TIPS at the moment.

Thoughts appreciated.
I'm retired. My bond funds are Vanguard 47% IT TIPS (22% of overall portfolio) and 53% TBM. I would prefer to go at least 80% TIPS, but TBM is my best choice in one account.

I don't expect unexpected inflation either; but in case unexpected inflation should occur, I want some reliable inflation protection. Non-retirees might feel differently.

Bonds for income may be an obsolete concept. Bonds are for diversification and ballast.
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Re: Bonds - Throw it all on the table!!!

Post by UpperNwGuy »

I'm a retiree, and I don't expect unexpected inflation. (And yes, I lived through the high inflation 1970s and early 1980s as an adult, so I know what high inflation is and what damage it can do.) I don't own TIPS or I-Bonds, just Total Bond and Intermediate Tax Exempt. I consider my equities to be my hedge against unexpected inflation if it should occur.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

UpperNwGuy wrote: Sat Nov 02, 2019 4:45 pm I'm a retiree, and I don't expect unexpected inflation. (And yes, I lived through the high inflation 1970s and early 1980s as an adult, so I know what high inflation is and what damage it can do.) I don't own TIPS or I-Bonds, just Total Bond and Intermediate Tax Exempt. I consider my equities to be my hedge against unexpected inflation if it should occur.
That’s what I do. Equities as a longer term hedge and those two bond funds.
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Re: Bonds - Throw it all on the table!!!

Post by elainet7 »

PFFD preferred stock index fund-acts like bonds
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

elainet7 wrote: Sat Nov 02, 2019 5:09 pm PFFD preferred stock index fund-acts like bonds
How does preferred stock respond during a market downturn?
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Unexpected Inflation Strategies

Post by hudson »

UpperNwGuy wrote: Sat Nov 02, 2019 4:45 pm I'm a retiree, and I don't expect unexpected inflation. (And yes, I lived through the high inflation 1970s and early 1980s as an adult, so I know what high inflation is and what damage it can do.) I don't own TIPS or I-Bonds, just Total Bond and Intermediate Tax Exempt. I consider my equities to be my hedge against unexpected inflation if it should occur.
Are equities historically an inflation hedge? I've heard it both ways.
I don't own any inflation protected products because CDs and well known bond funds pay more.
If unexpected inflation hits, I guess that I would just have to take the hit especially with intermediate term CDs with early withdrawal penalties and adjust the sails. I might have to adjust my spending.
I'd lean on this forum for strategies.
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Re: Unexpected Inflation Strategies

Post by UpperNwGuy »

hudson wrote: Sat Nov 02, 2019 5:59 pm I'd lean on this forum for strategies.
Be advised that this forum is unusually conservative when it comes to discussing bonds. In fact, the two topics where the consensus of this forum departs the most from John Bogle's recommendations are: (a) US vs international stocks, and (b) how conservatively to construct the bond side of a portfolio.
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Re: Unexpected Inflation Strategies

Post by hudson »

UpperNwGuy wrote: Sat Nov 02, 2019 6:14 pm
hudson wrote: Sat Nov 02, 2019 5:59 pm I'd lean on this forum for strategies.
Be advised that this forum is unusually conservative when it comes to discussing bonds. In fact, the two topics where the consensus of this forum departs the most from John Bogle's recommendations are: (a) US vs international stocks, and (b) how conservatively to construct the bond side of a portfolio.
John Bogle is and was the best! We are lucky! Without Bogle and Bogleheads, I would probably be getting used by a local investment advisor; I would probably have a great portfolio of variable annuities and great load mutual funds.

I like the varied opinions and strategies that you read on Bogleheads. Once I read and understand the strategies, I'm ready to go my own way and do what fits my situation.
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Re: Bonds - Throw it all on the table!!!

Post by mary1492 »

abuss368 wrote: Fri Nov 01, 2019 8:27 am I am curious how many Bogleheads are investing in TIPS? Inflation is expected to be low. Not much income from TIPS at the moment.
I stay away from TIPS for a few reasons:

1. As we all know, inflation (by government calculations) is low and expected to stay low, around the Fed's desired 2% target.

2. For TIPS to pay off, you are wagering that inflation will take off at some time. This means that you are betting that something will happen where the Fed is unable to keep it under control. Should such a scenario occur, the Fed would throw everything it has at it to bring it back down. So, any jump in inflation would likely be for a (relatively) short period of time...maybe a couple years at most. When the inflation rate does go back down, so too the rates on TIPS.

3. Should inflation pick up, the Fed would combat it by raising interest rates. When that happens, yields on CDs would go up in tandem. At that point we'd be able to purchase CDs with higher yields, and even lock in higher rates on longer term ones. Again, as mentioned above, when inflation goes back down, the TIPS rate would also go back down - whereas purchased CD yields would remain locked going forward.

So, personally, I do not see the draw to TIPS under any scenario. I believe that the investor would always have better fixed income options available.
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Re: Unexpected Inflation Strategies

Post by pascalwager »

UpperNwGuy wrote: Sat Nov 02, 2019 6:14 pm
hudson wrote: Sat Nov 02, 2019 5:59 pm I'd lean on this forum for strategies.
Be advised that this forum is unusually conservative when it comes to discussing bonds. In fact, the two topics where the consensus of this forum departs the most from John Bogle's recommendations are: (a) US vs international stocks, and (b) how conservatively to construct the bond side of a portfolio.
I would say that we're conservative about investment quality (investment-grade securities), but not so conservative about reinvestment risk (adopting durations shorter than our investment horizons).
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Re: Unexpected Inflation Strategies

Post by pascalwager »

hudson wrote: Sat Nov 02, 2019 5:59 pm
UpperNwGuy wrote: Sat Nov 02, 2019 4:45 pm I'm a retiree, and I don't expect unexpected inflation. (And yes, I lived through the high inflation 1970s and early 1980s as an adult, so I know what high inflation is and what damage it can do.) I don't own TIPS or I-Bonds, just Total Bond and Intermediate Tax Exempt. I consider my equities to be my hedge against unexpected inflation if it should occur.
Are equities historically an inflation hedge? I've heard it both ways.
I don't own any inflation protected products because CDs and well known bond funds pay more.
If unexpected inflation hits, I guess that I would just have to take the hit especially with intermediate term CDs with early withdrawal penalties and adjust the sails. I might have to adjust my spending.
I'd lean on this forum for strategies.
No, equities are not a hedge against inflation, but over time equity share prices might rise enough to make you somewhat forget your fixed income losses. Or, alternatively, equity share prices might decline, resulting in an even more strongly depressed portfolio.
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Re: Bonds - Throw it all on the table!!!

Post by Violinist »

1) List the bond funds, individual bonds, CD's, etc. that you invest in: VBAIX through work 457 which is a 60/40 balanced fund of TSM, TBM. and add in Montana Fixed fund enough to bring that percentage to 40/60 in the 457 (age in bonds - I am in my 60's). I am a low income, small potatoes investor and conservative - follow Malkiel's advice of "sell down to your sleeping point" In Schwab IRAs have Schwab TSM and TBM and TIPs index funds. Try to maintain 40% TSM, 40% TBM, 20% TIPS in those funds. Rebalance once a year.

Have Ibonds and CDs and hi yield savings with Synchrony outside of retirement accounts. Want to get those to 7 years of modest living expense so we don't have to sell things in desperation when the markets crash and we wait for them to rebound. You can probably tell I am of the age group who lived through inflation.
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Re: Unexpected Inflation Strategies

Post by abuss368 »

pascalwager wrote: Sat Nov 02, 2019 8:50 pm
UpperNwGuy wrote: Sat Nov 02, 2019 6:14 pm
hudson wrote: Sat Nov 02, 2019 5:59 pm I'd lean on this forum for strategies.
Be advised that this forum is unusually conservative when it comes to discussing bonds. In fact, the two topics where the consensus of this forum departs the most from John Bogle's recommendations are: (a) US vs international stocks, and (b) how conservatively to construct the bond side of a portfolio.
I would say that we're conservative about investment quality (investment-grade securities), but not so conservative about reinvestment risk (adopting durations shorter than our investment horizons).
I would agree. Selecting one low cost and diversified short or intermediate term bond fund and staying the course will work fine over time.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

An excellent thread as I look back. As the years went on I have simplified with Total Bond in tax advantaged and Intermediate Term Tax Exempt in taxable.

The simplicity has worked so well.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
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Re: Bonds - Throw it all on the table!!!

Post by bearcub »

Most of my bond allocation is in the two Vanguard TIPS Funds. I am retired.
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Re: Bonds - Throw it all on the table!!!

Post by Munir »

Not because of low interest rates, but for credit safety and in spite of lower yields, I shifted all my bond holdings to US Treasury Intermediate Index (VSIGX). Once the pandemic and economic picture settles down (if it does settle down), I might reconsider moving some funds to the other Vanguard intermediate bond funds. I also moved a chunk to the Vanguard US Treasury Money Market fund. This is all TIRA money, and I am an 82 retiree in a distribution phase. I don't remember ever being as concerned about further slides- maybe it's my age.
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Re: Bonds - Throw it all on the table!!!

Post by anon_investor »

abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I never had a very large allocation to bonds (likely 20-30 years from retirement having an AA entering 2019 around 95/5 to 90/10), mostly in a total bond index in both my TIRA and my pre-tax 401k. However, in July last year I actually rolled over my entire TIRA into my 401k to allow for backdoor Roth IRA contributions in 2019 and beyond. However, because I am also now doing mega backdoor Roth contributions within my 401k and the investments cannot be split between Roth/Pretax (it is just one big pool), I decided to not hold ny bonds in my 401k, lest I waste the valuable "Roth" space. With the changing interest rates I was just not sure what to do, but at my spouse's urging in mid-2019 we decided to build up our cash emergency fund (from 3 months to closer to 8-10 months), which I kept in no penalty CDs and just counted all of that as part of our fixed income allocation. Fast forward COVID19 hit, and while we would have probably done better with our fixed income in total bond index, the 0 volatility of CDs definitely helped us sleep at night. With that safety blanket my spouse was on board with us investing a good portion of my bonus that just happened to get paid out in mid-March right before the market lows. I did use some of my bonus to max out I Bonds for 2020, and as some CDs expires previously earning 2.30%, after having followed vineviz's thread about the first 20% in LTT, I started adding some LTT (VLGSX). So now my fixed income is a mix of I Bonds, LTT, no penalty CDs and cash (HYS accounts), having previously been in total bond index and cash (HYS accounts/VMFXX). My plan is to buy more LTT as my no penalty CDs expire, and more I Bonds annually, while still keeping a cash emergency fund in the 3-6 month range maintaining an AA of around 90/10) - I do still count my cash emergency found as part of my AA.
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Re: Bonds - Throw it all on the table!!!

Post by Doc »

abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I'd say probably yes:

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

Post by Hector »

abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I still hold short term Treasurys; average maturity ~3 years. But I am not excited about buying new 5-year notes with ~0.3% rate.
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Re: Bonds - Throw it all on the table!!!

Post by aj76er »

Hector wrote: Fri May 08, 2020 5:24 pm
abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I still hold short term Treasurys; average maturity ~3 years. But I am not excited about buying new 5-year notes with ~0.3% rate.
At that rate, why not just do a HY Savings account (e.g. Ally)? You can still get 1.5% APY right now. No penalty CDs at Ally are another option (also 1.5% APY for 25k).

saving >100bps is like dumping a financial advisor!
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Re: Bonds - Throw it all on the table!!!

Post by Dave55 »

abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
Yes, I was 100% Total Bond. Now I am about 40% Total Bond VBTLX, 30% Vanguard GNMA VFIJX and 30% Vanguard Short Term Investment Grade VFSUX. I am chasing yield and proud of it.


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

Post by anon_investor »

aj76er wrote: Fri May 08, 2020 6:24 pm saving >100bps is like dumping a financial advisor!
Haha I have never seen it pit that way before. I definitely agree, I used to keep a few thousand bucks in my Vanguard settlement fund, but not anymore, why give up a risk free 1%.
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Re: Bonds - Throw it all on the table!!!

Post by Hector »

aj76er wrote: Fri May 08, 2020 6:24 pm
Hector wrote: Fri May 08, 2020 5:24 pm
abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I still hold short term Treasurys; average maturity ~3 years. But I am not excited about buying new 5-year notes with ~0.3% rate.
At that rate, why not just do a HY Savings account (e.g. Ally)? You can still get 1.5% APY right now. No penalty CDs at Ally are another option (also 1.5% APY for 25k).

saving >100bps is like dumping a financial advisor!
It's in the retirement account. That is why.
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Re: Bonds - Throw it all on the table!!!

Post by anon_investor »

Hector wrote: Fri May 08, 2020 8:58 pm
aj76er wrote: Fri May 08, 2020 6:24 pm
Hector wrote: Fri May 08, 2020 5:24 pm
abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I still hold short term Treasurys; average maturity ~3 years. But I am not excited about buying new 5-year notes with ~0.3% rate.
At that rate, why not just do a HY Savings account (e.g. Ally)? You can still get 1.5% APY right now. No penalty CDs at Ally are another option (also 1.5% APY for 25k).

saving >100bps is like dumping a financial advisor!
It's in the retirement account. That is why.
Bummer. Why not go with the short term bond index (BSV), a tiny bit more risk but paying around 0.75%, and at least from past performance has not had a negative year (factoring in the coupon).
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Re: Bonds - Throw it all on the table!!!

Post by Hector »

anon_investor wrote: Fri May 08, 2020 10:13 pm
Hector wrote: Fri May 08, 2020 8:58 pm
aj76er wrote: Fri May 08, 2020 6:24 pm
Hector wrote: Fri May 08, 2020 5:24 pm
abuss368 wrote: Fri May 08, 2020 12:48 pm Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
I still hold short term Treasurys; average maturity ~3 years. But I am not excited about buying new 5-year notes with ~0.3% rate.
At that rate, why not just do a HY Savings account (e.g. Ally)? You can still get 1.5% APY right now. No penalty CDs at Ally are another option (also 1.5% APY for 25k).

saving >100bps is like dumping a financial advisor!
It's in the retirement account. That is why.
Bummer. Why not go with the short term bond index (BSV), a tiny bit more risk but paying around 0.75%, and at least from past performance has not had a negative year (factoring in the coupon).
I have not included corporate bonds yet because
  • When stock tanks, corporate bonds tanks too.
  • There is a risk of losing $$ in nominal terms with corporate bonds.


But I have been thinking about adding some lately. I have been thinking about a couple of options. But have not been able to decide yet:
  • Add 25-30% corporate bonds. Even though these would tank when stocks tank, I should have enough Treasurys to sell to buy stock.
  • Implementing a barbell strategy with Treasurys.
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Re: Bonds - Throw it all on the table!!!

Post by anon_investor »

Hector wrote: Sat May 09, 2020 2:53 pm
anon_investor wrote: Fri May 08, 2020 10:13 pm
Hector wrote: Fri May 08, 2020 8:58 pm
aj76er wrote: Fri May 08, 2020 6:24 pm
Hector wrote: Fri May 08, 2020 5:24 pm
I still hold short term Treasurys; average maturity ~3 years. But I am not excited about buying new 5-year notes with ~0.3% rate.
At that rate, why not just do a HY Savings account (e.g. Ally)? You can still get 1.5% APY right now. No penalty CDs at Ally are another option (also 1.5% APY for 25k).

saving >100bps is like dumping a financial advisor!
It's in the retirement account. That is why.
Bummer. Why not go with the short term bond index (BSV), a tiny bit more risk but paying around 0.75%, and at least from past performance has not had a negative year (factoring in the coupon).
I have not included corporate bonds yet because
  • When stock tanks, corporate bonds tanks too.
  • There is a risk of losing $$ in nominal terms with corporate bonds.


But I have been thinking about adding some lately. I have been thinking about a couple of options. But have not been able to decide yet:
  • Add 25-30% corporate bonds. Even though these would tank when stocks tank, I should have enough Treasurys to sell to buy stock.
  • Implementing a barbell strategy with Treasurys.
Seems too complicated to me. In your situation I would hold long term treasuries (VGLT) for rebalancing benefits in a crash and then short term bond index (BSV) for the short end of the barbell. BSV is almost 70% treasuries, so pretty safe and the corp bonds in it help it get better yield.
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Re: Bonds - Throw it all on the table!!!

Post by palanzo »

Munir wrote: Fri May 08, 2020 1:08 pm Not because of low interest rates, but for credit safety and in spite of lower yields, I shifted all my bond holdings to US Treasury Intermediate Index (VSIGX). Once the pandemic and economic picture settles down (if it does settle down), I might reconsider moving some funds to the other Vanguard intermediate bond funds. I also moved a chunk to the Vanguard US Treasury Money Market fund. This is all TIRA money, and I am an 82 retiree in a distribution phase. I don't remember ever being as concerned about further slides- maybe it's my age.
Why US Treasury Intermediate Index (VSIGX) rather than Intermediate-Term Treasury Fund (VFIUX)? Higher SEC yield in the latter.
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Re: Bonds - Throw it all on the table!!!

Post by rockstar »

abuss368 wrote: Fri Nov 01, 2019 8:27 am I am curious how many Bogleheads are investing in TIPS? Inflation is expected to be low. Not much income from TIPS at the moment.

Thoughts appreciated.
TIPS made sense last fall. They don't make sense to me now.
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Re: Bonds - Throw it all on the table!!!

Post by Munir »

palanzo wrote: Sat May 09, 2020 3:26 pm
Munir wrote: Fri May 08, 2020 1:08 pm Not because of low interest rates, but for credit safety and in spite of lower yields, I shifted all my bond holdings to US Treasury Intermediate Index (VSIGX). Once the pandemic and economic picture settles down (if it does settle down), I might reconsider moving some funds to the other Vanguard intermediate bond funds. I also moved a chunk to the Vanguard US Treasury Money Market fund. This is all TIRA money, and I am an 82 retiree in a distribution phase. I don't remember ever being as concerned about further slides- maybe it's my age.
Why US Treasury Intermediate Index (VSIGX) rather than Intermediate-Term Treasury Fund (VFIUX)? Higher SEC yield in the latter.
They are very close in their numbers. According to M*, VFIUX has a yield of 2.04% and VSIGX 1.96%. However, VSIGX is rated AAA in its holdings while VFIUX is AA. During the recent crash, VSIGX did a little better, and it's an index fund while the other is actively managed, and VSIGX's expense ratio is .03% less. One comment I read claimed that VSIGX's holdings are more pure US treasury and therefore slightly less risky than the other. These are all minor factors if taken each alone but collectively guided me to VSIGX.
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Re: Bonds - Throw it all on the table!!!

Post by palanzo »

Munir wrote: Sat May 09, 2020 4:55 pm
palanzo wrote: Sat May 09, 2020 3:26 pm
Munir wrote: Fri May 08, 2020 1:08 pm Not because of low interest rates, but for credit safety and in spite of lower yields, I shifted all my bond holdings to US Treasury Intermediate Index (VSIGX). Once the pandemic and economic picture settles down (if it does settle down), I might reconsider moving some funds to the other Vanguard intermediate bond funds. I also moved a chunk to the Vanguard US Treasury Money Market fund. This is all TIRA money, and I am an 82 retiree in a distribution phase. I don't remember ever being as concerned about further slides- maybe it's my age.
Why US Treasury Intermediate Index (VSIGX) rather than Intermediate-Term Treasury Fund (VFIUX)? Higher SEC yield in the latter.
They are very close in their numbers. According to M*, VFIUX has a yield of 2.04% and VSIGX 1.96%. However, VSIGX is rated AAA in its holdings while VFIUX is AA. During the recent crash, VSIGX did a little better, and it's an index fund while the other is actively managed, and VSIGX's expense ratio is .03% less. One comment I read claimed that VSIGX's holdings are more pure US treasury and therefore slightly less risky than the other. These are all minor factors if taken each alone but collectively guided me to VSIGX.
Those must be dividend yields. Take a look at Vanguard's SEC yields. You're right. VFIUX is only 86.8% Treasury/Agency. That might explain the 0.59% vs. 0.38% SEC yield.
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Re: Bonds - Throw it all on the table!!!

Post by Munir »

palanzo wrote: Sat May 09, 2020 5:36 pm
Munir wrote: Sat May 09, 2020 4:55 pm
palanzo wrote: Sat May 09, 2020 3:26 pm
Munir wrote: Fri May 08, 2020 1:08 pm Not because of low interest rates, but for credit safety and in spite of lower yields, I shifted all my bond holdings to US Treasury Intermediate Index (VSIGX). Once the pandemic and economic picture settles down (if it does settle down), I might reconsider moving some funds to the other Vanguard intermediate bond funds. I also moved a chunk to the Vanguard US Treasury Money Market fund. This is all TIRA money, and I am an 82 retiree in a distribution phase. I don't remember ever being as concerned about further slides- maybe it's my age.
Why US Treasury Intermediate Index (VSIGX) rather than Intermediate-Term Treasury Fund (VFIUX)? Higher SEC yield in the latter.
They are very close in their numbers. According to M*, VFIUX has a yield of 2.04% and VSIGX 1.96%. However, VSIGX is rated AAA in its holdings while VFIUX is AA. During the recent crash, VSIGX did a little better, and it's an index fund while the other is actively managed, and VSIGX's expense ratio is .03% less. One comment I read claimed that VSIGX's holdings are more pure US treasury and therefore slightly less risky than the other. These are all minor factors if taken each alone but collectively guided me to VSIGX.
Those must be dividend yields. Take a look at Vanguard's SEC yields. You're right. VFIUX is only 86.8% Treasury/Agency. That might explain the 0.59% vs. 0.38% SEC yield.
The yields you quoted are the correct yields as quoted by Vanguard. I did not see them till after I posted my numbers which came from the M* "compare funds" site and are probably old (dated).
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Re: Bonds - Throw it all on the table!!!

Post by mlcolorado »

We are 50% stock, 45% bonds and 5% cash, recently (12 months ago) retired 66 yo & 69 yo.

Bonds are split 70% Vanguard Total Bond VBTLX in rollover IRAs, and 30% Vanguard High-Yield Tax-Exempt VWALX in taxable.

No plans to change for the next 5 years, unless we think it is not working "Good Enough." We have won and have enough to have fun.
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From 2014 to 2019 to Today

Post by hudson »

Post by abuss368 » Fri May 08, 2020 12:48 pm
Bogleheads -

Has anyone changed their bond strategy in the current environment of low interest rates?
2014...Me...Hudson...same discussion
I try to keep Larry Swedroe's advice in mind with bonds where he says something like: "Go with AAA/AA rated bonds."
Therefore, I like treasuries and AAA/AA municipal bonds...as follows:

Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (VWIUX) (not all AAA/AA)
Vanguard Intermediate-Term Treasury Fund Admiral Shares
Baird Intermediate Municipal Bond Fund Class Institutional (Closer to AAA/AA than Van. Intermed. Term Tax-Ex.)
Vanguard Inflation-Protected Securities Fund Admiral Shares
Penfed CDs
IBonds
JULY 2019...Me Hudson...same discussion
For the most part, I'm 2/3s CDs and 1/3 VWIUX...Vang. Intermed. Muni
I would probably like anything that was Vanguard Risk Potential 1 or 2
May 10, 2020: Abus368, Have I changed my bond strategy since the virus and low interest rates?

I've sure thought about it, but decided not to change. Before the plague, I moved from 67% CDs and 1/3 VWIUX...Vang. Intermediate Muni to roughly 89% CDs and 11% VWIUX.
I did it for two reasons. 3%+ CDs were available, and I had some capital losses available to use up when selling VWIUX at a gain.

Bottom Line: No change in strategy...I'm still going with high quality intermediate fixed income.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

With rates at present levels perhaps now is a good time to add updated comments to help and consider.

Looking back over the thread it is amazing to see where we were.
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Re: Bonds - Throw it all on the table!!!

Post by Rajsx »

Interesting to follow the Bonds down the time line -

I am 64, Dw 59, overall AA 55/40/5 cash

In the Bonds 67& in Tax deferred are Total Bond Index VBTLX 80% & Total International Bond Index VTABX 20&

Remaining Bonds in taxable are Tax Exempt Intermediate Term Bond VWIUX 33%

Cash is in CDs in Discover & Ally Banks & high yielding Savings.

Thinking of gradually converting VBTLX to short Term Bond Index as the Bonds will be funding the initial years of Retirement.
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Re: Bonds - Throw it all on the table!!!

Post by Northern Flicker »

abuss368 wrote: Sat Nov 02, 2019 5:49 pm
elainet7 wrote: Sat Nov 02, 2019 5:09 pm PFFD preferred stock index fund-acts like bonds
How does preferred stock respond during a market downturn?
Like stock, i.e. not like bonds:

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Risk is not a guarantor of return.
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Re: Bonds - Throw it all on the table!!!

Post by typical.investor »

Rajsx wrote: Mon Sep 14, 2020 10:23 pm Interesting to follow the Bonds down the time line -

I am 64, Dw 59, overall AA 55/40/5 cash

In the Bonds 67& in Tax deferred are Total Bond Index VBTLX 80% & Total International Bond Index VTABX 20&

Remaining Bonds in taxable are Tax Exempt Intermediate Term Bond VWIUX 33%

Cash is in CDs in Discover & Ally Banks & high yielding Savings.

Thinking of gradually converting VBTLX to short Term Bond Index as the Bonds will be funding the initial years of Retirement.
Seems reasonable. Don’t forget VTABX won’t suffer NAV loss by a rise in US rates, so that’s a kind a backup there. No guarantees rates don’t go up everywhere simultaneously of course, but I wouldn’t hold my breath.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 »

typical.investor wrote: Mon Sep 14, 2020 10:54 pm
Rajsx wrote: Mon Sep 14, 2020 10:23 pm Interesting to follow the Bonds down the time line -

I am 64, Dw 59, overall AA 55/40/5 cash

In the Bonds 67& in Tax deferred are Total Bond Index VBTLX 80% & Total International Bond Index VTABX 20&

Remaining Bonds in taxable are Tax Exempt Intermediate Term Bond VWIUX 33%

Cash is in CDs in Discover & Ally Banks & high yielding Savings.

Thinking of gradually converting VBTLX to short Term Bond Index as the Bonds will be funding the initial years of Retirement.
Seems reasonable. Don’t forget VTABX won’t suffer NAV loss by a rise in US rates, so that’s a kind a backup there. No guarantees rates don’t go up everywhere simultaneously of course, but I wouldn’t hold my breath.
Agreed. Total Bond has a material amount of Treasuries which will support the fund during time of market stress.
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