Does it matter "when" you buy bonds?

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neomutiny06
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Does it matter "when" you buy bonds?

Post by neomutiny06 » Sat Dec 31, 2016 4:30 pm

I am contributing to my accounts this January. I will be adding quite a bit to my Vanguard Corporate Bond Index fund and my Vanguard TIPS fund.

I keep reading about timing the bond market. Is there a good or bad time to buy into bond funds? Is it anything like stocks being expensive or cheap?

Also, is there any need to dollar cost average into a bond fund?

DSInvestor
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Re: Does it matter "when" you buy bonds?

Post by DSInvestor » Sat Dec 31, 2016 4:39 pm

If you generate a growth chart at morningstar.com that overlays your stock and bond funds, I think you'll find that bond funds are much less volatile than stock funds. Long term bond funds tend to be more volatile than intermediate and short term bond funds.

Punta Cana DR
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Re: Does it matter "when" you buy bonds?

Post by Punta Cana DR » Sat Dec 31, 2016 4:53 pm

Which performs better long term?

livesoft
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Re: Does it matter "when" you buy bonds?

Post by livesoft » Sat Dec 31, 2016 4:53 pm

Of course it matters when you buy bond fund shares. The question really is, Does it matter enough to you?

Let me ask a point blank question: Take the fund VICSX. Would you rather have bought on 09/29/2016 or 3 months later on 12/15/2016?
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neomutiny06
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Re: Does it matter "when" you buy bonds?

Post by neomutiny06 » Sat Dec 31, 2016 5:16 pm

livesoft wrote:Of course it matters when you buy bond fund shares. The question really is, Does it matter enough to you?

Let me ask a point blank question: Take the fund VICSX. Would you rather have bought on 09/29/2016 or 3 months later on 12/15/2016?


Yes I see your point. Down 3% vs 0%. So it's just price I'm looking at? By the way, I'm not trying to time the market. I was just asking because I have heard that bond spreads can be wide and I don't quite understand it.

livesoft
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Re: Does it matter "when" you buy bonds?

Post by livesoft » Sat Dec 31, 2016 5:27 pm

neomutiny06 wrote:… because I have heard that bond spreads can be wide and I don't quite understand it.

Bond spreads or bond fund spreads? Mutual funds don't have spreads, do they?
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Lobster
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Re: Does it matter "when" you buy bonds?

Post by Lobster » Sat Dec 31, 2016 5:39 pm

neomutiny06 wrote:Is there a good or bad time to buy into bond funds?


livesoft wrote:Take the fund VICSX. Would you rather have bought on 09/29/2016 or 3 months later on 12/15/2016?


The trick is to look at the December returns in September and pick the best time to buy. Livesoft charges 2 and 20 for use of his time machine though so that will cut into your extra returns.

Keep it simple, buy when you have the funds :)
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livesoft
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Re: Does it matter "when" you buy bonds?

Post by livesoft » Sat Dec 31, 2016 5:44 pm

Lobster wrote:The trick is to look at the December returns in September and pick the best time to buy. Livesoft charges 2 and 20 for use of his time machine though so that will cut into your extra returns.

I should've charged 2 and 20 for the advice given to delay buying bond funds until after the December FOMC meeting. :sharebeer
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Set40
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Re: Does it matter "when" you buy bonds?

Post by Set40 » Sat Dec 31, 2016 5:55 pm

Is it good to be buying bonds in a rising interest rate environment?

dbr
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Re: Does it matter "when" you buy bonds?

Post by dbr » Sun Jan 01, 2017 11:07 am

Of course it matters when you buy. Knowing when that is ex ante and having any practical choice in the matter is another issue. It is not possible to avoid what the course of history hands you.

dbr
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Re: Does it matter "when" you buy bonds?

Post by dbr » Sun Jan 01, 2017 11:09 am

Set40 wrote:Is it good to be buying bonds in a rising interest rate environment?


Yes, because higher interest rates mean more return from bonds. If you want to be really clever you wait until interest rates have gone up knowing in advance when they will go up and when they will stop going up while being sure that you don't give up too much in present earnings by staying in something else that doesn't pay.

dbr
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Re: Does it matter "when" you buy bonds?

Post by dbr » Sun Jan 01, 2017 11:11 am

Punta Cana DR wrote:Which performs better long term?


The longer the term the higher the yield, but long bonds will stay depressed longer in the presence of rising interest rates while returning the most in the long run. A lot of people are very happy to just invest in intermediate terms and go away without worrying about bonds.

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