Eliminating bonds?

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AnEngineer
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Re: Eliminating bonds?

Post by AnEngineer »

There's a big difference between dumping bonds for stocks and for cash.
tibbitts
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Re: Eliminating bonds?

Post by tibbitts »

AnEngineer wrote: Sun May 02, 2021 8:38 am There's a big difference between dumping bonds for stocks and for cash.
Yes, and there are various definitions of "cash." For example some people would count exchanging a bond fund for a stable value fund as "dumping bonds." Then if you asked someone why they still held savings bonds they'd say "well, that's not what I meant."
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ruralavalon
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Re: Eliminating bonds?

Post by ruralavalon »

RobLyons wrote: Sun May 02, 2021 7:06 am
ruralavalon wrote: Sat May 01, 2021 12:17 pm
RobLyons wrote: Fri Apr 30, 2021 8:37 am Is anyone else ditching or reducing their bond holdings?
No. We are staying with Vanguard Intermediate-term Bond Index Fund (VBILX).



RobLyons wrote: Fri Apr 30, 2021 8:37 amMy reasons include I'm young, have great confidence, many years left to invest, financial stability, and excellent pension.
. . . . .
All of those are good reasons to consider a higher risk asset allocation.

Why are you so confident? What is your age? Did you have substantial investments in 2008? How did you react in that crash?


I'm 40 and plan to invest into my 80s if I'm cognitively able to.

I had investments in 2008. I lost 35% and didn't blink. And last year as things dipped I invested more.
Why do you reevaluate your tolerance 2-3 times per year? What factors in your personal financial situation change that often?
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LilyFleur
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Re: Eliminating bonds?

Post by LilyFleur »

tibbitts wrote: Sun May 02, 2021 9:13 am
AnEngineer wrote: Sun May 02, 2021 8:38 am There's a big difference between dumping bonds for stocks and for cash.
Yes, and there are various definitions of "cash." For example some people would count exchanging a bond fund for a stable value fund as "dumping bonds." Then if you asked someone why they still held savings bonds they'd say "well, that's not what I meant."
My stable value fund is out-earning my bond index fund this year. I have both.
JudgeLess
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Re: Eliminating bonds?

Post by JudgeLess »

The responses to this question have been interesting. I believe risk tolerance varies greatly, and each individual is the best judge of their risk preference. However, it is good if that tolerance for risk is stress tested. We have not seen much stress in the last 12 years, with the possible exception of March of this year, a very short period of equity decline.

From October of 2008 to March of 2009, domestic equities fell by about 50% and international equities declined by about 55%. I considered myself an experienced, disciplined investor, with a clear rebalancing policy. During that period I rebalanced three times. The last time was very difficult, after experiencing very large reductions in portfolio value and gloom and doom in the news, and great uncertainty about market futures. Risk tolerance in the abstract is very different than it is when you are in that situation. I would be careful of over confidence.

Also, if the assets are joint with a spouse or partner, their risk tolerance may be different. How would they view a decline of 50%? How would that affect your actions?
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Bogle7
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Re: Eliminating bonds?

Post by Bogle7 »

RobLyons wrote: Fri Apr 30, 2021 8:37 amIs anyone else ditching or reducing their bond holdings?
Yes.
Ages 72/63.
Stocks are 86%.
Old fart who does three index funds, baby.
NativeTxn
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Re: Eliminating bonds?

Post by NativeTxn »

We're both 41 and I recently jettisoned bonds from the portfolio. Now, I did replace them with some blue chip, dividend focused stocks to try to generate a higher return than bonds funds while still remaining "reasonably" stable.

I am fully aware that even "stable" dividend payers are not a bond proxy or a replacement for bonds, and that they are inherently more risky and will decline in value during a bear market more than bonds. However, given that as of now we have roughly 25 years before retirement, I'm fine with that added risk in our portfolio.

But, this isn't for everyone, and as others have said, going 100% equity is a question that only you can answer based on your risk tolerance and ability to stay the course when your 100% equity portfolio drops more than a portfolio with bonds would.
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grobertj
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Re: Eliminating bonds?

Post by grobertj »

Does anyone believe a fixed annuity is a reasonable alternative to bonds?
The only constant is CHANGE!!
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RobLyons
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Re: Eliminating bonds?

Post by RobLyons »

ruralavalon wrote: Sun May 02, 2021 9:51 am
RobLyons wrote: Sun May 02, 2021 7:06 am
ruralavalon wrote: Sat May 01, 2021 12:17 pm
RobLyons wrote: Fri Apr 30, 2021 8:37 am Is anyone else ditching or reducing their bond holdings?
No. We are staying with Vanguard Intermediate-term Bond Index Fund (VBILX).



RobLyons wrote: Fri Apr 30, 2021 8:37 amMy reasons include I'm young, have great confidence, many years left to invest, financial stability, and excellent pension.
. . . . .
All of those are good reasons to consider a higher risk asset allocation.

Why are you so confident? What is your age? Did you have substantial investments in 2008? How did you react in that crash?


I'm 40 and plan to invest into my 80s if I'm cognitively able to.

I had investments in 2008. I lost 35% and didn't blink. And last year as things dipped I invested more.
Why do you reevaluate your tolerance 2-3 times per year? What factors in your personal financial situation change that often?

Maybe it's my OCD or maybe I just enjoy it.. I'm not sure.
As for the past year, work froze our pensions/raises, then my wife was put out of work due to the pandemic and months later work reinstated the pensions and raises. These events didn't heavily impact us, rather gave me reasons to pause and reevaluate. No changes were made.
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UpperNwGuy
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Re: Eliminating bonds?

Post by UpperNwGuy »

ruralavalon wrote: Sat May 01, 2021 12:17 pm
RobLyons wrote: Fri Apr 30, 2021 8:37 am Is anyone else ditching or reducing their bond holdings?
No. We are staying with Vanguard Intermediate-term Bond Index Fund (VBILX).
I am doing the same.
28fe6
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Re: Eliminating bonds?

Post by 28fe6 »

It's not clear to me in this thread if we are talking about SELLING our bonds or eliminating any new investment in bonds.

I don't have any impulse to sell my current bonds in my portfolio, but I am having aversion to buying new bonds with interest rates and forward yields being so low or negative. Is it logical to not sell any bonds, but stop buying new bonds?

Sometimes I hear things like "if you got new money, would you invest it at your current AA, if not, then your AA is not appropriate." So stopping buying bonds but not selling any, is it illogical?
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ruralavalon
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Re: Eliminating bonds?

Post by ruralavalon »

28fe6 wrote: Mon May 03, 2021 10:26 am It's not clear to me in this thread if we are talking about SELLING our bonds or eliminating any new investment in bonds.

I don't have any impulse to sell my current bonds in my portfolio, but I am having aversion to buying new bonds with interest rates and forward yields being so low or negative. Is it logical to not sell any bonds, but stop buying new bonds?

Sometimes I hear things like "if you got new money, would you invest it at your current AA, if not, then your AA is not appropriate." So stopping buying bonds but not selling any, is it illogical?
I am planning to buy more via rebalancing if the stock market continues to rise.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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