vineviz wrote: ↑
Fri Oct 12, 2018 8:45 am
I'm sympathetic to the argument that many investors don't have access to a decent bond funds with specific maturity targets, but I'm not sure that the lack of availability should alter their preferences even though it might alter their ability to execute their preference.
Herein lies the rub for me. You are talking investing theory and that is fine when people understand that is what you are talking about. I have no problem with your theory of matching duration to horizon. But the average investor here who is looking for portfolio help will only hear "I should be using long term bonds, preferably treasuries" and they will try to set up a portfolio to achieve that even though it is not the best portfolio they can build.
For example, some will avoid filling their tax-deferred work accounts even though that is probably more important than having a certain kind of bond fund. Some will contribute to IRA - even though their contributions are not deductible - just to have a place to put their long term bonds. Some might put their long term bonds into a taxable account (
) because that's the only place they have to put them.
It is important for average investors to realize the decision tree does not start with "what kind of bonds should I have"? It should start with "what are the best choices available in my work account that can be used to build my best possible portfolio?"
Then there are other decisions to make on the decision tree before you ever get to "what to put into this space I have left? When you get to that point of the decision tree, the bonds are usually already placed and the only space left is space that should not hold long term bonds anyway (taxable and maybe Roth IRA although I'm not one to absolutely avoid bonds in Roth IRA).
The one really good place for long term bonds, traditional IRA such as a large rollover from a 401k, is something many people are not even using any more because they want to be able to use the "back door" maneuver for Roth IRA. They have made the one good place for long term bonds disappear.
There is a place here for talking theory here and many do talk theory to the nth degree. But I think we all have to be careful about encouraging theory to people who either can't implement it or will not build their best portfolio because they mistakenly think that something is more important that it really is.
and this thread are a good example. Linenoise
took your discussion in the other thread to heart and decided it was pretty important to get those long term bonds into his/her portfolio. Unfortunately, it can't happen in this portfolio.