VCIT

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hoops777
Posts: 2912
Joined: Sun Apr 10, 2011 12:23 pm

VCIT

Post by hoops777 » Thu Mar 26, 2020 10:20 am

I think I learned a good lesson as of late about corporate bonds.
I own about 50 K of VCIT in my Roth that I bought about 2 years ago. If I sell between 85 and 86 it is what I bought it for. I am thinking of saying good bye to corporate bonds. Any thoughts about owning corporate bonds going forward ? The one big caveat is that I have almost zero stocks but will be adding as this market plays out.
K.I.S.S........so easy to say so difficult to do.

3funder
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Joined: Sun Oct 15, 2017 9:35 pm

Re: VCIT

Post by 3funder » Thu Mar 26, 2020 10:25 am

Go with VBTLX.

https://investor.vanguard.com/mutual-fu ... view/vbtlx

It is only 30% corporate bonds.

MnD
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Joined: Mon Jan 14, 2008 12:41 pm

Re: VCIT

Post by MnD » Thu Mar 26, 2020 11:08 am

hoops777 wrote:
Thu Mar 26, 2020 10:20 am
I think I learned a good lesson as of late about corporate bonds.
I own about 50 K of VCIT in my Roth that I bought about 2 years ago. If I sell between 85 and 86 it is what I bought it for. I am thinking of saying good bye to corporate bonds. Any thoughts about owning corporate bonds going forward ? The one big caveat is that I have almost zero stocks but will be adding as this market plays out.
I calculate a two year total return including todays price change of 7.28%. That's very close to the return expected from current yield.
Assuming you are just looking at share price change, you have received all the interest payments from these bonds and the principal value is now the same as when you purchased. That's how bonds are supposed to work. They distribute income as opposed to it building up in share price. In my opinion people that are bailing out now from bonds with credit risk that has already shown up in pricing, and replacing them with Treasury bonds with substantial interest risk that hasn't shown up yet are making a major investing behavioral error.

They very well be posting in the future "I think I learned a good lesson as of late about Treasury bonds".
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.

Topic Author
hoops777
Posts: 2912
Joined: Sun Apr 10, 2011 12:23 pm

Re: VCIT

Post by hoops777 » Thu Mar 26, 2020 11:28 am

MnD wrote:
Thu Mar 26, 2020 11:08 am
hoops777 wrote:
Thu Mar 26, 2020 10:20 am
I think I learned a good lesson as of late about corporate bonds.
I own about 50 K of VCIT in my Roth that I bought about 2 years ago. If I sell between 85 and 86 it is what I bought it for. I am thinking of saying good bye to corporate bonds. Any thoughts about owning corporate bonds going forward ? The one big caveat is that I have almost zero stocks but will be adding as this market plays out.
I calculate a two year total return including todays price change of 7.28%. That's very close to the return expected from current yield.
Assuming you are just looking at share price change, you have received all the interest payments from these bonds and the principal value is now the same as when you purchased. That's how bonds are supposed to work. They distribute income as opposed to it building up in share price. In my opinion people that are bailing out now from bonds with credit risk that has already shown up in pricing, and replacing them with Treasury bonds with substantial interest risk that hasn't shown up yet are making a major investing behavioral error.

They very well be posting in the future "I think I learned a good lesson as of late about Treasury bonds".
Interesting. I am not complaining about the return. I was thinking very seriously of selling it when it was 95 but chose not to. Treasury bonds certainly do not excite me. Not really any good fixed income options now.
K.I.S.S........so easy to say so difficult to do.

moneyman11
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Joined: Tue Feb 19, 2008 10:09 am

Re: VCIT

Post by moneyman11 » Thu Mar 26, 2020 11:35 am

After the last week, I wonder why not ONLY have corporate bonds for the fixed income portion of my portfolio?

During good times, you collect the risk premium over treasuries.

But when the risk does show up, you just hold on until the Fed Cavalry rides in to bail you out.

Win-win.

rkhusky
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Re: VCIT

Post by rkhusky » Thu Mar 26, 2020 11:39 am

My corporate bonds are still paying the same amount of dividends. I don’t plan to lock in a NAV loss based on short term results for a fund with a duration of 5+ years.

Vanguard Fan 1367
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Joined: Wed Feb 08, 2017 3:09 pm

Re: VCIT

Post by Vanguard Fan 1367 » Thu Mar 26, 2020 11:43 am

I have VCIT and VCLT which is Vanguard's Long Term Bond Fund ETF. I am thinking that this might not be the best time to sell. It might not have been the best choice to get into those in the first place but things might improve.

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Doc
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Location: Two left turns from Larry

Re: VCIT

Post by Doc » Thu Mar 26, 2020 11:46 am

hoops777 wrote:
Thu Mar 26, 2020 10:20 am
I think I learned a good lesson as of late about corporate bonds.
What's the lesson?

That corporate bonds do worse than Treasuries in an equity market "crash"? Duh.

Our overall AA is 50:50. Our bonds are ~ 40/35/20/5 Treasury/Corp/Cash/other. (The high cash is due to an specific need in 14 days.) And I think it's just fine. (The duration is somewhat shorter than in normal times but the yield curve is FLAT. There's nothing to be gained by going longer right now.)
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

Topic Author
hoops777
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Joined: Sun Apr 10, 2011 12:23 pm

Re: VCIT

Post by hoops777 » Thu Mar 26, 2020 12:31 pm

Doc wrote:
Thu Mar 26, 2020 11:46 am
hoops777 wrote:
Thu Mar 26, 2020 10:20 am
I think I learned a good lesson as of late about corporate bonds.
What's the lesson?

That corporate bonds do worse than Treasuries in an equity market "crash"? Duh.

Our overall AA is 50:50. Our bonds are ~ 40/35/20/5 Treasury/Corp/Cash/other. (The high cash is due to an specific need in 14 days.) And I think it's just fine. (The duration is somewhat shorter than in normal times but the yield curve is FLAT. There's nothing to be gained by going longer right now.)
Yea duh. I was referring to the Swedroe advice that is often seen on this site.
K.I.S.S........so easy to say so difficult to do.

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Doc
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Location: Two left turns from Larry

Re: VCIT

Post by Doc » Thu Mar 26, 2020 1:04 pm

hoops777 wrote:
Thu Mar 26, 2020 12:31 pm
Yea duh. I was referring to the Swedroe advice that is often seen on this site.
Duh me too. As I am hitting the "submit" key with my right hand my left hand is on Larry's bond book. :D

Did you notice that my bond portfolio is very "Larry like"?

I do drive by his house every now and then but I have never stopped to say hi.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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