Switching 40% of my portfolio to bonds: just can't do it.

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ThisTimeItsDifferent
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Joined: Sat Jan 31, 2015 2:51 pm

Re: Switching 40% of my portfolio to bonds: just can't do it

Post by ThisTimeItsDifferent » Thu Apr 09, 2015 1:02 pm

siamond wrote:
ThisTimeItsDifferent wrote:I don't have any bonds to speak of either (except for a small amount as a portion of the Vanguard STAR fund in a Roth) at age 45 and have 80% in stock and 20% in cash but seeing the VTSAX (stock) vs VBTLX (bond) results from 2000 to 2015 is amazing, by steadily increasing and avoiding the 2000 and 2008 crashes, the total bond fund is ahead of total stock with lower volatility for an initial investment at the start of that interval!

http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
Plain cherry-picking. Click on 5Y and see if it is equally amazing. Click on 10Y. Click on maximum. Click on pretty much everything, except the carefully chosen dates of the post. Not quite sure what is your point.
It's definitely cherry picking! I had to search for a long time duration when bond performance surpassed stocks but I was surprised to find a time as long as 15 years when that happened. Of course, "past performance is no guarantee of future results."

If one were making regular contributions during that time, then stocks would have instead been better, buying more when prices were low. Conversely, if one were making regular withdrawals, then bonds would have been even better, not requiring selling more when low.

I've been automatically investing 100% in equity mutual funds for 20 years, never selling, and leaving some excess in cash, "high yield" (1% woo hoo!) savings and CDs. The stock investments have now grown to the point where I need to decide whether I have the right asset allocation or should rebalance.

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siamond
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Joined: Mon May 28, 2012 5:50 am

Re: Switching 40% of my portfolio to bonds: just can't do it

Post by siamond » Thu Apr 09, 2015 1:35 pm

ThisTimeItsDifferent wrote:It's definitely cherry picking! I had to search for a long time duration when bond performance surpassed stocks but I was surprised to find a time as long as 15 years when that happened. Of course, "past performance is no guarantee of future results."
Ah ok, I understand. Well, just for fun, start in 1940 (in the US). Try 10 years of 100% bonds. Then 20 years. Then 30 years. Then 40 years. And you may never say again that bonds are safe! Oh, and then do the same with stocks. And yes, this is cherry-picking too, of course.

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marklearnsbogle
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Location: New York City

Re: Switching 40% of my portfolio to bonds: just can't do it

Post by marklearnsbogle » Sun Apr 12, 2015 2:36 pm

TwoByFour wrote:
markp wrote: Is anyone prepared to make a reasoned case that I should switch a significant portion of my portfolio to bonds
1. Right now
2. Irrespective of the yield even if it was zero or negative.

... and hence help me make the leap.

Mark
My personal feeling is that the only reason to have any bonds at all is psychological. I was at 95% equities up until I was 60. My mother was at 100% equities until the day she died at 93 years old, she lived off that for 40+ years and left an inheritance. Lots of people have high equity stakes and do just fine. That being said, I have grown cautious and am now at about 70/30. But the only reason I have those bonds is so I sleep better. If you feel you can sleep OK without worrying, stay at 100/0.
I relate to your experience and you have hit the nail squarely on the head - it is mostly a psychological experience. My mother is 85 and has been 100% equities for easily 40 years. In 2008 she changed not one thing, sold nothing, stayed firm and didn't sweat it. Most of her investments continued their dividends. I am 55 and in about 20% bonds and I sleep well. I agree that that's what it's about - what works for the individual in the flush times and in the less than flush. The market will never stay UP all the time, or DOWN all the time, but will operate in "this too shall pass".
"Nothing is simpler than owning the stock market and holding it forever, and that’s essentially the idea behind the index fund.” - Bogle.

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