My favorite authors are turning their backs on Bonds

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UpperNwGuy
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Re: My favorite authors are turning their backs on Bonds

Post by UpperNwGuy »

staustin wrote: Wed Jun 09, 2021 5:46 pm Financial repression is certainly very real and must be considered when determining an asset allocation.

We've changed the mix of our bonds but not the percentage allocation; overweight abs, corporate, high yield and emerging market. No interest in owning treasuries in the current environment or being pushed into alt investments.
Glad to see a positive statement about corporate bonds. Normally they get no love in this forum.
jdb
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Re: My favorite authors are turning their backs on Bonds

Post by jdb »

vineviz wrote: Mon Jun 07, 2021 1:13 pm
SteadyOne wrote: Mon Jun 07, 2021 12:14 pm Purpose of bonds is to decrease volatility of the portfolio. This is especially important at the withdrawal phase as you do not want to sell stocks at the bottom. Alternatives are cash and gold I guess.
I often see things like this repeated here, but it's (mostly) not true.

Reducing portfolio volatility is not the purpose of bonds. The purpose of bonds (from the perspective of the investor, at least) is to obtain a predictable stream of income or cash flows.

One effect of including bonds in the portfolio is that it USUALLY reduces portfolio volatility, but this is a byproduct and not generally the actual goal.
Yes. Reminds me of Groucho Marx. He lost lots of money in 1929 crash. Some years later at height of his fame was touring NYSE. A broker shouted “Groucho what are you invested in? Groucho answered “Only Bonds”. The broker said “they don’t give you good returns”. Groucho answered “Not if you have enough of them”. Groucho would not understand the angst that bonds engender on this site. Neither do I. It is source of predicable returns. Good luck.
alex_686
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Re: My favorite authors are turning their backs on Bonds

Post by alex_686 »

jdb wrote: Wed Jun 09, 2021 6:17 pm Yes. Reminds me of Groucho Marx. He lost lots of money in 1929 crash. Some years later at height of his fame was touring NYSE. A broker shouted “Groucho what are you invested in? Groucho answered “Only Bonds”. The broker said “they don’t give you good returns”. Groucho answered “Not if you have enough of them”. Groucho would not understand the angst that bonds engender on this site. Neither do I. It is source of predicable returns. Good luck.
Yes, if you are rich enough not to care about returns then you don’t need to worry about them.

Few Bogleheads are in that spot.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
jdb
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Re: My favorite authors are turning their backs on Bonds

Post by jdb »

alex_686 wrote: Wed Jun 09, 2021 6:35 pm
jdb wrote: Wed Jun 09, 2021 6:17 pm Yes. Reminds me of Groucho Marx. He lost lots of money in 1929 crash. Some years later at height of his fame was touring NYSE. A broker shouted “Groucho what are you invested in? Groucho answered “Only Bonds”. The broker said “they don’t give you good returns”. Groucho answered “Not if you have enough of them”. Groucho would not understand the angst that bonds engender on this site. Neither do I. It is source of predicable returns. Good luck.
Yes, if you are rich enough not to care about returns then you don’t need to worry about them.

Few Bogleheads are in that spot.
In investments as in life moderation helps. If you have $10 in equities nothing wrong with $6 In fixed income in my opinion. Nothing to do with wealth. Groucho would agree. Good luck.
rockstar
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Re: My favorite authors are turning their backs on Bonds

Post by rockstar »

There are more than two choices: bonds and stocks.
alex_686
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Re: My favorite authors are turning their backs on Bonds

Post by alex_686 »

jdb wrote: Wed Jun 09, 2021 6:52 pm
alex_686 wrote: Wed Jun 09, 2021 6:35 pm
jdb wrote: Wed Jun 09, 2021 6:17 pm Yes. Reminds me of Groucho Marx. He lost lots of money in 1929 crash. Some years later at height of his fame was touring NYSE. A broker shouted “Groucho what are you invested in? Groucho answered “Only Bonds”. The broker said “they don’t give you good returns”. Groucho answered “Not if you have enough of them”. Groucho would not understand the angst that bonds engender on this site. Neither do I. It is source of predicable returns. Good luck.
Yes, if you are rich enough not to care about returns then you don’t need to worry about them.

Few Bogleheads are in that spot.
In investments as in life moderation helps. If you have $10 in equities nothing wrong with $6 In fixed income in my opinion. Nothing to do with wealth. Groucho would agree. Good luck.
I sort of agree with this, but....

Look, most people don't have great wealth. They have to work of a living. There is a choice we get with our income. Current consumption or savings. If we save, a choice between stocks and bonds. I person who invests a healthy slug of their savings into equites rather than bonds only has to save about 1/2 as much.

It does not matter how modest your current savings are, or how modest your future spending is. That is the ratio, and it is a fairly hefty difference.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Nicolas
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Re: My favorite authors are turning their backs on Bonds

Post by Nicolas »

jdb wrote: Wed Jun 09, 2021 6:17 pm Yes. Reminds me of Groucho Marx. He lost lots of money in 1929 crash. Some years later at height of his fame was touring NYSE. A broker shouted “Groucho what are you invested in? Groucho answered “Only Bonds”. The broker said “they don’t give you good returns”. Groucho answered “Not if you have enough of them”. Groucho would not understand the angst that bonds engender on this site. Neither do I. It is source of predicable returns. Good luck.
Groucho lost a lot of money in shares of Anaconda Copper . Later in one of his films he used “Anaconda” as a swear word.
Johnathon Livingston
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Re: My favorite authors are turning their backs on Bonds

Post by Johnathon Livingston »

UpperNwGuy wrote: Wed Jun 09, 2021 6:00 pm
Johnathon Livingston wrote: Wed Jun 09, 2021 5:32 pm I think the era of the 60/40 has passed. Back in the 90s when I started investing, a financial advisor would put a 25 year old or a 55 year old in a 60/40. It was a beautiful thing—60% in the US stock market, 40% in US Bonds. The 60/40 offered good returns during a bull run and would pop back up during a bear market and get you back above water and appreciating again in no time. Simple, elegant, versatile.

Change with the times my friends.
What is your recommended portfolio for the post-60/40 era?
Generally speaking, I think people need a more aggressive portfolio with a higher equity allocation than the past, especially for younger investors. That’s vague and general, but beyond that it really depends on the person and their situation. For example, for someone in their 20s who doesn’t know much about investing or have any interest in it, I like index target date funds. I’m a fan of Vanguard’s and also like Blackrock’s. TDFs aren’t perfect, and I don’t like that Vanguard allocates 10% to bonds until age 45 ( I think 100% equities until 40 or 45 would be better) but I think these are a great option for many people. Others who aren’t saving enough starting young face a more complex situation and might need to be more creative than using a target date fund alone or at all. Others who have a lot of interest in investing might also not like a target date fund.
Vanguard Fan 1367
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Re: My favorite authors are turning their backs on Bonds

Post by Vanguard Fan 1367 »

jdb wrote: Wed Jun 09, 2021 6:17 pm Yes. Reminds me of Groucho Marx. He lost lots of money in 1929 crash. Some years later at height of his fame was touring NYSE. A broker shouted “Groucho what are you invested in? Groucho answered “Only Bonds”. The broker said “they don’t give you good returns”. Groucho answered “Not if you have enough of them”. Groucho would not understand the angst that bonds engender on this site. Neither do I. It is source of predicable returns. Good luck.
I am pretty sure that in Groucho's time the interest rates weren't at the pitiful lows of today.
John Bogle: "It's amazing how difficult it is for a man to understand something if he's paid a small fortune not to understand it."
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