YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX (Vanguard Total Bond Market Index Fund Admiral Shares) has a 2.64% dividend yield, while VBILX (Vanguard Intermediate-Term Bond Index Fund Admiral Shares) has 2.76%. VTSAX (Vanguard Total Stock Market Index Fund Admiral Shares) has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
In the event of a market crash, bonds will lose less value, sure. But if your investment horizon is ten years, and you are financially sound, you don't need to sell bonds to buy stocks on the cheap.
Bonds funds are supposed to provide volatility while offering reduced performance. If they fail at that, there is no reason to have them.
Edited to reflect names of acronyms.
In the event of a market crash, bonds will lose less value, sure. But if your investment horizon is ten years, and you are financially sound, you don't need to sell bonds to buy stocks on the cheap.
Bonds funds are supposed to provide volatility while offering reduced performance. If they fail at that, there is no reason to have them.
Edited to reflect names of acronyms.
Last edited by fantasytensai on Fri May 25, 2018 12:40 pm, edited 1 time in total.
- triceratop
- Posts: 5838
- Joined: Tue Aug 04, 2015 8:20 pm
- Location: la la land
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Are you selling swaps in the event stocks underperform bonds over arbitrary 10-year periods?
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns. Not every market crash is guaranteed to be like the 2008 crisis. There are even 10-year periods like 2000-2009 where bonds beat stocks.
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns. Not every market crash is guaranteed to be like the 2008 crisis. There are even 10-year periods like 2000-2009 where bonds beat stocks.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I may be wrong but I don't believe VTSAX has undergone any 10 year segments where the price went down, and the upsides are so much higher.triceratop wrote: ↑Tue May 15, 2018 11:54 am Are you selling swaps in the event stocks underperform bonds over arbitrary 10-year periods?
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
To be honest, I wouldn't even notice the slight drops in my bond funds if folks on here didn't constantly mention it.
Best performing intermediate-term bond fund: VEGBX (Vanguard Emerging Markets Bonds Admiral Share) -1.66%
In-between: VSIGX (Vanguard Intermediate Treasury Bond Index Admiral Shares) -2.23%
Worst performing intermediate-term bond fund: VICSX (Vanguard Intermediate Corporate Bond Index Admiral Shares) -3.47%
Best performing intermediate-term bond fund: VEGBX (Vanguard Emerging Markets Bonds Admiral Share) -1.66%
In-between: VSIGX (Vanguard Intermediate Treasury Bond Index Admiral Shares) -2.23%
Worst performing intermediate-term bond fund: VICSX (Vanguard Intermediate Corporate Bond Index Admiral Shares) -3.47%
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Oh, are you saying it's impossible then?fantasytensai wrote: ↑Tue May 15, 2018 11:59 ambut I don't believe VTSAX has undergone any 10 year segments where the price went down
And what if you need the money before 10 years? Are you saying it's impossible to lose one's job as well?
Last edited by HomerJ on Tue May 15, 2018 12:07 pm, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Don't look now then because BND is trading down more than 0.4% today!
That means that if one rebalances into VBTLX today, then they will outperform VBTLX for 2018 by about 2.75%. That's simply Amazing! to be able to outperform a bond fund by that amount with a similar bond fund.
BTW, bond funds like VBTLX don't move by 0.5% in a day, so today could be somewhat of an RBD for VBTLX.
That means that if one rebalances into VBTLX today, then they will outperform VBTLX for 2018 by about 2.75%. That's simply Amazing! to be able to outperform a bond fund by that amount with a similar bond fund.
BTW, bond funds like VBTLX don't move by 0.5% in a day, so today could be somewhat of an RBD for VBTLX.
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I mean, if that is your entire argument, then for many people, no, there is no reason to hold bond funds.HomerJ wrote: ↑Tue May 15, 2018 12:06 pmOh, are you saying it's impossible then? Because it hasn't happened yet?fantasytensai wrote: ↑Tue May 15, 2018 11:59 ambut I don't believe VTSAX has undergone any 10 year segments where the price went down
And what if you need the money before 10 years? Are you saying it's impossible to lose one's job as well?
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Can you explain how buying VBTLX today will outperform it by 2.75%?livesoft wrote: ↑Tue May 15, 2018 12:07 pm Don't look now then because BND is trading down more than 0.4% today!
That means that if one rebalances into VBTLX today, then they will outperform VBTLX for 2018 by about 2.75%. That's simply Amazing! to be able to outperform a bond fund by that amount with a similar bond fund.
BTW, bond funds like VBTLX don't move by 0.5% in a day, so today could be somewhat of an RBD for VBTLX.
Edit: wow just noticed the 0.50% drop on BND too. Now VBTLX is dropping as much as VTSAX on a bad day. I can't even sell VBTLX to buy VTSAX...talk about being 100% useless.
Edit: fixed to 0.50%. Thanks livesoft!
Last edited by fantasytensai on Tue May 15, 2018 12:27 pm, edited 1 time in total.
- triceratop
- Posts: 5838
- Joined: Tue Aug 04, 2015 8:20 pm
- Location: la la land
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
So, you are selling swaps then?fantasytensai wrote: ↑Tue May 15, 2018 11:59 amI may be wrong but I don't believe VTSAX has undergone any 10 year segments where the price went down, and the upsides are so much higher.triceratop wrote: ↑Tue May 15, 2018 11:54 am Are you selling swaps in the event stocks underperform bonds over arbitrary 10-year periods?
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I wasn't being flippant. You need to think carefully before stating things like "We can put all our money in a risky investment, because for sure it will have a positive return in 10 years and for sure we won't need money before then"fantasytensai wrote: ↑Tue May 15, 2018 12:08 pmI mean, if that is your entire argument, then for many people, no, there is no reason to hold bond funds.HomerJ wrote: ↑Tue May 15, 2018 12:06 pmOh, are you saying it's impossible then? Because it hasn't happened yet?fantasytensai wrote: ↑Tue May 15, 2018 11:59 ambut I don't believe VTSAX has undergone any 10 year segments where the price went down
And what if you need the money before 10 years? Are you saying it's impossible to lose one's job as well?
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
- TheTimeLord
- Posts: 12092
- Joined: Fri Jul 26, 2013 2:05 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
responded to wrong post.
Last edited by TheTimeLord on Tue May 15, 2018 1:27 pm, edited 1 time in total.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
A 2% fluctuation in value hardly qualifies as 'volatile'.
It seems to me that when people are constantly worrying about being in a certain asset class, that's probably a pretty good time to be buying.
It seems to me that when people are constantly worrying about being in a certain asset class, that's probably a pretty good time to be buying.
Last edited by onourway on Tue May 15, 2018 1:35 pm, edited 2 times in total.
- TheTimeLord
- Posts: 12092
- Joined: Fri Jul 26, 2013 2:05 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
fantasytensai wrote: ↑Tue May 15, 2018 11:59 amI may be wrong but I don't believe VTSAX has undergone any 10 year segments where the price went down, and the upsides are so much higher.triceratop wrote: ↑Tue May 15, 2018 11:54 am Are you selling swaps in the event stocks underperform bonds over arbitrary 10-year periods?
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns.
Looking at this post we have had negative real return periods as long as 20 years. I believe the 10 year period ended in February of 2009.
willthrill81 wrote: ↑Sat Feb 11, 2017 11:49 am Lately, we've seen a lot of discussion revolving around expected returns from equities. This is obviously unpredictable, but history can give us a lot of insight into the possibilities. As Mark Twain said, "History doesn't repeat itself, but it does rhyme."
While it is important for stock investors to realize that they could, at any given time, lose 50% of their investment in equities, the likelihood of losing money over the entire period of investment declines sharply over the long-term. For instance, I could easily lose 50% in my equity investments this year, but nothing like that kind of loss has even remotely occurred over a 10 year period in the U.S. stock market.
There are many equity classes that could be examined, but let's take a look at probably the most popular: the S&P 500. Getting solid data on this asset class is far easier than many others. I've found this calculator to be a very useful one for examining time periods of investment in the S&P 500 and used it to get the data shown below.
https://dqydj.com/sp-500-historical-return-calculator/
Let's take a look at the worst real (inflation adjusted) annual returns for the S&P 500 from 1871 to 2016 with dividends reinvested.
Minimum Real Annual Returns from S&P 500
3 yr. -35.2%
5 yr. -13.2%
10 yr. -5.9%
20 yr. -.2%
30 yr. 1.9%
40 yr. 3.2%
That tells us what the the worst periods have been, but what about all of the other 10, 20, 30, and 40 year periods. This is where understanding percentile rankings for various periods can be very helpful; they show us what the distribution of annual real returns has been over time.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I stand corrected. Thank you. My investment horizon is just about 10 years. I'll probably drop my AA to 90/10 from 80/20 rather than go 100% equity.TheTimeLord wrote: ↑Tue May 15, 2018 1:26 pmfantasytensai wrote: ↑Tue May 15, 2018 11:59 amI may be wrong but I don't believe VTSAX has undergone any 10 year segments where the price went down, and the upsides are so much higher.triceratop wrote: ↑Tue May 15, 2018 11:54 am Are you selling swaps in the event stocks underperform bonds over arbitrary 10-year periods?
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns.
Looking at this post we have had negative real return periods as long as 20 years. I believe the 10 year period ended in February of 2009.
willthrill81 wrote: ↑Sat Feb 11, 2017 11:49 am Lately, we've seen a lot of discussion revolving around expected returns from equities. This is obviously unpredictable, but history can give us a lot of insight into the possibilities. As Mark Twain said, "History doesn't repeat itself, but it does rhyme."
While it is important for stock investors to realize that they could, at any given time, lose 50% of their investment in equities, the likelihood of losing money over the entire period of investment declines sharply over the long-term. For instance, I could easily lose 50% in my equity investments this year, but nothing like that kind of loss has even remotely occurred over a 10 year period in the U.S. stock market.
There are many equity classes that could be examined, but let's take a look at probably the most popular: the S&P 500. Getting solid data on this asset class is far easier than many others. I've found this calculator to be a very useful one for examining time periods of investment in the S&P 500 and used it to get the data shown below.
https://dqydj.com/sp-500-historical-return-calculator/
Let's take a look at the worst real (inflation adjusted) annual returns for the S&P 500 from 1871 to 2016 with dividends reinvested.
Minimum Real Annual Returns from S&P 500
3 yr. -35.2%
5 yr. -13.2%
10 yr. -5.9%
20 yr. -.2%
30 yr. 1.9%
40 yr. 3.2%
That tells us what the the worst periods have been, but what about all of the other 10, 20, 30, and 40 year periods. This is where understanding percentile rankings for various periods can be very helpful; they show us what the distribution of annual real returns has been over time.
- TheTimeLord
- Posts: 12092
- Joined: Fri Jul 26, 2013 2:05 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
The information is from Will's thread viewtopic.php?t=210755 so all credit goes to him.fantasytensai wrote: ↑Tue May 15, 2018 1:29 pmI stand corrected. Thank you. My investment horizon is just about 10 years. I'll probably drop my AA to 90/10 from 80/20 rather than go 100% equity.TheTimeLord wrote: ↑Tue May 15, 2018 1:26 pmfantasytensai wrote: ↑Tue May 15, 2018 11:59 amI may be wrong but I don't believe VTSAX has undergone any 10 year segments where the price went down, and the upsides are so much higher.triceratop wrote: ↑Tue May 15, 2018 11:54 am Are you selling swaps in the event stocks underperform bonds over arbitrary 10-year periods?
Bonds are there useful because stocks can and have previously gone through extremely brutal sustained drawdowns.
Looking at this post we have had negative real return periods as long as 20 years. I believe the 10 year period ended in February of 2009.
willthrill81 wrote: ↑Sat Feb 11, 2017 11:49 am Lately, we've seen a lot of discussion revolving around expected returns from equities. This is obviously unpredictable, but history can give us a lot of insight into the possibilities. As Mark Twain said, "History doesn't repeat itself, but it does rhyme."
While it is important for stock investors to realize that they could, at any given time, lose 50% of their investment in equities, the likelihood of losing money over the entire period of investment declines sharply over the long-term. For instance, I could easily lose 50% in my equity investments this year, but nothing like that kind of loss has even remotely occurred over a 10 year period in the U.S. stock market.
There are many equity classes that could be examined, but let's take a look at probably the most popular: the S&P 500. Getting solid data on this asset class is far easier than many others. I've found this calculator to be a very useful one for examining time periods of investment in the S&P 500 and used it to get the data shown below.
https://dqydj.com/sp-500-historical-return-calculator/
Let's take a look at the worst real (inflation adjusted) annual returns for the S&P 500 from 1871 to 2016 with dividends reinvested.
Minimum Real Annual Returns from S&P 500
3 yr. -35.2%
5 yr. -13.2%
10 yr. -5.9%
20 yr. -.2%
30 yr. 1.9%
40 yr. 3.2%
That tells us what the the worst periods have been, but what about all of the other 10, 20, 30, and 40 year periods. This is where understanding percentile rankings for various periods can be very helpful; they show us what the distribution of annual real returns has been over time.
IMHO, Investing should be about living the life you want, not avoiding the life you fear. |
Run, You Clever Boy! [9085]
- oldcomputerguy
- Moderator
- Posts: 17878
- Joined: Sun Nov 22, 2015 5:50 am
- Location: Tennessee
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
If you have an investment horizon greater than ten years, and don't plan to sell your holdings in that timeframe, what does it matter what the NAV does? In fact, if you're reinvesting dividends, the greater dividend yield of bond funds combined with lower NAV would seem to be reason to prefer holding them versus stock funds, rather than a reason to shun them in favor of stock funds.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
What am I missing?
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
- jeffyscott
- Posts: 13438
- Joined: Tue Feb 27, 2007 8:12 am
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
You should at least look at current yields, rather than trailing, so 3.11% and 3.38%.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%.
If you like the yield of corporate stocks at 1.74%, how about corporate bonds at 5.67% (VWEAX) or 4.57% (VLTCX)?
-
- Posts: 12073
- Joined: Fri Sep 18, 2009 1:10 am
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Deleted
Last edited by letsgobobby on Fri May 24, 2019 5:34 pm, edited 1 time in total.
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I mean, is this serious? Why does NAV matter?oldcomputerguy wrote: ↑Tue May 15, 2018 4:16 pmIf you have an investment horizon greater than ten years, and don't plan to sell your holdings in that timeframe, what does it matter what the NAV does? In fact, if you're reinvesting dividends, the greater dividend yield of bond funds combined with lower NAV would seem to be reason to prefer holding them versus stock funds, rather than a reason to shun them in favor of stock funds.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
What am I missing?
The reason to invest is to make money. If you started out the year with 100k of VBILX at $11.33 a share. Today, on May 15, 2018 the NAV is $10.85. That means your 100k is now worth 95.76k, or a loss of more than 4k. Let's be generous and say that the yield is 3% for the year, that means in 5 months you earned about 2k in dividend. So accounting for dividends, VBILX lost more than 2k in 5 months. That sounds pretty bad to me.
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
bonds or bond funds?letsgobobby wrote: ↑Tue May 15, 2018 9:39 pmBonds are more attractive relative to stocks than they've been in a long, long time.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
In the event of a market crash, bonds will lose less value, sure. But if your investment horizon is ten years, and you are financially sound, you don't need to sell bonds to buy stocks on the cheap.
Bonds funds are supposed to provide volatility while offering reduced performance. If they fail at that, there is no reason to have them.
- Sandtrap
- Posts: 19582
- Joined: Sat Nov 26, 2016 5:32 pm
- Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Given that this is so. . .fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
In the event of a market crash, bonds will lose less value, sure. But if your investment horizon is ten years, and you are financially sound, you don't need to sell bonds to buy stocks on the cheap.
Bonds funds are supposed to provide volatility while offering reduced performance. If they fail at that, there is no reason to have them.
then shouldn't a "standard" "Bogle" 3-fund portfolio have CD's instead of bond funds (i.e.: VBTLX)????
Why?
Why not?
aloha,
j
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
A layman's perspective is that CDs surely can be used versus say Total Bond if primarily looking at reducing overall portfolio volatility but not so much for rebalancing into stocks as not nearly as liquid.Sandtrap wrote: ↑Tue May 15, 2018 10:18 pmGiven that this is so. . .fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
In the event of a market crash, bonds will lose less value, sure. But if your investment horizon is ten years, and you are financially sound, you don't need to sell bonds to buy stocks on the cheap.
Bonds funds are supposed to provide volatility while offering reduced performance. If they fail at that, there is no reason to have them.
then shouldn't a "standard" "Bogle" 3-fund portfolio have CD's instead of bond funds (i.e.: VBTLX)????
Why?
Why not?
aloha,
j
-
- Posts: 12073
- Joined: Fri Sep 18, 2009 1:10 am
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Deleted
Last edited by letsgobobby on Fri May 24, 2019 5:33 pm, edited 1 time in total.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
So you care about short-term bond fluctuations, but you take the long view on stocks?fantasytensai wrote: ↑Tue May 15, 2018 10:08 pmI mean, is this serious? Why does NAV matter?oldcomputerguy wrote: ↑Tue May 15, 2018 4:16 pmIf you have an investment horizon greater than ten years, and don't plan to sell your holdings in that timeframe, what does it matter what the NAV does? In fact, if you're reinvesting dividends, the greater dividend yield of bond funds combined with lower NAV would seem to be reason to prefer holding them versus stock funds, rather than a reason to shun them in favor of stock funds.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
What am I missing?
The reason to invest is to make money. If you started out the year with 100k of VBILX at $11.33 a share. Today, on May 15, 2018 the NAV is $10.85. That means your 100k is now worth 95.76k, or a loss of more than 4k. Let's be generous and say that the yield is 3% for the year, that means in 5 months you earned about 2k in dividend. So accounting for dividends, VBILX lost more than 2k in 5 months. That sounds pretty bad to me.
He's saying that in 10 years the fact that the bond fund is down 2% this year won't matter, just like the fact a stock fund could go down 30% this year doesn't matter to you... Because you're thinking 10 year returns, not 5 month returns.
Does this make sense to you? You're pointing out a short-term 2% loss in bond funds as a reason not to invest in them, but you're okay if stock funds drop because you're a long-term investor. You're not being consistent.
Something to note... Bond funds are self-correcting. The reason the NAV is down is because the yield is increasing. So they are starting to pay larger and larger dividends, which over time, will make up for the short-term loss in NAV.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
- randomizer
- Posts: 1547
- Joined: Sun Jul 06, 2014 3:46 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I hold bonds because the future may not look like the past.
Or it might.
Either way, nobody knows nothin'.
Or it might.
Either way, nobody knows nothin'.
87.5:12.5, EM tilt — HODL the course!
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Yes, but that takes a really long time, particularly as yields keep increasing and the NAV keeps falling.
These threads keep coming up over the last year and a half, and some of us have been saying again and again that CDs make more sense in accounts where you can invest in them. The yields are close, and you do get your principal back with the interest.
- jeffyscott
- Posts: 13438
- Joined: Tue Feb 27, 2007 8:12 am
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Yes, such terrible things never happen with stocks. I mean there has never been a time when VTSMX lost 4% in 5 months.fantasytensai wrote: ↑Tue May 15, 2018 10:08 pmThe reason to invest is to make money. If you started out the year with 100k of VBILX at $11.33 a share. Today, on May 15, 2018 the NAV is $10.85. That means your 100k is now worth 95.76k, or a loss of more than 4k. Let's be generous and say that the yield is 3% for the year, that means in 5 months you earned about 2k in dividend. So accounting for dividends, VBILX lost more than 2k in 5 months. That sounds pretty bad to me.
BTW, if you had invested that $100K in VBILX 10 years ago, you have $153K now. While that is less than US stocks, it is more than foreign stocks have returned over that time.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
What part of "stay the course" have we forgotten? Short term changes in NAV are nothing more than fodder for discussion- financial porn if you will.
I will place my bets on the wisdom of an 89 year old prodigy!!
Best of luck on all of your investments,
Dan
I will place my bets on the wisdom of an 89 year old prodigy!!
Best of luck on all of your investments,
Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” |
— Warren Buffett
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I would describe the last few months as "sideways." Boring yes, but nothing to worry about.
70% Global Stocks / 30% Bonds
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Am I the only one here that is annoyed with Vxxxx ticker symbols that are never identified by OP's?
"Optimum est pati quod emendare non possis." |
-Seneca
- oldcomputerguy
- Moderator
- Posts: 17878
- Joined: Sun Nov 22, 2015 5:50 am
- Location: Tennessee
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
HomerJ,HomerJ wrote: ↑Wed May 16, 2018 12:47 amHe's saying that in 10 years the fact that the bond fund is down 2% this year won't matter, just like the fact a stock fund could go down 30% this year doesn't matter to you... Because you're thinking 10 year returns, not 5 month returns.oldcomputerguy wrote: ↑Tue May 15, 2018 4:16 pm If you have an investment horizon greater than ten years, and don't plan to sell your holdings in that timeframe, what does it matter what the NAV does? In fact, if you're reinvesting dividends, the greater dividend yield of bond funds combined with lower NAV would seem to be reason to prefer holding them versus stock funds, rather than a reason to shun them in favor of stock funds.
What am I missing?
Thank you. Your post more eloquently expresses the thought I was struggling to put forth.
There is only one success - to be able to spend your life in your own way. (Christopher Morley)
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I'm sorry, it still does not make sense. I am perfectly fine with stocks dropping 30% because they have the potential to rise 30% the other way. Bonds will never have that potential, which is why I agree with some other posters that a penalty free CD may be a better option. I don't know what the purpose bond is for you guys, but I buy bonds for stability to balance out the volatility of stocks, not to have them drop 10 times harder than stocks.HomerJ wrote: ↑Wed May 16, 2018 12:47 amSo you care about short-term bond fluctuations, but you take the long view on stocks?fantasytensai wrote: ↑Tue May 15, 2018 10:08 pmI mean, is this serious? Why does NAV matter?oldcomputerguy wrote: ↑Tue May 15, 2018 4:16 pmIf you have an investment horizon greater than ten years, and don't plan to sell your holdings in that timeframe, what does it matter what the NAV does? In fact, if you're reinvesting dividends, the greater dividend yield of bond funds combined with lower NAV would seem to be reason to prefer holding them versus stock funds, rather than a reason to shun them in favor of stock funds.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
What am I missing?
The reason to invest is to make money. If you started out the year with 100k of VBILX at $11.33 a share. Today, on May 15, 2018 the NAV is $10.85. That means your 100k is now worth 95.76k, or a loss of more than 4k. Let's be generous and say that the yield is 3% for the year, that means in 5 months you earned about 2k in dividend. So accounting for dividends, VBILX lost more than 2k in 5 months. That sounds pretty bad to me.
He's saying that in 10 years the fact that the bond fund is down 2% this year won't matter, just like the fact a stock fund could go down 30% this year doesn't matter to you... Because you're thinking 10 year returns, not 5 month returns.
Does this make sense to you? You're pointing out a short-term 2% loss in bond funds as a reason not to invest in them, but you're okay if stock funds drop because you're a long-term investor. You're not being consistent.
Something to note... Bond funds are self-correcting. The reason the NAV is down is because the yield is increasing. So they are starting to pay larger and larger dividends, which over time, will make up for the short-term loss in NAV.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
How have bonds dropped '10x harder than stocks?'fantasytensai wrote: ↑Wed May 16, 2018 8:23 am I'm sorry, it still does not make sense. I am perfectly fine with stocks dropping 30% because they have the potential to rise 30% the other way. Bonds will never have that potential, which is why I agree with some other posters that a penalty free CD may be a better option. I don't know what the purpose bond is for you guys, but I buy bonds for stability to balance out the volatility of stocks, not to have them drop 10 times harder than stocks.
If you are referring to the face they have dropped 2-3% in a year, that's a completely arbitrary and essentially meaningless comparison.
Bonds do not have zero risk. They aren't even particularly low risk. They will fluctuate in value, even up to 5-10% at times. Which is still ~5-10x less volatility than stocks exhibit.
-
- Posts: 577
- Joined: Fri Mar 15, 2013 8:49 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
These kind of hysterics do no one any good. I have read a few of your past posts and the impression I get is you are somewhat impatient and might have unrealistic expectations. Look at the following chart. It looks to me like total market bond fund did it's job of being much less volatile that socks.fantasytensai wrote: ↑Wed May 16, 2018 8:23 amI'm sorry, it still does not make sense. I am perfectly fine with stocks dropping 30% because they have the potential to rise 30% the other way. Bonds will never have that potential, which is why I agree with some other posters that a penalty free CD may be a better option. I don't know what the purpose bond is for you guys, but I buy bonds for stability to balance out the volatility of stocks, not to have them drop 10 times harder than stocks.
http://quotes.morningstar.com/chart/fun ... A%5B%5D%7D
PS if anyone knows how to post the actual image instead of the link (or tell me how to) that would be great and probably instructive to a lot of lurkers who won't bother to click the link.
-
- Posts: 226
- Joined: Tue Dec 27, 2016 11:59 am
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
+1CantPassAgain wrote: ↑Wed May 16, 2018 9:20 amThese kind of hysterics do no one any good. I have read a few of your past posts and the impression I get is you are somewhat impatient and might have unrealistic expectations.fantasytensai wrote: ↑Wed May 16, 2018 8:23 amI'm sorry, it still does not make sense. I am perfectly fine with stocks dropping 30% because they have the potential to rise 30% the other way. Bonds will never have that potential, which is why I agree with some other posters that a penalty free CD may be a better option. I don't know what the purpose bond is for you guys, but I buy bonds for stability to balance out the volatility of stocks, not to have them drop 10 times harder than stocks.
and +1letsgobobby wrote: ↑Tue May 15, 2018 9:39 pm
Bonds are more attractive relative to stocks than they've been in a long, long time.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
What are you talking about? Bonds drop 10x LESS hard than stocks.fantasytensai wrote: ↑Wed May 16, 2018 8:23 am I'm sorry, it still does not make sense. I am perfectly fine with stocks dropping 30% because they have the potential to rise 30% the other way. Bonds will never have that potential, which is why I agree with some other posters that a penalty free CD may be a better option. I don't know what the purpose bond is for you guys, but I buy bonds for stability to balance out the volatility of stocks, not to have them drop 10 times harder than stocks.
Stock funds drop 30%, and can gain 30%.
Bond funds drop 2% and can gain 2%.
What's the problem here? How can you be so upset over a 5-month 2% loss in bonds? Are you really thinking this through?
Since yields are rising (which is why the NAV went down), bond funds will start paying out 1% more a year soon, and they will make back their losses automatically.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Stocks and bonds both have had long-run Sharpe ratios maybe like 0.3. Or a little lower for bonds. It's hard to say how much of that historical behavior is relevant in the present (especially as both probably should be less volatile going forward, especially bonds given modern monetary policy), but stocks are probably not that much better in terms of risk/return. It also depends a bit on which bonds you're looking at. Extending duration usually lowers risk/return in isolation, if not necessarily much in terms of the overall portfolio.fantasytensai wrote: ↑Wed May 16, 2018 8:23 am I'm sorry, it still does not make sense. I am perfectly fine with stocks dropping 30% because they have the potential to rise 30% the other way. Bonds will never have that potential, which is why I agree with some other posters that a penalty free CD may be a better option. I don't know what the purpose bond is for you guys, but I buy bonds for stability to balance out the volatility of stocks, not to have them drop 10 times harder than stocks.
My point is just that the range of outcomes for bonds is not that inferior, just mostly scaled down, though I'm sympathetic to rejecting bad or incomplete arguments given for bonds (that they're not-stocks—cash and other assets do that as well; or simply that they're less volatile than stocks, which doesn't provide information about the return).
Bringing up the fact that bonds can be down 10x or let's say 100x or even -1000x (different sign) compared to stocks over a given period is somewhere between disingenuous and useless, though. Want somebody to show a period where VTSAX is up 0.1% and VBTLX is up 10%? WOW! 100x performance. Who wants stocks?
Direct bank CDs are still generally better investments in terms of risk/return than either (though you may still want stocks for higher expected return as you can't just leverage CDs at the risk-free rate), inconvenience and liquidity aside. No need to rehash that.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Unless you're a retiree living off your bonds (in which case rising yields should make you happy, not annoyed) I see no reason to even concern yourself with day to day or month to month shifts in NAV of bond funds. Who cares? Just pick your AA and stick to it.
I just take my few hundred bucks a month in yield and plow it right back into Total Bond. I like lower prices!
I just take my few hundred bucks a month in yield and plow it right back into Total Bond. I like lower prices!
-
- Posts: 2454
- Joined: Tue Mar 07, 2017 3:25 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
The three fund VTSAX/VTIAX/VBTLX and their corresponding etf's VTI/VXUS/BND are about the only symbols you really should be expected to know as they are most pertinent to this forum. I think I mostly see the issue when people start using the Fidelity and Schwab corresponding funds and post as if they are widely known.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Unless you are imminently spending a good portion of your investment, you should be agnostic regarding today's value. If you are spending today, you want high prices. If you are accumulating, you want to be buying asset classes with the (relatively) lowest prices. Many experts believe that equities are currently priced very high - and this high price will necessarily mean lower future returns. If you don't understand why this is, there are plenty of books suggested in the wiki that will help.
As such, high prices for stocks today is a good thing only if you are currently spending the money. If you are instead, as you indicate, still buying, bonds should be appealing now precisely because their price has been falling. 10 years from now stocks could very well have returned 0% real, with a tremendous amount of volatility thrown in. This is precisely what happened between ~1999 - 2010. If you buy bonds of the appropriate duration and hold them long enough, you will make back your money, with orders of magnitude less volatility.
The only way you make money is by buying low and selling high. The fact that so many people are worked up over the fact that bond prices are falling is a great example of just how pervasive bad investor behavior is.
As such, high prices for stocks today is a good thing only if you are currently spending the money. If you are instead, as you indicate, still buying, bonds should be appealing now precisely because their price has been falling. 10 years from now stocks could very well have returned 0% real, with a tremendous amount of volatility thrown in. This is precisely what happened between ~1999 - 2010. If you buy bonds of the appropriate duration and hold them long enough, you will make back your money, with orders of magnitude less volatility.
The only way you make money is by buying low and selling high. The fact that so many people are worked up over the fact that bond prices are falling is a great example of just how pervasive bad investor behavior is.
- Noobvestor
- Posts: 5944
- Joined: Mon Aug 23, 2010 1:09 am
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
I don't even understand the question. You lead with bond funds dropping by a few percent over nearly half a year, which stock funds often do in a single day. Not exactly a great argument. Then you go to yields, which are actually up, not down. Bond funds haven't fallen 'harder' than anything over any non-arbitrary time frame - they've held their own, and their yields have gone up as the NAV has gone down. Same as always.fantasytensai wrote: ↑Tue May 15, 2018 11:47 am If your investment horizon is over ten years, there is absolutely no reason to own bond funds right now. VBTLX has a 2.64% dividend yield, while VBILX has 2.76%. VTSAX has 1.74%. Why chase the less than 1% difference in yield, when bond funds have fallen so much harder than VTSAX?
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
-
- Posts: 9446
- Joined: Sun Oct 08, 2017 7:16 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Have to disagree. OP cites VBILX. Should he have spelled that one out and not the other two? And what about all those who post the tickers for the Investment Shares of Total Stock, Total International, and Total Bond? If you’re going to require us to memorize, we’ve got a lot of memorizing to do just to keep up with posts limited to the three fund portfolio.deltaneutral83 wrote: ↑Wed May 16, 2018 1:27 pmThe three fund VTSAX/VTIAX/VBTLX and their corresponding etf's VTI/VXUS/BND are about the only symbols you really should be expected to know as they are most pertinent to this forum. I think I mostly see the issue when people start using the Fidelity and Schwab corresponding funds and post as if they are widely known.
-
- Posts: 2454
- Joined: Tue Mar 07, 2017 3:25 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Just one more reason I use ETF's, less confusion in ticker symbols!UpperNwGuy wrote: ↑Thu May 17, 2018 2:12 am Have to disagree. OP cites VBILX. Should he have spelled that one out and not the other two? And what about all those who post the tickers for the Investment Shares of Total Stock, Total International, and Total Bond? If you’re going to require us to memorize, we’ve got a lot of memorizing to do just to keep up with posts limited to the three fund portfolio.
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
It appears that nobody is understanding the point that I am trying to make. When this many people are not getting it, it must be my fault. I will try one more time in the simplist terms possible, and if I still fail, I'm giving up.
1. Everyone is quick to point out that yield is increasing. But THE DROP IN NAV IS MUCH MORE THAN THE INCREASE IN YIELD. You start with $100. You lose $20 but gain $10. That's NOT good.
2. Everyone is also quick to point out that you have to look at the long term - 10 years rather than 5 months. But over a period of 10 years, owning 100% stocks has a much greater ceiling than 80/20, or even 90/10. The risks with stocks is almost always within shorter durations.
1. Everyone is quick to point out that yield is increasing. But THE DROP IN NAV IS MUCH MORE THAN THE INCREASE IN YIELD. You start with $100. You lose $20 but gain $10. That's NOT good.
2. Everyone is also quick to point out that you have to look at the long term - 10 years rather than 5 months. But over a period of 10 years, owning 100% stocks has a much greater ceiling than 80/20, or even 90/10. The risks with stocks is almost always within shorter durations.
-
- Posts: 577
- Joined: Fri Mar 15, 2013 8:49 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Yes, we are all stupid. I remember a while back you being all upset that your brother paid less in taxes than you. I explained multiple reasons why that was probably the case. You were having none of it.fantasytensai wrote: ↑Thu May 17, 2018 9:01 am It appears that nobody is understanding the point that I am trying to make. When this many people are not getting it, it must be my fault. I will try one more time in the simplist terms possible, and if I still fail, I'm giving up.
1. Everyone is quick to point out that yield is increasing. But THE DROP IN NAV IS MUCH MORE THAN THE INCREASE IN YIELD. You start with $100. You lose $20 but gain $10. That's NOT good.
2. Everyone is also quick to point out that you have to look at the long term - 10 years rather than 5 months. But over a period of 10 years, owning 100% stocks has a much greater ceiling than 80/20, or even 90/10. The risks with stocks is almost always within shorter durations.
Do what you want, it's your money.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
And then you gain another $10 next year, and another $10 the year after.fantasytensai wrote: ↑Thu May 17, 2018 9:01 am1. Everyone is quick to point out that yield is increasing. But THE DROP IN NAV IS MUCH MORE THAN THE INCREASE IN YIELD. You start with $100. You lose $20 but gain $10. That's NOT good.
This is how bond funds work. They are self-correcting which is why they are so stable (in comparison to stocks).
If yields go up, NAVs go down.... Boo, my bond fund lost some value... But hey! It's paying out more now!
If yields go down, NAVs go up... Boo, my bond fund is paying out less.... But hey! It's worth more now!
This is how bond funds work. You haven't discovered something new. You haven't discovered a huge flaw with bond funds.
This is how bond funds work. This is a GOOD feature of bond funds.
The main danger to bond funds over the long-term is inflation, not interest rates rising, because in the long-term, the extra yield cancels out the NAV losses.
Exactly the same for bond funds. Again, over the long-term, getting paid 1% a year more for the next 10 years is worth losing 2% today.2. Everyone is also quick to point out that you have to look at the long term - 10 years rather than 5 months. But over a period of 10 years, owning 100% stocks has a much greater ceiling than 80/20, or even 90/10. The risks with stocks is almost always within shorter durations.
You can make an argument that stocks are a better long-term play than bonds. You cannot make that argument based on the last 5 months of bond returns.
That's exactly as dumb as me pointing to a single day 3% loss in stocks and telling you "See, see! Stocks are terrible!" That's what you are doing here, except with bonds.
Last edited by HomerJ on Thu May 17, 2018 9:13 am, edited 1 time in total.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Point 1. Over what time period? If you hold your fund to duration, you will make up all loss in NAV and then some. This is automatic.fantasytensai wrote: ↑Thu May 17, 2018 9:01 am It appears that nobody is understanding the point that I am trying to make. When this many people are not getting it, it must be my fault. I will try one more time in the simplist terms possible, and if I still fail, I'm giving up.
1. Everyone is quick to point out that yield is increasing. But THE DROP IN NAV IS MUCH MORE THAN THE INCREASE IN YIELD. You start with $100. You lose $20 but gain $10. That's NOT good.
2. Everyone is also quick to point out that you have to look at the long term - 10 years rather than 5 months. But over a period of 10 years, owning 100% stocks has a much greater ceiling than 80/20, or even 90/10. The risks with stocks is almost always within shorter durations.
Point 2. Owning stocks has a higher long-term potential if you are lucky enough to time your need for the money to a good period for stocks. A blended portfolio recovers much faster from a down-turn than an all-stock portfolio. Sometimes as much as 5-10 years faster.
Further, we are barely 5 years out from a fifteen year period where bonds returned more than stocks. Investor memory is notoriously short.
People here are anything but stupid. The advice you are given here is conservative precisely because risky investor behavior tends to result in bad outcomes eventually. The philosophies advocated here are not about reaping the greatest reward. They are about maximizing your chances of success, thereby minimizing your chances of losing everything and working decades longer than necessary or even dying with nothing. This is what makes the Bogleheads board special. Most investing groups are interested in maximizing returns. We are interested in minimizing poor outcomes.
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Excellent post right here. This should be in the wiki.onourway wrote: ↑Thu May 17, 2018 9:11 amThe philosophies advocated here are not about reaping the greatest reward. They are about maximizing your chances of success, thereby minimizing your chances of losing everything and working decades longer than necessary or even dying with nothing. This is what makes the Bogleheads board special. Most investing groups are interested in maximizing returns. We are interested in minimizing poor outcomes.
This is exactly correct. 100% stocks does indeed have a higher ceiling. But for many of us here, investing isn't about reaping the highest reward, it's about minimizing the chances of getting hurt if risks show up.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
-
- Posts: 475
- Joined: Fri Sep 30, 2016 3:30 pm
Re: YTD: VBTLX down 2.28%; VBILX down 2.99%; VTSAX down 0.23%
Please do not put words in my mouth. I did not call anyone stupid. If anything, I am the stupid one here because 49 posts into this discussion, I am still not understanding the advocacy for bond funds in a rising interest environment.CantPassAgain wrote: ↑Thu May 17, 2018 9:04 amYes, we are all stupid. I remember a while back you being all upset that your brother paid less in taxes than you. I explained multiple reasons why that was probably the case. You were having none of it.fantasytensai wrote: ↑Thu May 17, 2018 9:01 am It appears that nobody is understanding the point that I am trying to make. When this many people are not getting it, it must be my fault. I will try one more time in the simplist terms possible, and if I still fail, I'm giving up.
1. Everyone is quick to point out that yield is increasing. But THE DROP IN NAV IS MUCH MORE THAN THE INCREASE IN YIELD. You start with $100. You lose $20 but gain $10. That's NOT good.
2. Everyone is also quick to point out that you have to look at the long term - 10 years rather than 5 months. But over a period of 10 years, owning 100% stocks has a much greater ceiling than 80/20, or even 90/10. The risks with stocks is almost always within shorter durations.
Do what you want, it's your money.
Thank you all for your feedback. I want to reiterate that I appreciate all the insight that I received here. It is my fault that I did not understand the points. But I know for a fact that this forum consists of some of the most intelligent people I have seen, and I have never meant any disrespect.