Rising Interest Rate Strategy

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Calhoon
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Rising Interest Rate Strategy

Post by Calhoon » Thu Jun 07, 2018 12:01 pm

In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.

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Pajamas
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Re: Rising Interest Rate Strategy

Post by Pajamas » Thu Jun 07, 2018 12:14 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
Know that bonds will decrease in value with an increase in interest rate...at least in the short term.
If you are worried about a decrease in value in the short term, stick to CDs, money market, savings accounts, etc. where the principle is not at risk and the interest will at least partly cover inflation.

DragonJoey3
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Re: Rising Interest Rate Strategy

Post by DragonJoey3 » Thu Jun 07, 2018 12:16 pm

My strategy is to stay the course with my asset allocation and let the averages work it out. I don't try to time the market, and I use a portfolio that does well in rising rate markets as well as falling rate markets. I would encourage anyone that wants to try to predict and time the market to limit the portion of their portfolio they use to place bets.

It's easy to say "The Federal Reserve will raise rates 3 times this year," but you have to remember that's not a given. Any number of black-swan events could change their mind, or even drop rates! Stay the course, and if you want to bet that rates rise limit the amount you gamble/speculate with.


Edit: That being said to be useful to the question asked, I would bank on short term notes, if you really wanna gamble "TBT" to short the 20 year notes.

Valuethinker
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Re: Rising Interest Rate Strategy

Post by Valuethinker » Thu Jun 07, 2018 12:17 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
There's far too many factors affecting stock prices to say. With rising interest rates:

- stocks go down because the opportunity cost of money is higher, the investor can gain a better return (than before) in bonds

- stocks go up because interest rates are raised by the Central Bank, which is seeking to cool economic activity, which is strong which means corporate earnings are strong

- stocks go down because US dollar is up because market expects faster interest rate rises from Fed than from other Central Banks, therefore profits earned overseas are worth less when repatriated into US dollars

These factors can go either way, in sum.

As to bonds, if you are worried about rising interest rates you hold shorter duration funds. A short term bond fund for example, or even a Money Market Fund. That reduces the average duration of your portfolio, and thus its sensitivity to interest rates.

Be warned, if interest rates don't rise as you expect, you are accepting a lower yield to do this strategy (the yield curve is normally upward sloping, the longer the maturity, the higher the Yield to Maturity). A lot of money has been lost in the last 10 years by investors (myself included) who were "sure" that interest rates would rise.

grok87
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Re: Rising Interest Rate Strategy

Post by grok87 » Thu Jun 07, 2018 12:17 pm

30 year tips
Keep calm and Boglehead on. KCBO.

alex_686
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Re: Rising Interest Rate Strategy

Post by alex_686 » Thu Jun 07, 2018 12:20 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
On bonds, expected increases in the interest rate are already priced in. Yeah, we don't know the exact timing or level of increases but think of that as a probabilistic dispersion. As the blurry future becomes clearer we should see some minor adjustments in price, probably not major ones. Probably.

A stock's price is its discounted Free Cash Flow to Equity. As the discount (interest rate) increases, the value of of that cash flow decreases. For example, consider a stock that is paying $1 a year in dividends. What would you pay for that stock if interest rates were 3%? What if it were 10%? See "Dividend Discount Model" as a simplified example. IIRC there is about a 40% to 60% explanatory power between long term interest rates and stock returns.

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oldcomputerguy
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Re: Rising Interest Rate Strategy

Post by oldcomputerguy » Thu Jun 07, 2018 12:34 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?
Same place as in a falling rate environment... right where your IPS says you should be. My IPS calls for 50/50 total stock and aggregate bond funds. I haven't changed a single thing in response to changing interest rates. Not one dollar.

Trying to decide your allocation based on short-term market changes is by definition market-timing.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

magneto
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Re: Rising Interest Rate Strategy

Post by magneto » Thu Jun 07, 2018 1:12 pm

Agree with above comments about holding shorter duration Bonds and/or Cash.
Presently hesitating about moving to longer duration Treasuries total, then hesitating again, as Vanguard fund in question UK:VUTY, seems to have lost 4.4% in US$, in just over 6 months.
Cash or short duration in comparison then doesn't look so bad!
Seems difficult to eke out a +ve real yield or return on Fixed Income without taking undue credit risk.
Hence some look to Alternatives.
'There is a tide in the affairs of men ...', Brutus (Market Timer)

WanderingDoc
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Re: Rising Interest Rate Strategy

Post by WanderingDoc » Thu Jun 07, 2018 1:39 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
Always real estate. Increased interest rates and inflation. Rents will rise, less people will be able to afford a higher interest mortgage, more renters, lower vacancies, and you maintain a fixed rate 30 year mortgage which is payed by your tenants. Cycle continues. You have zero control over was equities and bonds will return. Even if they return the historical average, that IRR is still disappointing.

You have all the control to decide what real estate deal to buy, what submarket, the returns on a particular property, type of financing, getting below market value, buy in the path of job growth and progress, exit strategies, the list goes on.
I'm not looking to get rich quick (stocks), I'm not looking to get rich slow (indexing), I'm looking to get rich, for sure (real estate) | Don't wait to buy real estate. Buy real estate.. and wait.

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patrick013
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Re: Rising Interest Rate Strategy

Post by patrick013 » Thu Jun 07, 2018 1:51 pm

I think the people that had CD ladders are going to get the prize.
5 year CD's were paying 10 year Trsy rates and should mature
just in time to reinvest at much higher rates. Now 2 and 3 year
CD's are paying 5 year rates and higher and should mature in
time to reinvest at much higher rates. As a semi-active strategy
a ladder has options. Reinvest without capital loss, spend some
of the proceeds, or reinvest at longer maturities to secure a rate.

Requires some judgment but even the most robotic ladders look
good.

Buyers love higher rates, sellers love lower rates. Likewise, buyers
love higher spreads, sellers love lower spreads. And the rates have
to move to get the prize or we might be better sitting in long term
checking our duration. It might be a big letdown.
age in bonds, buy-and-hold, 10 year business cycle

SpaceCowboy
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Re: Rising Interest Rate Strategy

Post by SpaceCowboy » Thu Jun 07, 2018 5:11 pm

patrick013 wrote:
Thu Jun 07, 2018 1:51 pm
I think the people that had CD ladders are going to get the prize.
5 year CD's were paying 10 year Trsy rates and should mature
just in time to reinvest at much higher rates. Now 2 and 3 year
CD's are paying 5 year rates and higher and should mature in
time to reinvest at much higher rates. As a semi-active strategy
a ladder has options. Reinvest without capital loss, spend some
of the proceeds, or reinvest at longer maturities to secure a rate.

Requires some judgment but even the most robotic ladders look
good.

Buyers love higher rates, sellers love lower rates. Likewise, buyers
love higher spreads, sellers love lower spreads. And the rates have
to move to get the prize or we might be better sitting in long term
checking our duration. It might be a big letdown.
I’ve been happy with my CD ladder and stable value fund strategy for fixed income. Thank you Kevin M
However, now that rates are actually rising, I’m looking for somewhere to shift maturing CD proceeds and am considering some sort of floating rate fund like the BKLN ETF. Granted there is a big difference in risk. Any other floating rate type products that make sense.

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whodidntante
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Re: Rising Interest Rate Strategy

Post by whodidntante » Thu Jun 07, 2018 5:40 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
Short treasury futures or shorten duration.

dbr
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Re: Rising Interest Rate Strategy

Post by dbr » Thu Jun 07, 2018 5:48 pm

I would not try to find a "best place to be" in a "rising interest rate environment." For a long term investor in a portfolio of stocks and bonds I would not do anything that concerns an "environment" other than have an allocation and stay there. A short term investor would not hold either stocks or bonds, except maybe the shortest duration bonds.

ThrustVectoring
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Re: Rising Interest Rate Strategy

Post by ThrustVectoring » Thu Jun 07, 2018 7:10 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
Your strategy shouldn't really care about changes in interest rates. Regularly save and invest money according to the asset allocation specified in your investing policy statement.

Most of the talk about a "rising interest rate environment" is to convince people that things are different enough that you need to do something about it, and coincidentally the talkers have an incentive to push a "change things" agenda.

Like, stock market volatility is waaaay bigger than bond market volatility, and the standard advice there is to stick to your strategy regardless of market movements and invest consistently. No reason to make any changes on the bond side of things either.
Current portfolio: 60% VTI / 40% VXUS

mix
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Re: Rising Interest Rate Strategy

Post by mix » Thu Jun 07, 2018 7:24 pm

13 week treasury bills are working for me.

visualguy
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Re: Rising Interest Rate Strategy

Post by visualguy » Thu Jun 07, 2018 7:30 pm

No point in taking the risk with bond funds - it's extremely unlikely that there's anything to be gained. There's the double whammy of the Fed raising interest rates and also ramping up quantitative tightening at the same time. Sleep well with CDs and stable value funds (or individual bonds) instead.

stlutz
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Re: Rising Interest Rate Strategy

Post by stlutz » Thu Jun 07, 2018 9:58 pm

I don't know where the best place to be is because I don't know when we are in a rising rate environment until after the fact. Are we in such an environment now, or did the 10 year treasury peak at 3.11% back on May 17th and we won't be back there for many years?

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patrick013
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Re: Rising Interest Rate Strategy

Post by patrick013 » Fri Jun 08, 2018 3:08 pm

SpaceCowboy wrote:
Thu Jun 07, 2018 5:11 pm
However, now that rates are actually rising, I’m looking for somewhere to shift maturing CD proceeds and am considering some sort of floating rate fund like the BKLN ETF. Granted there is a big difference in risk. Any other floating rate type products that make sense.
For fixed income I stay investment grade. It also is supposed to respond
to rate changes better than non-investment grade. So a 2 maybe a 3 year
CD is where I would end up. A bond may pay a little better if you can find
one in that maturity range that does. Rates aren't spiking so it's a slow dull
and boring process.
age in bonds, buy-and-hold, 10 year business cycle

SpaceCowboy
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Re: Rising Interest Rate Strategy

Post by SpaceCowboy » Fri Jun 08, 2018 3:58 pm

patrick013 wrote:
Fri Jun 08, 2018 3:08 pm
SpaceCowboy wrote:
Thu Jun 07, 2018 5:11 pm
However, now that rates are actually rising, I’m looking for somewhere to shift maturing CD proceeds and am considering some sort of floating rate fund like the BKLN ETF. Granted there is a big difference in risk. Any other floating rate type products that make sense.
For fixed income I stay investment grade. It also is supposed to respond
to rate changes better than non-investment grade. So a 2 maybe a 3 year
CD is where I would end up. A bond may pay a little better if you can find
one in that maturity range that does. Rates aren't spiking so it's a slow dull
and boring process.
Actually in rising interest rate environment, high yield tends to perform better in general. The issue is that spreads are pretty low right now, so it's not clear that you're being adequately compensated for the additional risk.
In a rising interest rate environment, I'm staying away from bond funds in general, because of the fluctuations in value. My CDs and stable value strategy has done well compared to Total Bond over the last several years.

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patrick013
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Re: Rising Interest Rate Strategy

Post by patrick013 » Fri Jun 08, 2018 5:20 pm

SpaceCowboy wrote:
Fri Jun 08, 2018 3:58 pm
Actually in rising interest rate environment, high yield tends to perform better in general. The issue is that spreads are pretty low right now, so it's not clear that you're being adequately compensated for the additional risk.
I think investment grade has a slightly higher duration than non-investment
grade so if you're buying for yield investment grade should respond. Spreads
could prove that wrong but overall or on average the duration effect is usually
greater with investment grade. Plus the risk is somewhat less. It's a good
strategy.
age in bonds, buy-and-hold, 10 year business cycle

rixer
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Re: Rising Interest Rate Strategy

Post by rixer » Sat Jun 09, 2018 8:28 am

As a retiree drawing income from the portfolio, I am looking forward to seeing the total bond fund go to up slightly to 4%. I will collect my earnings while things settle out.

gmaynardkrebs
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Re: Rising Interest Rate Strategy

Post by gmaynardkrebs » Sat Jun 09, 2018 8:48 am

Given that the rising rates are priced in, at least in theory, one should focus only on choosing the duration that meets your future liabilities. However, in practice, I can't bring myself to buy a long nominal bond (>10Y) given the flat yield curve and unknowable inflation risk.

MnD
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Re: Rising Interest Rate Strategy

Post by MnD » Sat Jun 09, 2018 8:51 am

I'm lucky to have a t-bond yield linked stable value fund for core fixed income.
Beyond that, Prime Money Market, a T-bill ladder and an actively manged go-anywhere global bond fund with a relatively short duration.
No change on the equity side - global market cap. I'm aware that at some level of interest rates - equity may take a hit.

michaeljc70
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Re: Rising Interest Rate Strategy

Post by michaeljc70 » Sat Jun 09, 2018 9:21 am

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
That is not entirely correct. Bonds decrease in value when interest rates rise more than anticipated. Any expected rate changes are already reflected in the price of the bond (or NAV of the bond fund).
Last edited by michaeljc70 on Sat Jun 09, 2018 10:12 am, edited 1 time in total.

Calhoon
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Re: Rising Interest Rate Strategy

Post by Calhoon » Sat Jun 09, 2018 9:40 am

Maybe I'll look at vusfx for short, cds, or vmmxx.

Does something like the vmmxx do a good job of tracking interest rates?

I was reading about it again last night in History of the united States in five crashes. He was talking about how the federal reserve cut interest rates in 1982 and the lower rates made stocks attractive enough for those who had fled eight years before. Where did they all go? I'm curious where everyone went. Bank, bonds, money market?

gmaynardkrebs
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Re: Rising Interest Rate Strategy

Post by gmaynardkrebs » Sat Jun 09, 2018 11:43 am

michaeljc70 wrote:
Sat Jun 09, 2018 9:21 am
Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
That is not entirely correct. Bonds decrease in value when interest rates rise more than anticipated. Any expected rate changes are already reflected in the price of the bond (or NAV of the bond fund).
A bond paying 3% today will be worth less tomorrow if interest rates jump to 3.5%. Why would someone pay you yesterday’s price when they can buy the identical (or virtually identical) bond today with a higher coupon?

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Sandtrap
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Re: Rising Interest Rate Strategy

Post by Sandtrap » Sat Jun 09, 2018 12:31 pm

An option:
CD Ladders and other "security of principal" vehicles in the total amount to equal the average duration of the bond portion of one's portfolio.

IE: with "X" = annual expenses and average bond fund duration in one's portfolio (at 5 years) then 5X in CD Ladders or equiv.

j

michaeljc70
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Re: Rising Interest Rate Strategy

Post by michaeljc70 » Sat Jun 09, 2018 12:37 pm

gmaynardkrebs wrote:
Sat Jun 09, 2018 11:43 am
michaeljc70 wrote:
Sat Jun 09, 2018 9:21 am
Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
That is not entirely correct. Bonds decrease in value when interest rates rise more than anticipated. Any expected rate changes are already reflected in the price of the bond (or NAV of the bond fund).
A bond paying 3% today will be worth less tomorrow if interest rates jump to 3.5%. Why would someone pay you yesterday’s price when they can buy the identical (or virtually identical) bond today with a higher coupon?
Not if they already expected rates to jump to 3.5%.....which is what I said.

Do bonds tank on days the Fed holds their meetings and announce an expected rate hike?

gmaynardkrebs
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Re: Rising Interest Rate Strategy

Post by gmaynardkrebs » Sat Jun 09, 2018 12:53 pm

michaeljc70 wrote:
Sat Jun 09, 2018 12:37 pm
gmaynardkrebs wrote:
Sat Jun 09, 2018 11:43 am
michaeljc70 wrote:
Sat Jun 09, 2018 9:21 am
Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
That is not entirely correct. Bonds decrease in value when interest rates rise more than anticipated. Any expected rate changes are already reflected in the price of the bond (or NAV of the bond fund).
A bond paying 3% today will be worth less tomorrow if interest rates jump to 3.5%. Why would someone pay you yesterday’s price when they can buy the identical (or virtually identical) bond today with a higher coupon?
Not if they already expected rates to jump to 3.5%.....which is what I said.

Do bonds tank on days the Fed holds their meetings and announce an expected rate hike?
Ok, i think I see what you are saying now.

dknightd
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Re: Rising Interest Rate Strategy

Post by dknightd » Sat Jun 09, 2018 12:53 pm

I think it is a good idea to diversify your "fixed rate" investments. Just like all other investments. I have some in intermediate length bond fund, some in inflation linked bond fund, some in short term bond fund, some in EE bonds I bought years ago, some in MM account, some in 12 month CD's. My "emergency find" is hidden in there someplace. At least now interest rates are slowly moving somewhat above nearly zero. I think this is a good thing. YMMV

longinvest
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Re: Rising Interest Rate Strategy

Post by longinvest » Sat Jun 09, 2018 2:00 pm

Here's the take of our mentor, Jack Bogle, about a rising interest rate strategy:

http://www.aaii.com/journal/article/ach ... unds.touch (June 2014)
CR(Charles Rotblut): What about bond funds? A lot of our members are concerned about the direction of interest rates and how an increase in rates will impact bond funds.

JB(Jack Bogle): That’s a good question and a complicated one.

I don’t look at bond funds as a unity. You can hold a short-term bond fund if you’re willing to sacrifice income in favor or principal stability. You can hold a long-term bond fund if you want a higher interest rate and therefore a higher long-term return, but you have to be willing to tolerate the higher volatility.

I tend to favor, mostly for behavioral reasons, an intermediate-term maturity, which will only have roughly half the volatility of the stock market. Given the mathematics of all this, if you’re a holder of a bond fund, you really want interest rates to go up. Yes, the principal value will drop when rates go up, but the reinvestment rate on those bonds will also rise. If the rate today for a short-term, intermediate-term, long-term combined corporate bond portfolio (leaving aside the government bonds for the moment) is 4%, and yields go up to 6%, your return for the next 10 years will not be 4%. It’ll be 4.4% or 4.5%. This is because the reinvestment rate will rise. It does require discipline, and I would not fault someone for saying “it’s not worth it to me to get that low return; I’m going to put it all in the stock market.” If you can hold that investment in the stock market through thick and thin, that is likely to be the better strategy.

I used this example once many years ago in a different context. Think about a car that goes 80 mph and a car that goes 60 mph. The car that goes 80 mph will reach its destination first almost every time—almost, for it has a higher risk of crashing. The more aggressive investment should do better and it almost certainly will do better, but some of the strategies will fail you, some of the funds will fail you, and there may even be a long period where the market will fail you—where stocks will not do better than bonds.

We certainly saw from about 1980 through today that bonds outpaced stocks because rates were very high in the beginning. There was no way bonds could not outpace stocks, just because the rates got up to 13% or 14% on intermediate-term Treasury notes.

All these factors are confounding, and I operate on a rule of simplicity. Yes, this could happen and that could happen, so just take a position somewhere in the middle and hold on. Plan on keeping your strategy not only when things are going badly, but when things are going well. If you can do that, you’re going to end up with a good return in the long run.
Green annotations and underlines added by longinvest.

I like our mentor's practical view. He perfectly understands how bonds work; when coupons are reinvested, rising rates generally increase returns, as long as one waits for the appropriate time (related to duration), of course.

John Bogle doesn't advocate switching from one bond type to another or changing one's stock allocation based on future yield prognostics; he advocates choosing a relatively moderate allocation and sticking to it in good and bad times.

In other words, he urges us to stay the course.
Last edited by longinvest on Sun Jun 10, 2018 8:40 am, edited 1 time in total.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic / international) stocks / domestic (nominal / inflation-indexed) long-term bonds | VCN/VXC/VLB/ZRR

jalbert
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Re: Rising Interest Rate Strategy

Post by jalbert » Sat Jun 09, 2018 4:13 pm

Calhoon wrote:
Thu Jun 07, 2018 12:01 pm
In a rising interest rate environment where's the best place to be?

Know that bonds will decrease in value with an increase in interest rate...at least in the short term.

What about stocks? A couple months back when they were talking about interest rates going up I was reading in articles that this could hurt stocks as investors would drop risky equities for...what exactly I'm not sure.
Another way to ask your question is: for how much longer will interest rates rise? The answer is that nobody knows.
Risk is not a guarantor of return.

nbseer
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Re: Rising Interest Rate Strategy

Post by nbseer » Sat Jun 09, 2018 5:57 pm

My tIRA is almost 100% in short-term (1 year) CDs, now paying 2.25%. I figure, in this slowly rising-interest rate environment, by the time these come due, rates will be higher and I'll do it again. Staying away from multi-year ladders cause it doesn't seem the longer-term CDs are paying that much more than the short-term ones, don't want my money locked up for more than a year.

gmaynardkrebs
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Re: Rising Interest Rate Strategy

Post by gmaynardkrebs » Sun Jun 10, 2018 7:10 am

nbseer wrote:
Sat Jun 09, 2018 5:57 pm
My tIRA is almost 100% in short-term (1 year) CDs, now paying 2.25%. I figure, in this slowly rising-interest rate environment, by the time these come due, rates will be higher and I'll do it again. Staying away from multi-year ladders cause it doesn't seem the longer-term CDs are paying that much more than the short-term ones, don't want my money locked up for more than a year.
I went with 2yr brokered CDs paying 2.8%, but I'm on the same page with you re the multi-year ladders. The longer terms just don't pay enough extra.

Dandy
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Re: Rising Interest Rate Strategy

Post by Dandy » Sun Jun 10, 2018 7:51 am

Age 70 with asset preservation goal. I have my fixed income (57%) allocated roughly 1/3 no loss of principal products, 1/3 short term bond funds and 1/3 intermediate bond funds. That somewhat tempers the impact of rate changes. I don't overly fuss about making sure each category is exactly 1/3 so I allow some drift when it seems to my advantage.

I roughly follow Dr. Bernstein's idea of having 20 years of draw down "safe". For me that excludes intermediate bond funds. I have allowed the "safe" no loss of principal assets exceed my "needs" since the rising rates are a favorable tail wind -- for now.

UpperNwGuy
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Re: Rising Interest Rate Strategy

Post by UpperNwGuy » Sun Jun 10, 2018 8:13 am

My strategy is to stick with the same intermediate term bond funds that I would be using even if interest rates were not rising. In other words, no change in strategy.

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