Leeraar wrote:You might want to read what Rick Ferri has to say about Total Bond Fund.
There are two schools: Slice and dice, don't invest in this, overweight that; and total market. Both factions have reason to criticize TBM. Personally, I don't worry about it.
True. I am total market in my equity assets since the total approximates market cap distributions and all that. With Bonds it feels like it's a bit different animal. When people talk about being 100% stock the answer is almost always "you need to have some bonds to help you sleep at night."
And I'm still learning about bonds because I know little about it. Seems that equities are bit simpler to understand than bonds and the different types of bonds seems to be quite bit different as well.
Reading book called "The Bond Book" and it has been quite illuminating so far. In the books I've read so far (Bogleheads, Bernstein, Swensen's) I've yet to come across one that really delves into what are the diff types of bonds and how to invest in them. Most just say to invest in indexes in stocks and bonds. Still learning of course.
Leeraar wrote:True but TIPS declined during the financial crisis and Total Bond did not.
Interesting. Again I'm still learning regarding bonds but what does that one-time data point tell about usefulness of TIPS in a long-term investment/retirement portfolio?
dbr wrote:The second factor is that most of us are not making investments in bonds; we are investing in portfolios and it is the risk and return of the portfolio that matters. If you own both stocks and bonds, then it doesn't make a lot of sense to speak of being risk adverse or not risk adverse in any one component. Virtually all bonds are enough less risky than stocks to allow effective dilution of portfolio risk. One can refine the analysis to greater and greater degree and less and less purpose as one works down through high yield, corporate, munis, Treasuries and TIPS, long and short
As I mentioned in this post ealier, I'm still learing about bonds so I know I did my best to put my money to work for my portfolio. And while I'm reading "The Bond Book" my understanding of bonds, through opinions on here and in the books I"ve read so far....seems to suggest that bonds are basically the counter-balance to equity. And with bonds the whole point is NOT to generate huge returns (as is equity) but to protect assets by having a different risk profile than equities...and hopefully less risky.
So would it make sense to choose the types of bonds that are the least risky in terms of credit quality and interest-rate risk? AKA, only buy US Govt bonds (Treasury, TIPS) because they are considered impossible to default (though we were close to that a few months ago.....) and then to avoid super-long term bonds and hold intermediate-length bonds so as to mitigate interest rate risk?[Quotes fixed by admin LadyGeek]