"The Cash Panickers"

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Taylor Larimore
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"The Cash Panickers"

Post by Taylor Larimore »

Bogleheads:

Each month I look forward to the investment newsletter by George Sisti called "Vectors." Mr. Sisti must be a Boglehead because his latest newsletter contains solid Boglehead advice like this:
"Both the decline and the recovery were unimaginable on February 19th, the latest example of why attempting to time your way into and out of the stock market is a fool's errand."

"Six month, 52% gains are rare occurrences, which is one reason why I'm an advocate of having an appropriate allocation to U.S. Treasury securities and high-quality corporate bonds in your portfolio."

"Through May 2020, more than 80% of these cash panickers would have been better off if they had simply "stayed the course".

"The long-term, goal focused investor's best strategy continues to be to stay the course and, if possible, invest a little bit more every month to take advantage of lower prices."

"What happens on Wall Street in any given day, week, month, or year is of little significance to a family’s long-term financial plan and wealth accumulation program."

"This is the latest example of why a passive, buy and hold strategy is so much easier on the mind and so hard to beat."

"During the first six months of 2020, in an analysis of 4,400 mutual funds, Morningstar research found that just 48% of
domestic stock funds outperformed their index fund competitors."

"Perhaps the lesson we can learn from all this is that the financial media is a source of sound, which is not the same thing as saying that it is a source of sound advice."
http://www.oncoursefp.com/files/Vectors ... 0final.pdf

Best wishes.
Taylor
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Re: "The Cash Panickers"

Post by ImUrHuckleberry »

I do not believe that the decline was unimaginable on Feb 19th, as there were many people on this forum following the situation in China and expecting it to negatively impact the market. But certainly the recovery being so quick seemed to surprise almost everybody.
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Re: "The Cash Panickers"

Post by willthrill81 »

I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
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Re: "The Cash Panickers"

Post by Ferdinand2014 »

willthrill81 wrote: Sun Sep 13, 2020 8:31 pm I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
David Swensen and Warren Buffett would agree (at least for the average investor). I would agree as well. My fixed income is 100% treasury’s .
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett
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Re: "The Cash Panickers"

Post by 000 »

willthrill81 wrote: Sun Sep 13, 2020 8:31 pm I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
IMO it depends on how big the bond allocation is.

I don't think I want more than 40% of my whole portfolio in any single issuer.
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Re: "The Cash Panickers"

Post by willthrill81 »

000 wrote: Sun Sep 13, 2020 9:29 pm
willthrill81 wrote: Sun Sep 13, 2020 8:31 pm I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
IMO it depends on how big the bond allocation is.

I don't think I want more than 40% of my whole portfolio in any single issuer.
The thing is, if the Treasury defaults, the whole system (i.e. all bonds and stocks too) is at high risk of going down the toilet.
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Re: "The Cash Panickers"

Post by 000 »

willthrill81 wrote: Sun Sep 13, 2020 9:57 pm The thing is, if the Treasury defaults, the whole system (i.e. all bonds and stocks too) is at high risk of going down the toilet.
I disagree. There have been many sovereign defaults that did not wipe out stock and corporate bond investments.

The idea that treasuries are "risk-free" is a sophism made up by economists in order to have a unit of measure.

I'm sure someone will be along soon to tell me a monetary sovereign cannot default, but in the real world some monetary sovereigns have chosen default over continued currency debasement.
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Re: "The Cash Panickers"

Post by willthrill81 »

000 wrote: Sun Sep 13, 2020 10:11 pm
willthrill81 wrote: Sun Sep 13, 2020 9:57 pm The thing is, if the Treasury defaults, the whole system (i.e. all bonds and stocks too) is at high risk of going down the toilet.
I disagree. There have been many sovereign defaults that did not wipe out stock and corporate bond investments.
Not the U.S. Treasury. :twisted:

Seriously, there's a big difference between Zimbabwe defaulting than the U.S.
000 wrote: Sun Sep 13, 2020 10:11 pmThe idea that treasuries are "risk-free" is a sophism made up by economists in order to have a unit of measure.
I personally cannot stand the term 'risk-free' because there's no such investment. Even nominal Treasuries suffer from interest rate risk and inflation risk.
000 wrote: Sun Sep 13, 2020 10:11 pmI'm sure someone will be along soon to tell me a monetary sovereign cannot default, but in the real world some monetary sovereigns have chosen default over continued currency debasement.
Again, not the U.S. Treasury.
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Re: "The Cash Panickers"

Post by 000 »

willthrill81 wrote: Sun Sep 13, 2020 10:13 pm Not the U.S. Treasury. :twisted:

Seriously, there's a big difference between Zimbabwe defaulting than the U.S.
Well, some might claim the unilateral haltings (1933, 1971) of gold redemption were a default. i.e. the issuer didn't live up to a promise.

But I was actually thinking (as far as recent events) of Russia and Argentina. The financial, economic, and social systems didn't collapse there when their governments defaulted. Yes, they may not have since been as prosperous as some other places, but life went on without a complete loss of investor capital. Neither is comparable to Zimbabwe.
willthrill81 wrote: Sun Sep 13, 2020 10:13 pm I personally cannot stand the term 'risk-free' because there's no such investment. Even nominal Treasuries suffer from interest rate risk and inflation risk.
Indeed :D
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Re: "The Cash Panickers"

Post by Robot Monster »

"The Cash Panickers" would make a good title for a story about a young couple who live in a sleepy, quiet suburb, and yet behind closed doors are panic-selling, and rushing back into the market, at the slightest provocation. This leads to the inevitable downward spiral. Written in the style of Shirley Jackson.
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Re: "The Cash Panickers"

Post by Greenman72 »

willthrill81 wrote: Sun Sep 13, 2020 8:31 pm I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
Not necessarily disagreeing, but I think you missed the forest because you were focusing only on one leaf on one branch on one limb on one tree.
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Re: "The Cash Panickers"

Post by willthrill81 »

Greenman72 wrote: Mon Sep 14, 2020 12:06 pm
willthrill81 wrote: Sun Sep 13, 2020 8:31 pm I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
Not necessarily disagreeing, but I think you missed the forest because you were focusing only on one leaf on one branch on one limb on one tree.
I get the general point of the OP, but I disagree with one of the specific points in the quote in the OP, one that is often made.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings
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Re: "The Cash Panickers"

Post by abuss368 »

Interesting and "thank you" for sharing Taylor!

I found it interesting but not surprising that ""Through May 2020, more than 80% of these cash panickers would have been better off if they had simply "stayed the course".

This supports market timing is a flawed strategy.
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Re: "The Cash Panickers"

Post by abuss368 »

David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to TIPS. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
Last edited by abuss368 on Tue Sep 15, 2020 6:16 am, edited 1 time in total.
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Re: "The Cash Panickers"

Post by tipswatcher »

When you retire, and have no other income, you do become a bit of a "cash hoarder" but in our case, the panic works in reverse. The main point is that you will constantly be looking for tax-efficient way to replenish your cash supply to live on for, maybe 24 months? After 12 months, you will be looking to build that stockpile back up to 24 months.

In January -- new tax year! -- when the market was high, we withdrew some cash from traditional retirement accounts, selling out of stock funds and moving into a taxable cash management account.

In March, when the market was falling fast, we converted stock funds from a traditional IRA to a Roth IRA. We also switched some money from bonds to stocks in our traditional IRA accounts.

Then, in early September, with the stock market high, we took out more cash from the traditional IRA accounts, and moved it into an 11-month bank CD paying a glorious 0.75%.

Did we make genius moves? No way, we were too scared to move heavily from bonds to stocks in mid-March, and we left our asset allocation a little short on stocks. Human nature at work.

The last step will come in December, when we can get a pretty good idea of our actual income, will be one more Roth conversions, or possibly, if the market is still high, a cash grab instead.
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Re: "The Cash Panickers"

Post by wolf359 »

abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
Total Bond Market is currently 42% treasuries and 20% government backed mortgages. It's already roughly 60/40 on government securities/corporate bonds.

Maybe they didn't see the need because of the makeup of BND.
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Re: "The Cash Panickers"

Post by abuss368 »

wolf359 wrote: Mon Sep 14, 2020 1:40 pm
abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
Total Bond Market is currently 42% treasuries and 20% government backed mortgages. It's already roughly 60/40 on government securities/corporate bonds.

Maybe they didn't see the need because of the makeup of BND.
That is an excellent reminder. During market panics, Total Bond has often increased because of the Treasuries.
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Re: "The Cash Panickers"

Post by marcopolo »

tipswatcher wrote: Mon Sep 14, 2020 1:37 pm When you retire, and have no other income, you do become a bit of a "cash hoarder" but in our case, the panic works in reverse. The main point is that you will constantly be looking for tax-efficient way to replenish your cash supply to live on for, maybe 24 months? After 12 months, you will be looking to build that stockpile back up to 24 months.

In January -- new tax year! -- when the market was high, we withdrew some cash from traditional retirement accounts, selling out of stock funds and moving into a taxable cash management account.

In March, when the market was falling fast, we converted stock funds from a traditional IRA to a Roth IRA. We also switched some money from bonds to stocks in our traditional IRA accounts.

Then, in early September, with the stock market high, we took out more cash from the traditional IRA accounts, and moved it into an 11-month bank CD paying a glorious 0.75%.

Did we make genius moves? No way, we were too scared to move heavily from bonds to stocks in mid-March, and we left our asset allocation a little short on stocks. Human nature at work.

The last step will come in December, when we can get a pretty good idea of our actual income, will be one more Roth conversions, or possibly, if the market is still high, a cash grab instead.
Not necessarily.
We pull cash out of a balanced portfolio as needed for living expenses. We do not keep a separate "stockpile".
Once in a while you get shown the light, in the strangest of places if you look at it right.
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Re: "The Cash Panickers"

Post by honduranhurricane »

The big thing for me on this thread,,,is that Taylor reads an investment newsletter. I was honestly surprised, not sure why,,,but I really was. Enough so that I signed up for the newsletter!
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Re: "The Cash Panickers"

Post by Grt2bOutdoors »

abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
And what is the difference between a Treasury and a bond?

I believe what he recommends is 1/2 in nominal treasuries and 1/2 in inflation linked Treasuries. Page 84 of Unconventional Success, table 3.1 - Well Diversified, Equity-Oriented Portfolio's provide a Framework for Investment Success:

Domestic Equity - 30%
Foreign developed equity - 15%
Emerging markets equity - 5%
Real Estate - 20%
U.S. Treasury Bonds - 15%
U.S. Treasury Inflation Protected Securities - 15%

With 30% of assets in U.S. Government obligations, the portfolio exhibits a substantial commitment to the highest quality securities, affording investors security in times of financial crisis.
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Re: "The Cash Panickers"

Post by Grt2bOutdoors »

abuss368 wrote: Mon Sep 14, 2020 1:40 pm
wolf359 wrote: Mon Sep 14, 2020 1:40 pm
abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
Total Bond Market is currently 42% treasuries and 20% government backed mortgages. It's already roughly 60/40 on government securities/corporate bonds.

Maybe they didn't see the need because of the makeup of BND.
That is an excellent reminder. During market panics, Total Bond has often increased because of the Treasuries.
Swensen never made a recommendation to hold bonds. He only recommended holding US Government securities, both nominal and inflation protected. See my earlier post with his exact recommendation. It's not accurate to state that total bond has increased solely because of the Treasuries. Where's the data to support that? Are we now saying that Total Bond is like the FAANG of equities, driven mainly by 5 various flavors of government securities only, the corporates are doing nothing this year?

The Vanguard Intermediate Term Investment Grade Bond Fund is only about 8% government, the remainder is corporates. It's up 8.47% through end of August 31, 2020. https://investor.vanguard.com/mutual-fu ... ance/vficx

Vanguard Intermediate Term Corporates is up 7.52% https://investor.vanguard.com/mutual-fu ... ance/vicsx

Vanguard Total Bond Market is up 6.92% through August 31, 2020 https://investor.vanguard.com/mutual-fu ... ance/vbtlx
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Re: "The Cash Panickers"

Post by Spinola »

Do I qualify as a cash panicker? Hitting the 7 digit territory wasn't as hard as foretold.. :mrgreen:

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Re: "The Cash Panickers"

Post by abuss368 »

Grt2bOutdoors wrote: Mon Sep 14, 2020 10:34 pm
abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
And what is the difference between a Treasury and a bond?

I believe what he recommends is 1/2 in nominal treasuries and 1/2 in inflation linked Treasuries. Page 84 of Unconventional Success, table 3.1 - Well Diversified, Equity-Oriented Portfolio's provide a Framework for Investment Success:

Domestic Equity - 30%
Foreign developed equity - 15%
Emerging markets equity - 5%
Real Estate - 20%
U.S. Treasury Bonds - 15%
U.S. Treasury Inflation Protected Securities - 15%

With 30% of assets in U.S. Government obligations, the portfolio exhibits a substantial commitment to the highest quality securities, affording investors security in times of financial crisis.
Correct as I wanted to say TIPS. I edited my post.
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Re: "The Cash Panickers"

Post by abuss368 »

Grt2bOutdoors wrote: Mon Sep 14, 2020 10:46 pm
abuss368 wrote: Mon Sep 14, 2020 1:40 pm
wolf359 wrote: Mon Sep 14, 2020 1:40 pm
abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
Total Bond Market is currently 42% treasuries and 20% government backed mortgages. It's already roughly 60/40 on government securities/corporate bonds.

Maybe they didn't see the need because of the makeup of BND.
That is an excellent reminder. During market panics, Total Bond has often increased because of the Treasuries.
Swensen never made a recommendation to hold bonds. He only recommended holding US Government securities, both nominal and inflation protected. See my earlier post with his exact recommendation. It's not accurate to state that total bond has increased solely because of the Treasuries. Where's the data to support that? Are we now saying that Total Bond is like the FAANG of equities, driven mainly by 5 various flavors of government securities only, the corporates are doing nothing this year?

The Vanguard Intermediate Term Investment Grade Bond Fund is only about 8% government, the remainder is corporates. It's up 8.47% through end of August 31, 2020. https://investor.vanguard.com/mutual-fu ... ance/vficx

Vanguard Intermediate Term Corporates is up 7.52% https://investor.vanguard.com/mutual-fu ... ance/vicsx

Vanguard Total Bond Market is up 6.92% through August 31, 2020 https://investor.vanguard.com/mutual-fu ... ance/vbtlx
During the financial crisis when everything was dropping Total Bond increased.
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Re: "The Cash Panickers"

Post by willthrill81 »

abuss368 wrote: Tue Sep 15, 2020 6:19 am
Grt2bOutdoors wrote: Mon Sep 14, 2020 10:46 pm
abuss368 wrote: Mon Sep 14, 2020 1:40 pm
wolf359 wrote: Mon Sep 14, 2020 1:40 pm
abuss368 wrote: Mon Sep 14, 2020 1:25 pm David Swensen, Yale University CIO, recommends 15% of a portfolio to Treasuries and 15% to bonds. Not sure why Vanguard never went the Treasury route with the Target and Life-Strategy funds.
Total Bond Market is currently 42% treasuries and 20% government backed mortgages. It's already roughly 60/40 on government securities/corporate bonds.

Maybe they didn't see the need because of the makeup of BND.
That is an excellent reminder. During market panics, Total Bond has often increased because of the Treasuries.
Swensen never made a recommendation to hold bonds. He only recommended holding US Government securities, both nominal and inflation protected. See my earlier post with his exact recommendation. It's not accurate to state that total bond has increased solely because of the Treasuries. Where's the data to support that? Are we now saying that Total Bond is like the FAANG of equities, driven mainly by 5 various flavors of government securities only, the corporates are doing nothing this year?

The Vanguard Intermediate Term Investment Grade Bond Fund is only about 8% government, the remainder is corporates. It's up 8.47% through end of August 31, 2020. https://investor.vanguard.com/mutual-fu ... ance/vficx

Vanguard Intermediate Term Corporates is up 7.52% https://investor.vanguard.com/mutual-fu ... ance/vicsx

Vanguard Total Bond Market is up 6.92% through August 31, 2020 https://investor.vanguard.com/mutual-fu ... ance/vbtlx
During the financial crisis when everything was dropping Total Bond increased.
That didn't happen this year though. Between March 6th and 19th, Vanguard's VBTLX dropped 6.5%. By comparison, their intermediate-term Treasury fund VFIUX dropped 2% over that same period. This was due to the corporate bond exposure in TBM. Vanguard's intermediate-term corporate bond fund VICSX lost over 13% during that period.

This is why many here don't hold TBM funds when they can avoid doing so. TBM includes corporate bonds, which behave like a combination of Treasuries and stocks, and many don't want what is effectively more stock exposure from their bond holdings. That doesn't make TBM a poor choice, but it means that TBM behaves like a combination of mostly intermediate-term Treasuries and a little bit of stocks.
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Re: "The Cash Panickers"

Post by abuss368 »

That is fair and reasonable. Certainly both the financial crisis and the pandemic have been black swan and unprecedented.
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Re: "The Cash Panickers"

Post by SCSurf »

I understand the pros for owning treasuries over total bond. What are all of the pros for holding total bond over treasuries.
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Re: "The Cash Panickers"

Post by Greenman72 »

^Higher coupons. Higher yields. Higher cash flows. (Whether this is a net benefit after you subtract out the risks is anyone's guess.)
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Re: "The Cash Panickers"

Post by burritoLover »

What happened to treasuries during the debt ceiling crisis when S&P downgraded the US credit rating?
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Re: "The Cash Panickers"

Post by willthrill81 »

SCSurf wrote: Tue Sep 15, 2020 12:54 pm I understand the pros for owning treasuries over total bond. What are all of the pros for holding total bond over treasuries.
That's been discussed extensively in other threads, most recently this one.

Basically, there aren't any really compelling pros for it. That doesn't mean that it's bad, but it's not optimal for any meaningful purpose. But it's the only option that many have in their workplace retirement accounts.
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Why Total Bond Market Index Fund

Post by Taylor Larimore »

SCSurf wrote: Tue Sep 15, 2020 12:54 pm I understand the pros for owning treasuries over total bond. What are all of the pros for holding total bond over treasuries.
SCSurf:

I selected Vanguard Total Bond Market Index Fund (VBTLX) The Three-Fund Portfolio primarily for these five reasons:

* Low cost: 0.05%

* Maximum Diversification (9719 bonds), sometimes called a "free lunch."

* 63% Treasury and U.S. government agency bonds.

* All securities are investment-grade.

* Largest bond fund in the world (others must like it).

Best wishes.
Taylor
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Carol88888
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Re: "The Cash Panickers"

Post by Carol88888 »

I wonder if Vanguard knows how many of the COVID cash panickers made it back into the market and at what level they got back in.

I suspect very few bought back in on the March 23rd bottom.
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goodenyou
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Re: "The Cash Panickers"

Post by goodenyou »

Many “panickers” are hoping for a second crash to get back in. The problem with getting out is that you lose your courage to get back in. It is never the right time.
"Ignorance more frequently begets confidence than does knowledge" | Do you know how to make a rain dance work? Dance until it rains.
rockstar
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Re: "The Cash Panickers"

Post by rockstar »

goodenyou wrote: Tue Sep 15, 2020 4:15 pm Many “panickers” are hoping for a second crash to get back in. The problem with getting out is that you lose your courage to get back in. It is never the right time.
It's because the motivation to sell in the first place is gut feel, rather than quantitative. You see it all the time here. Folks will post that they think the market is too expensive or grew too fast, so they want to go to cash. This isn't based on anything tangible. It's usually comes up when fear mongering articles hit CNBC. Then, like when they sell, they have no tangible plan to buy back in. At the bare minimum, they should be buy back at what they sold at originally, so that they don't miss the market getting too far ahead of them and keeping them in cash. It's really lack of planning. It's psychological. And this is really isn't taught in school.

And it doesn't help that all of the resources available want to fleece investors. Advisors charging almost the entire yield of the S&P 500 is absurd.
SteadyOne
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Re: "The Cash Panickers"

Post by SteadyOne »

willthrill81 wrote: Sun Sep 13, 2020 9:57 pm
000 wrote: Sun Sep 13, 2020 9:29 pm
willthrill81 wrote: Sun Sep 13, 2020 8:31 pm I don't understand why there is this persistent myth that corporate bonds add something to a portfolio otherwise comprised of stocks and Treasuries. If anything, the data we have seems to suggest that the opposite is true.

Since 2003 (all data in PV), a 25% stock / 75% intermediate-term Treasury AA had a .3% higher annualized return than corporate bonds, but had a much lower standard deviation (4.18% vs. 7.34%), and half the maximum drawdown (-7.59% vs. -15.11%). And that included two bear markets for stocks.
IMO it depends on how big the bond allocation is.

I don't think I want more than 40% of my whole portfolio in any single issuer.
The thing is, if the Treasury defaults, the whole system (i.e. all bonds and stocks too) is at high risk of going down the toilet.
US Treasury will never default because US borrows in its own currency. The government can always generate electronic dollar credit (no need to print currency anymore) and pay. That’s it.
“Every de­duc­tion is al­lowed as a mat­ter of leg­isla­tive grace.” US Federal Court
SteadyOne
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Joined: Fri Mar 22, 2019 5:26 pm

Re: "The Cash Panickers"

Post by SteadyOne »

burritoLover wrote: Tue Sep 15, 2020 1:22 pm What happened to treasuries during the debt ceiling crisis when S&P downgraded the US credit rating?
Nothing.
“Every de­duc­tion is al­lowed as a mat­ter of leg­isla­tive grace.” US Federal Court
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