Is it a good time to buy bond ETF now?

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larui529
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Is it a good time to buy bond ETF now?

Post by larui529 » Sat Nov 12, 2016 12:29 am

Hi, I am new to investment. I was observing the market last month and wanted to invest after election. I saw the stock market reached new high this week but bond market was falling. So I bought some Vanguard long term bond ETF (BLV) this Tuesday. I am thinking maybe the price of this ETF will hit bottom of valley soon since the price now is close to the price of last valley in mid 2015. What do you think? Is it a good time to buy bond ETF? I know the probability of reserve to increase rate is very high in December but the graph of BLV indicate there will be a increase almost every two years.

I also want to invest on stock ETF but it seems a little high at this moment. I don't want to buy at a high point. I am 29 years old and just start investing .Thanks.

Larry

Call_Me_Op
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Re: Is it a good time to buy bond ETF now?

Post by Call_Me_Op » Sat Nov 12, 2016 8:02 am

larui529 wrote:Hi, I am new to investment.


Welcome to the Bogleheads Forum!

larui529 wrote:I was observing the market last month and wanted to invest after election.


That's generally called "market timing," and is not recommended.

larui529 wrote:I saw the stock market reached new high this week but bond market was falling. So I bought some Vanguard long term bond ETF (BLV) this Tuesday.


This is also market timing. In addition, most here avoid long-term bonds because they are quite risky (very sensitive to interest rates), and the historical long-term return is only slightly better than for intermediate-term bonds.

larui529 wrote:I am thinking maybe the price of this ETF will hit bottom of valley soon since the price now is close to the price of last valley in mid 2015. What do you think? Is it a good time to buy bond ETF? I know the probability of reserve to increase rate is very high in December but the graph of BLV indicate there will be a increase almost every two years.


Past performance does not predict future results. You are engaging in guesswork.

larui529 wrote:I also want to invest on stock ETF but it seems a little high at this moment. I don't want to buy at a high point.


This again is attempting to time the market (market timing). You will be well-served by gaining a better understanding of asset allocation, devising a plan, and investing per the plan.
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livesoft
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Re: Is it a good time to buy bond ETF now?

Post by livesoft » Sat Nov 12, 2016 8:06 am

So what if it is called market timing?

Clearly, folks should have bought US stocks before the election by exchanging out of bonds and foreign stocks. Indeed, US stocks had dropped before the election, so it was natural to rebalance into them. Now after US stocks are up as much as 10% and foreign stocks are down and bonds are down, it is natural to rebalance into bond funds and foreign funds.

Now if one was doing more market timing, then one would wait to buy bond funds until the announcement after the December FOMC which is about a month away.

My opinion: It is not a bad time to buy bond fund shares now. And it is not a bad time to buy foreign equity fund shares now.

This is what having an asset allocation plan is all about and a rebalancing plan to go with it.
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Call_Me_Op
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Re: Is it a good time to buy bond ETF now?

Post by Call_Me_Op » Sat Nov 12, 2016 8:11 am

livesoft wrote:So what if it is called market timing?

Clearly, folks should have bought US stocks before the election by exchanging out of bonds and foreign stocks. Indeed, US stocks had dropped before the election, so it was natural to rebalance into them. Now after US stocks are up as much as 10% and foreign stocks are down and bonds are down, it is natural to rebalance into bond funds and foreign funds.


Rebalancing and market timing are two different things. He is not doing rebalancing.
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huntertheory
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Re: Is it a good time to buy bond ETF now?

Post by huntertheory » Sat Nov 12, 2016 8:16 am

Trying to tie the two posts above together, before you can intelligently make "buy" or "sell" decisions it's recommended that you develop some sort of overall investment plan, a big part of this being your asset allocation. There's a wealth of information on the wiki of this site and in the book list on how to think about it, but honestly if you are new to investing and 29 years old I think the place to start is Bill Bernstein's "If You Can" which notes that the more important thing is for young investors to save and and invest their savings in a portfolio that they can psychologically handle -- i.e., they don't get euphoric on the highs or despondent when the portfolio drops, and so he recommends a very basic portfolio of total bonds, total US stocks and total foreign stocks.

Once you have your plan set though you can do what livesoft describes, which is "rebalancing" into your target allocations based on market movements, which is (kinda sorta) like paring back winners and buying the dips. But if you do this willy nilly you wind up with the concern Call_Me_Op raised, which is "market timing" which has become Boglehead shorthand for overconfident investing decisions which, countless studies have shown, causes investors to do *worse* than if they had just plunked their funds in their asset allocation and let well enough alone. The investing game is as much against yourself as it is against the market or other investors.

All that said, at 29 years old you should just be putting away monthly savings into your asset allocation each month (via 401k, taxable savings, etc) and then rebalancing periodically as livesoft says.

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Re: Is it a good time to buy bond ETF now?

Post by livesoft » Sat Nov 12, 2016 8:35 am

Call_Me_Op wrote:Rebalancing and market timing are two different things. He is not doing rebalancing.

If one is going to market time, then one should at least do it profitably. If one was waiting for bond funds to drop in order to invest in them, then that was the plan. So now that bond funds have dropped, follow the plan and buy them. If foreign equity funds have dropped, follow the plan and buy them.

Also note that even if one has a rebalancing plan that does not mean that the things one would sell (US equities) do not keep going up and that the things that one would buy (bond funds and foreign equity) do not keep going down. Rebalancers should not act like they never lose extra money with their rebalancing actions. They are allowed to preen when they do make money from their rebalancing actions just like market timers are allowed to do that.

OTOH, my plan would never call for me to buy long-term bond funds. I stick to intermediate-term and short-term bond funds.
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TomatoTomahto
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Re: Is it a good time to buy bond ETF now?

Post by TomatoTomahto » Sat Nov 12, 2016 8:45 am

livesoft wrote:
Call_Me_Op wrote:Rebalancing and market timing are two different things. He is not doing rebalancing.

If one is going to market time, then one should at least do it profitably. If one was waiting for bond funds to drop in order to invest in them, then that was the plan. So now that bond funds have dropped, follow the plan and buy them. If foreign equity funds have dropped, follow the plan and buy them.

Also note that even if one has a rebalancing plan that does not mean that the things one would sell (US equities) do not keep going up and that the things that one would buy (bond funds and foreign equity) do not keep going down. Rebalancers should not act like they never lose extra money with their rebalancing actions. They are allowed to preen when they do make money from their rebalancing actions just like market timers are allowed to do that.

OTOH, my plan would never call for me to buy long-term bond funds. I stick to intermediate-term and short-term bond funds.

I very seldom do a sell/buy to rebalance, preferring to do it with new money, but bonds were down enough and equities up enough that I did so yesterday. BH are becoming very doctrinaire about finding and calling out market timers, implementing a purity test to discover them hiding among the rebalancers.

larui529
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Re: Is it a good time to buy bond ETF now?

Post by larui529 » Sat Nov 12, 2016 1:55 pm

Thank you all for your advices.

So I think I will buy some intermediate band ETF (BIV) or total bond market ETF (BND) instead of long term bond ETF. But I observed that the BIV and BND also suffer from interest rate increasing and they show same trend. The only difference is the loss is less. So what's the difference if I will hold them for 5-10 years?

I have a investment plan of put my portfolio ratio of stock to bond fund to 60%:40%. But I couldn't find a good opportunity to convince myself to buy the stock fund since they are all very risky according to vanguard risk potential form. Should I stick to my plan in buying fund or adjust it with market. I know it's sound like I want to time the market but it's hard not to look at it.

Last but not least, what do you think is the best book for a new investor. Thanks.

itstoomuch
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Re: Is it a good time to buy bond ETF now?

Post by itstoomuch » Mon Nov 14, 2016 6:01 pm

In my tradng accounts, I look at the charts to determine at what relation do I want to either buy or sell a company. I look for reasons why the security is at the current price, why it was at a higher/lower price.

If you are Dollar cost average buying/selling, there isn't a good reason to do the action immediately. I expect to lose in the short_term and do well in the long_term.

Ymmv.
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young-ish
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Re: Is it a good time to buy bond ETF now?

Post by young-ish » Mon Nov 14, 2016 6:23 pm

larui529 wrote:
Last but not least, what do you think is the best book for a new investor. Thanks.


Read the book If You Can by William J. Bernstein.

It's a great easy read and available for free on his website... http://efficientfrontier.com/ef/0adhoc/2books.htm

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David Jay
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Re: Is it a good time to buy bond ETF now?

Post by David Jay » Tue Nov 15, 2016 11:30 am

larui529 wrote:So I think I will buy some intermediate band ETF (BIV) or total bond market ETF (BND) instead of long term bond ETF. But I observed that the BIV and BND also suffer from interest rate increasing and they show same trend. The only difference is the loss is less. So what's the difference if I will hold them for 5-10 years?


Total Bond is an intermediate bond fund (based on duration). An intermediate bond fund should recover in 3-5 years (due to bond expiration and repurchase) so they are a reasonable choice if you intend to hold for 5-10 years. A long term bond fund may take 10-15 years to recover.
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