U.S. stocks in freefall

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willthrill81
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Re: U.S. stocks in freefall

Post by willthrill81 » Fri Feb 16, 2018 10:34 am

Greg in Idaho wrote:
Fri Feb 16, 2018 9:07 am
I think correction followed by the rebound is providing a decent opportunity for folks who just got a gut check and thought "I really wish I had rebalanced and not let things ride for so long" to act on that wish...
Be careful to not confuse optimal strategy with outcome.

For instance, if there is a 60% likelihood that heads will come up, then you should bet heads every time, knowing that you will be incorrect 40% of the time. But your strategy is optimum.

And I'm not saying that rebalancing is necessarily good or bad (I personally think it's unnecessary and carries some risk while avoiding others, but that's another thread).
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Re: U.S. stocks in freefall

Post by munemaker » Fri Feb 16, 2018 11:30 am

bligh wrote:
Wed Feb 14, 2018 4:38 pm
RRAAYY3 wrote:
Wed Feb 14, 2018 4:28 pm
Cheers to those who held... shots for those that bought more!
What about those of us who wanted to buy more, but hadn't kept any dry powder aside to do so. :)
Those are the smart ones, who stay fully invested and do not time the market.

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Re: U.S. stocks in freefall

Post by ruralavalon » Fri Feb 16, 2018 12:16 pm

munemaker wrote:
Fri Feb 16, 2018 11:30 am
bligh wrote:
Wed Feb 14, 2018 4:38 pm
RRAAYY3 wrote:
Wed Feb 14, 2018 4:28 pm
Cheers to those who held... shots for those that bought more!
What about those of us who wanted to buy more, but hadn't kept any dry powder aside to do so. :)
Those are the smart ones, who stay fully invested and do not time the market.
Cheers for anyone who held steady and didn't sell.

Cheers for anyone fully invested before, during and after (I don't believe in keeping cash on the sidelines "just in case" a dip occurs).

More cheers for anyone who didn't sell, and continued their regular contributions.

Even more cheers for anyone who rebalanced if they hit a rebalancing band.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

rgs92
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Re: U.S. stocks in freefall

Post by rgs92 » Fri Feb 16, 2018 12:26 pm

I prefer rebalancing on a time-basis rather than a banded one.
I actually like frequent or even continuous rebalancing. That's why I make large use of Vanguard Balanced Index and Fidelity Freedom Index funds.
Does this make sense if you are in tax-deferred accounts so you are not concerned about tax implications?

Also, does this make sense if you are in the income withdrawal stage of investing?

Thanks for any thoughts on this.

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Re: U.S. stocks in freefall

Post by lostdog » Fri Feb 16, 2018 12:43 pm

ruralavalon wrote:
Fri Feb 16, 2018 12:16 pm
munemaker wrote:
Fri Feb 16, 2018 11:30 am
bligh wrote:
Wed Feb 14, 2018 4:38 pm
RRAAYY3 wrote:
Wed Feb 14, 2018 4:28 pm
Cheers to those who held... shots for those that bought more!
What about those of us who wanted to buy more, but hadn't kept any dry powder aside to do so. :)
Those are the smart ones, who stay fully invested and do not time the market.
Cheers for anyone who held steady and didn't sell.

Cheers for anyone fully invested before, during and after (I don't believe in keeping cash on the sidelines "just in case" a dip occurs).

More cheers for anyone who didn't sell, and continued their regular contributions.

Even more cheers for anyone who rebalanced if they hit a rebalancing band.
+1
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lostdog
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Re: U.S. stocks in freefall

Post by lostdog » Fri Feb 16, 2018 12:46 pm

Anyone here admit to emotional selling during that dip?
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Re: U.S. stocks in freefall

Post by bgf » Fri Feb 16, 2018 1:14 pm

lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
i did some emotional buying of one of my core individual stocks. no selling.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

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Re: U.S. stocks in freefall

Post by RRAAYY3 » Fri Feb 16, 2018 1:18 pm

lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
I did some emotional tapping of my 1 year emergency fund in order to buy up Int’l

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Leif
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Re: U.S. stocks in freefall

Post by Leif » Fri Feb 16, 2018 1:18 pm

I'm sure some with weak hands were washed out. But that storm was very short. Don't cheer too loudly yet. Like the weather things change.
Investors should diversify across many asset-classes so that whatever happens, we will not have all our investments in underperforming asset classes and thereby fail to meet our goals-Taylor Larimore

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Re: U.S. stocks in freefall

Post by livesoft » Fri Feb 16, 2018 1:21 pm

rgs92 wrote:
Fri Feb 16, 2018 12:26 pm
I prefer rebalancing on a time-basis rather than a banded one.
I actually like frequent or even continuous rebalancing. That's why I make large use of Vanguard Balanced Index and Fidelity Freedom Index funds.
Does this make sense if you are in tax-deferred accounts so you are not concerned about tax implications?

Also, does this make sense if you are in the income withdrawal stage of investing?
Yes, using Balanced Index and Freedom Index funds in tax-deferred accounts makes excellent sense.

Indeed, I think most investors would do best by using such funds as Vanguard LifeStrategy and Target Retirement funds in their tax-advantaged accounts. So a livesoft-sanctioned three-fund portfolio might be:

1. Taxable:
Total US Stock Market.

2. Roth:
A LifeStrategy/Target Retirement with little fixed income or enough to reach one's desired asset allocation if no tax-deferred account).

3. Tax-deferred
A LifeStrategy/Target Retirement with more fixed income or enough to reach one's desired asset allocation with no fixed income in taxable and little fixed income in Roth.

That's just 3 funds, tax-efficient and auto-rebalancing. It may also avoid tax-loss harvesting issues in taxable.
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RRAAYY3
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Re: U.S. stocks in freefall

Post by RRAAYY3 » Fri Feb 16, 2018 1:23 pm

Leif wrote:
Fri Feb 16, 2018 1:18 pm
I'm sure some with weak hands were washed out. But that storm was very short. Don't cheer too loudly yet. Like the weather things change.
All that’ll change for me is I keep my 6 month e-fund rather than build it back up to 1 year while buying up those cheaper shares

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Re: U.S. stocks in freefall

Post by thangngo » Fri Feb 16, 2018 1:45 pm

livesoft wrote:
Fri Feb 16, 2018 1:21 pm
rgs92 wrote:
Fri Feb 16, 2018 12:26 pm
I prefer rebalancing on a time-basis rather than a banded one.
I actually like frequent or even continuous rebalancing. That's why I make large use of Vanguard Balanced Index and Fidelity Freedom Index funds.
Does this make sense if you are in tax-deferred accounts so you are not concerned about tax implications?

Also, does this make sense if you are in the income withdrawal stage of investing?
Yes, using Balanced Index and Freedom Index funds in tax-deferred accounts makes excellent sense.

Indeed, I think most investors would do best by using such funds as Vanguard LifeStrategy and Target Retirement funds in their tax-advantaged accounts. So a livesoft-sanctioned three-fund portfolio might be:

1. Taxable:
Total US Stock Market.

2. Roth:
A LifeStrategy/Target Retirement with little fixed income or enough to reach one's desired asset allocation if no tax-deferred account).

3. Tax-deferred
A LifeStrategy/Target Retirement with more fixed income or enough to reach one's desired asset allocation with no fixed income in taxable and little fixed income in Roth.

That's just 3 funds, tax-efficient and auto-rebalancing. It may also avoid tax-loss harvesting issues in taxable.
For taxable, maybe we have more than just Total US stock market so that we can TLH?

I agree with LS/Target Retirement of simplicity. Most of investors will benefit from this.

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steve roy
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Re: U.S. stocks in freefall

Post by steve roy » Fri Feb 16, 2018 2:04 pm

To rebalance while equities are zigging and zagging wildly seems more effort than it's worth. My new rule is "Rebalance every 7.4 years, whether the asset allocation needs the rebalance or not."

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corn18
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Re: U.S. stocks in freefall

Post by corn18 » Fri Feb 16, 2018 2:09 pm

steve roy wrote:
Fri Feb 16, 2018 2:04 pm
To rebalance while equities are zigging and zagging wildly seems more effort than it's worth. My new rule is "Rebalance every 7.4 years, whether the asset allocation needs the rebalance or not."
Ah man, what am I supposed to do with my portfolio for 7.4 years? The lack of random acts of stupidity now that I am a BH is driving me nuts. I just gave my cat a bath and braided my dog's hair for lack of any investment activity. AHHHHHHHHHHHH!!!!!

retiringwhen
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Re: U.S. stocks in freefall

Post by retiringwhen » Fri Feb 16, 2018 2:11 pm

thangngo wrote:
Fri Feb 16, 2018 1:45 pm

For taxable, maybe we have more than just Total US stock market so that we can TLH?
I have been thinking going Vanguard Large Cap Index (VLCAX) / Small Cap Index (VSMAX) since I already have to splice with the 500 Index in my 401(K).

Market's been too good this week to implement, my losses from last week disappeared this week :wink:

rgs92
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Re: U.S. stocks in freefall

Post by rgs92 » Fri Feb 16, 2018 2:13 pm

Thanks yet again Livesoft! So if you have no taxable or Roth accounts to speak of, you just need 1 single fund.
I thought Bogleheadism was simple, but that's the ultimate .

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Re: U.S. stocks in freefall

Post by marcopolo » Fri Feb 16, 2018 5:49 pm

Greg in Idaho wrote:
Fri Feb 16, 2018 9:07 am
I think correction followed by the rebound is providing a decent opportunity for folks who just got a gut check and thought "I really wish I had rebalanced and not let things ride for so long" to act on that wish...

And the correction is providing a partial answer for those who regularly ask here, "how does one determine one's risk tolerance?" We didn't go into the abyss at all, just a VERY small hint at what that might be like. A good learning opportunity.
I don't think this correction really tested one's risk tolerance. Because it was so short, and not too steep (so far). If anything, I think it increased complacency. See all the gleeful posts about "buying opportunities", and "wish we would have a crash".

In a real down turn you would see those posts dry up, and more really fearful posts (see sheepdog's thread from 2008-9 time period that is still bouncing around, a very illuminating read: viewtopic.php?f=10&t=25126).

I fear this short and shallow correction will lead people to falsely think their willingness to take risk is higher than it actually is, and result in some people getting more aggressive than they probably should be. I hope i am wrong.
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: U.S. stocks in freefall

Post by cfs » Fri Feb 16, 2018 5:57 pm

lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
Full disclosure, I did NOTHING during the so-called dip. Muchas gracias por leer ~cfs~
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Re: U.S. stocks in freefall

Post by Helo80 » Fri Feb 16, 2018 5:59 pm

lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
I emotionally bought some TSM... not a huge amount, but how often does the dow fall 1000 points? Might as well market time a bit.

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Re: U.S. stocks in freefall

Post by AnalogKid22 » Fri Feb 16, 2018 6:43 pm

Helo80 wrote:
Fri Feb 16, 2018 5:59 pm
lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
I emotionally bought some TSM... not a huge amount, but how often does the dow fall 1000 points? Might as well market time a bit.
Me too, but still contributing to TSM every 2-weeks.

DrGoogle2017
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Re: U.S. stocks in freefall

Post by DrGoogle2017 » Fri Feb 16, 2018 10:26 pm

I don’t think the volatility is done yet. Many bumpy rides for this year is my guess.

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Re: U.S. stocks in freefall

Post by oldcomputerguy » Fri Feb 16, 2018 10:38 pm

Helo80 wrote:
Fri Feb 16, 2018 5:59 pm
lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
I emotionally bought some TSM... not a huge amount, but how often does the dow fall 1000 points? Might as well market time a bit.
I don't consider that to be market timing so much as rebalancing with new money. :beer
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.

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Re: U.S. stocks in freefall

Post by ZumZabo » Sat Feb 17, 2018 4:53 am

lostdog wrote:
Fri Feb 16, 2018 12:46 pm
Anyone here admit to emotional selling during that dip?
I feel like I must have missed something. I only witnessed some market noise that set market returns back a couple of months. Haven’t we all seen this many times and gone on with our routines with no consequence? My AA hasn’t changed in any meaningful amount that would cause any rebalancing.
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Re: U.S. stocks in freefall

Post by selters » Sat Feb 17, 2018 5:55 am

bligh wrote:
Wed Feb 14, 2018 4:38 pm
RRAAYY3 wrote:
Wed Feb 14, 2018 4:28 pm
Cheers to those who held... shots for those that bought more!
What about those of us who wanted to buy more, but hadn't kept any dry powder aside to do so. :)
You probably bought at a lower level than the bottom on 9 February, so you were better off either way. :)

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Re: U.S. stocks in freefall

Post by jpdion » Sat Feb 17, 2018 9:42 am

jpdion wrote:
Mon Feb 05, 2018 4:28 pm
A bit of serendipity -- DW retired 12/31/17 and initiated the rollover of her 401(k) ASAP. Distribution occurred 1/29/18, check came today. Check will be forwarded to Vanguard and will be deposited into a money market account inside her TIRA for later investment. Sell high, buy low! :happy
Well, with the rebound, the serendipity will be basically a wash if we allocate into the 3 fund portfolio AA we have. Dip wasn't long enough to gain any advantage.

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Re: U.S. stocks in freefall

Post by nedsaid » Sun Feb 18, 2018 10:43 am

Sometimes it seems that the market wants a correction, the technical definition being a 10% pullback. It also seems that when this happens, there is just nothing to do but wait until the big market players get what they want. Well, we got our correction and then the market started recovering. It reminds me of the August 2015-February 2016 mini-bear, when the market intra-day got to 20% down from the peak and then started roaring back. The market seemed to want to go down 20% and then it was back to business.

My portfolio probably got down to 7% losses or so, we have recovered enough that now I am down about 3.5%. I am beginning to wonder what the fuss was all about. Still, when portfolios get to be larger and larger, even modest percentage losses can be substantial real dollars. I think this is a big reason for older investors getting more and more cautious.

Still, I think someone, somewhere with big money was doing foolish and risky things. I had heard someone had a big short on VIX, the volatility index, not something you want to be doing when the market goes from being placid to being violently volatile. Whoever it was, and whatever they were doing, somebody lost gobs of money. Too many folks out there want to treat the investment markets like a casino.
A fool and his money are good for business.

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Re: U.S. stocks in freefall

Post by itstoomuch » Sun Feb 18, 2018 2:50 pm

Whatever happens be now and then, everyone needs to think about how the will react; For some who are near retirement or in retirement, they need to think about a prolong bad spot or good spot.

YMMV
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wrongfunds
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Re: U.S. stocks in freefall

Post by wrongfunds » Wed Feb 21, 2018 2:49 pm

what happened? There has been no new entry under this topic for 3 trading days. How am I supposed to know if the US stocks are in freefall or not?

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Re: U.S. stocks in freefall

Post by livesoft » Wed Feb 21, 2018 2:56 pm

Saturday, Sunday, and Monday were not trading days. It is now mid-Wednesday, so 1.5 trading days is not that long, is it?
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Re: U.S. stocks in freefall

Post by ruralavalon » Wed Feb 21, 2018 2:57 pm

wrongfunds wrote:
Wed Feb 21, 2018 2:49 pm
what happened? There has been no new entry under this topic for 3 trading days. How am I supposed to know if the US stocks are in freefall or not?
Somebody fixed the anti-gravity device, so things are falling up again.
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Re: U.S. stocks in freefall

Post by indexonlyplease » Wed Feb 21, 2018 3:09 pm

Question

If the market has a correction say 10% and you rebalance back to your AA. Is that like using dry powder because you just bought stocks funds at a lower price??

And if you did not rebalance your AA would get back to normal one day.

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Re: U.S. stocks in freefall

Post by Da5id » Wed Feb 21, 2018 3:12 pm

indexonlyplease wrote:
Wed Feb 21, 2018 3:09 pm
Question

If the market has a correction say 10% and you rebalance back to your AA. Is that like using dry powder because you just bought stocks funds at a lower price??
Kind of. But at least some advocates of "dry powder" seem to argue for keeping cash on hand to "buy stocks on sale". Based on (IMHO) a wrongheaded belief that they know that the market is due for a sale "real soon now". Assuming you are just sticking to your asset allocation by balancing bonds into stocks because stocks have fallen enough to trigger a rebalancing event, sounds reasonable to me.

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Re: U.S. stocks in freefall

Post by aj76er » Wed Feb 21, 2018 3:26 pm

indexonlyplease wrote:
Wed Feb 21, 2018 3:09 pm
Question

If the market has a correction say 10% and you rebalance back to your AA. Is that like using dry powder because you just bought stocks funds at a lower price??

And if you did not rebalance your AA would get back to normal one day.
In the short term, re-balancing in a choppy market will generally give you a "re-balancing bonus" (ie. mechanical buy low and sell high). However, a lot of folks (for good reason) don't like that term because holding bonds and/or cash for this purpose really just decreases your overall portfolio return over long time frames. So, really one should hold bonds or cash because they need (or want) the reduced volatility. An age-based rule for bonds+cash is good for most people because it avoids market timing.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Re: U.S. stocks in freefall

Post by fantasytensai » Wed Feb 21, 2018 3:37 pm

What do I do with my bond funds that have been dropping like a rock? I'm already at 80/20 but I still feel absolutely screwed by my bond fund allocations. I have the risk tolerance for 90/10 but it just sickens me to sell VBTLX at such a huge loss.

Da5id
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Re: U.S. stocks in freefall

Post by Da5id » Wed Feb 21, 2018 3:54 pm

fantasytensai wrote:
Wed Feb 21, 2018 3:37 pm
What do I do with my bond funds that have been dropping like a rock? I'm already at 80/20 but I still feel absolutely screwed by my bond fund allocations. I have the risk tolerance for 90/10 but it just sickens me to sell VBTLX at such a huge loss.
If they are in taxable, sell to harvest the loss, buy VBILX (intermediate bond fund), enjoy your tax benefit. Watch for wash sale rules.

If not in taxable, well, just enjoy the fact that as NAV has fallen yield has risen. Losses aren't "huge" in the big scheme of things. VBTLX has since 2002 a worst year loss of 2.15% (after accounting for dividends) according to https://www.portfoliovisualizer.com/backtest-portfolio.

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Re: U.S. stocks in freefall

Post by fantasytensai » Wed Feb 21, 2018 4:01 pm

Da5id wrote:
Wed Feb 21, 2018 3:54 pm
fantasytensai wrote:
Wed Feb 21, 2018 3:37 pm
What do I do with my bond funds that have been dropping like a rock? I'm already at 80/20 but I still feel absolutely screwed by my bond fund allocations. I have the risk tolerance for 90/10 but it just sickens me to sell VBTLX at such a huge loss.
If they are in taxable, sell to harvest the loss, buy VBILX (intermediate bond fund), enjoy your tax benefit. Watch for wash sale rules.

If not in taxable, well, just enjoy the fact that as NAV has fallen yield has risen. Losses aren't "huge" in the big scheme of things. VBTLX has since 2002 a worst year loss of 2.15% (after accounting for dividends) according to https://www.portfoliovisualizer.com/backtest-portfolio.
It's in my IRA...I want to cry haha.

Serious question, how is the rising yield reflected in VBTLX? Does VBTLX's yield actually rise as well to reflect the rising yield? If so, how often would VBTLX's yield change?

lee1026
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Re: U.S. stocks in freefall

Post by lee1026 » Wed Feb 21, 2018 4:03 pm

VBTLX's yield changes on a nano-second basis. Anytime its price changes, so does its yield.

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Re: U.S. stocks in freefall

Post by thangngo » Wed Feb 21, 2018 4:05 pm

fantasytensai wrote:
Wed Feb 21, 2018 3:37 pm
What do I do with my bond funds that have been dropping like a rock? I'm already at 80/20 but I still feel absolutely screwed by my bond fund allocations. I have the risk tolerance for 90/10 but it just sickens me to sell VBTLX at such a huge loss.
If you can't stand the volatility of bond, how could you do stock? Stick to CDs then.

fantasytensai
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Re: U.S. stocks in freefall

Post by fantasytensai » Wed Feb 21, 2018 4:20 pm

thangngo wrote:
Wed Feb 21, 2018 4:05 pm
fantasytensai wrote:
Wed Feb 21, 2018 3:37 pm
What do I do with my bond funds that have been dropping like a rock? I'm already at 80/20 but I still feel absolutely screwed by my bond fund allocations. I have the risk tolerance for 90/10 but it just sickens me to sell VBTLX at such a huge loss.
If you can't stand the volatility of bond, how could you do stock? Stick to CDs then.
Because the role of bonds IS stability. Stocks are meant to rise and fall. I don't gloat when stocks are high, and I don't cry when stocks are low, because that's what they are supposed to do.

Bonds, at least I am told, are supposed to be your rock when stocks are going through this volatility. It has been a rock alright, a sinking a rock.

Dudley
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Re: U.S. stocks in freefall

Post by Dudley » Wed Feb 21, 2018 4:28 pm

fantasytensai wrote:
Wed Feb 21, 2018 3:37 pm
What do I do with my bond funds that have been dropping like a rock? I'm already at 80/20 but I still feel absolutely screwed by my bond fund allocations. I have the risk tolerance for 90/10 but it just sickens me to sell VBTLX at such a huge loss.
If you feel VBTLX is "dropping like a rock" I really doubt you have the risk tolerance for 90/10 when the stock market eventually kicks off.

RetireBy55
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Re: U.S. stocks in freefall

Post by RetireBy55 » Wed Feb 21, 2018 4:31 pm

fantasytensai wrote:
Wed Feb 21, 2018 4:20 pm
Because the role of bonds IS stability. Stocks are meant to rise and fall. I don't gloat when stocks are high, and I don't cry when stocks are low, because that's what they are supposed to do.

Bonds, at least I am told, are supposed to be your rock when stocks are going through this volatility. It has been a rock alright, a sinking a rock.
I've never liked VBTLX as a bond fund. Returns are dismal. There are a lot better choices (PONDX comes to mind) out there.

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Re: U.S. stocks in freefall

Post by david1082b » Wed Feb 21, 2018 5:00 pm

RetireBy55 wrote:
Wed Feb 21, 2018 4:31 pm
fantasytensai wrote:
Wed Feb 21, 2018 4:20 pm
Because the role of bonds IS stability. Stocks are meant to rise and fall. I don't gloat when stocks are high, and I don't cry when stocks are low, because that's what they are supposed to do.

Bonds, at least I am told, are supposed to be your rock when stocks are going through this volatility. It has been a rock alright, a sinking a rock.
I've never liked VBTLX as a bond fund. Returns are dismal. There are a lot better choices (PONDX comes to mind) out there.
PONDX lost about 10% during the 2008 crisis from top to bottom, so it's really not suitable for people who don't like the recent price declines in total market bond funds. CDs and EE and I Series savings bonds would be more appropriate for those who don't like bond price movements. A Target Retirement or a Lifestrategy would also be useful, then they can ignore stock versus bond movements and concentrate on total return. Regarding the price declines in Total Bond Market, it also had similar declines in 2013, 2015, 2016, it's just standard stuff of course, but newbs might not be able to take a bond fund on its own and would be better off with stuff that doesn't change in price.

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Taylor Larimore
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Re: U.S. stocks in freefall

Post by Taylor Larimore » Wed Feb 21, 2018 5:13 pm

I've never liked VBTLX as a bond fund. Returns are dismal. There are a lot better choices (PONDX comes to mind) out there.
We sometimes forget that bonds are for safety.

In the stock bear market of 2008, PONDX fell -5.8% when safety was needed. Meanwhile Total Bond Market gained +5% (a 10.8% difference). The .79% Expense Ratio for PONDX does not help.

The most efficient way to increase return is to increase our stock allocation--not by using risky bond funds.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: U.S. stocks in freefall

Post by RetireBy55 » Wed Feb 21, 2018 5:35 pm

Taylor Larimore wrote:
Wed Feb 21, 2018 5:13 pm
I've never liked VBTLX as a bond fund. Returns are dismal. There are a lot better choices (PONDX comes to mind) out there.
We sometimes forget that bonds are for safety.

In the stock bear market of 2008, PONDX fell -5.8% when safety was needed. Meanwhile Total Bond Market gained +5% (a 10.8% difference). The .79% Expense Ratio for PONDX does not help.

The most efficient way to increase return is to increase our stock allocation--not by using risky bond funds.

Best wishes.
Taylor
Fair points on the 2008 drop..on the ER..I know we focus a lot on ER here, but if the fund's net return over 3, 5 and 10 years outpaces that of a fund with a lower ER..I'll go with the higher average return / higher ER every time..

Wish I knew how to do a screen cap on BG forum but do a M* compare of PONDX v. VBTLX. Or better yet from an ER perspective, PIGIX (.5 ER) which is the Institutional class and widely available - it absolutely kills VBTLX over the 1, 3, 5, 10 AND 15 year periods.

I've tried to love VBTLX but just can't get excited about sub 2% returns over the past 1, 3, 5 years. You'd be better off in cash..I'm sure there's a good reason to have VBTLX as part of one's portfolio, but I had a forced sell on it (wife's company got acquired, wiped out the old 401K which had VBTLX) and we have not put any new money into it since.

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Re: U.S. stocks in freefall

Post by triceratop » Wed Feb 21, 2018 5:35 pm

Taylor Larimore wrote:
Wed Feb 21, 2018 5:13 pm
I've never liked VBTLX as a bond fund. Returns are dismal. There are a lot better choices (PONDX comes to mind) out there.
We sometimes forget that bonds are for safety.

In the stock bear market of 2008, PONDX fell -5.8% when safety was needed. Meanwhile Total Bond Market gained +5% (a 10.8% difference). The .79% Expense Ratio for PONDX does not help.

The most efficient way to increase return is to increase our stock allocation--not by using risky bond funds.

Best wishes.
Taylor
09/12/2008 - 04/03/2009 Max Drawdown:

Total Bond Market: -4.94%
PONDX: -9.47%

It is true that starting at 01/01/2008 gives different results. But Total Bond Market had drawdowns too; corporate spreads widened considerably and that obviously hurt the prices of the corporate issues that Total Bond Market holds.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: U.S. stocks in freefall

Post by Dominic » Wed Feb 21, 2018 6:26 pm

triceratop wrote:
Wed Feb 21, 2018 5:35 pm
Taylor Larimore wrote:
Wed Feb 21, 2018 5:13 pm
I've never liked VBTLX as a bond fund. Returns are dismal. There are a lot better choices (PONDX comes to mind) out there.
We sometimes forget that bonds are for safety.

In the stock bear market of 2008, PONDX fell -5.8% when safety was needed. Meanwhile Total Bond Market gained +5% (a 10.8% difference). The .79% Expense Ratio for PONDX does not help.

The most efficient way to increase return is to increase our stock allocation--not by using risky bond funds.

Best wishes.
Taylor
09/12/2008 - 04/03/2009 Max Drawdown:

Total Bond Market: -4.94%
PONDX: -9.47%

It is true that starting at 01/01/2008 gives different results. But Total Bond Market had drawdowns too; corporate spreads widened considerably and that obviously hurt the prices of the corporate issues that Total Bond Market holds.
And, for reference, intermediate term Treasury bonds had a max drawdown of -3.43% from April-May 2008. In my backtesting of a 60/40 portfolio, holding an intermediate Treasury fund in place of TBM slightly improved returns and slightly reduced risk. (This is on top of the state tax efficiency of Treasuries, as well as the ability to build your own ladder at an expense ratio of 0, if you want to spend the time. You could even achieve similar results with FDIC-insured CDs.) I tried PONDX in place of the intermediate term Treasury fund, and although the PONDX-based portfolio returned better, it was much riskier.

I'm not convinced that corporate bonds are worth holding. Yes, TBM holds more issues than a Treasury-only bond portfolio, but it's not more diversified in a risk sense. The Treasuries have the same term risk as TBM, and then there's default risk, which is technically more diversified in TBM than in Treasuries-only. However, if the Treasury defaults (or even the FDIC), we've got much bigger problems on our hands -- the broad market would collapse. Meanwhile, the default risk on corporate bonds is essentially the same risk you get from the stock market.

I agree with Taylor that you shouldn't chase yield in fixed income. However, I think the ideal case is to to hold only government bonds and/or CDs. That provides better protection against a stock market correction than anything else.

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Re: U.S. stocks in freefall

Post by Noobvestor » Wed Feb 21, 2018 11:09 pm

Edited to delete content re:whoops - I read the ticker wrong (thanks aptly-named visualguy for noticing!)
Last edited by Noobvestor on Wed Feb 21, 2018 11:29 pm, edited 2 times in total.
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Re: U.S. stocks in freefall

Post by visualguy » Wed Feb 21, 2018 11:23 pm

He was talking about VBTLX (6.1 years), not VBLTX.

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Re: U.S. stocks in freefall

Post by Portfolio7 » Wed Feb 21, 2018 11:44 pm

Question and statement together here: I admit, in the accumulation stage, I don't really get the case for holding corporate bonds when you could have higher expected returns from stocks.... I used to own corporates and high yield, but Swenson influenced me a lot. I decided that rather than corporates and hi yield, I should instead own a mix of stocks and fixed income (gov't bonds/tips, or stable value/CD/MM)... but the fixed income should be limited to products where the issuers interests and mine align most closely; and my risk-based AA assessment should be based on that mix of assets.

Perhaps once you're retired, the superior claim of bonds on corporate assets along with a reduced need for portfolio growth might speak stronger in their favor?

If one could market time all the various asset sub-classes, then many of them would grow in usefulness, but assuming you lack a crystal ball, gov't bonds or a stable cash-like alternative is the only approach that makes sense to me (with the exception of munis in taxable accounts, which I think of as a special case in more ways than one).

I am happy to get 'schooled' by someone if they think they have a good case for bonds other than the instruments above (gov't bonds/tips, or stable value/CD/MM).
An investment in knowledge pays the best interest.

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Re: U.S. stocks in freefall

Post by fantasytensai » Thu Feb 22, 2018 9:36 am

lee1026 wrote:
Wed Feb 21, 2018 4:03 pm
VBTLX's yield changes on a nano-second basis. Anytime its price changes, so does its yield.
That is good to hear.

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