For those with bond heavy AAs...how you feeling?

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LeftCoastIV
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Re: For those with bond heavy AAs...how you feeling?

Post by LeftCoastIV »

We're 50/50. I do wish our fixed income would do something besides play its role as ballast though. I've seen MYGA's come up on this forum. May need to look into that more.
Admiral
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Re: For those with bond heavy AAs...how you feeling?

Post by Admiral »

Dude2 wrote: Wed Mar 10, 2021 6:27 am
samsoes wrote: Wed Mar 10, 2021 6:20 am
Peaceful wrote: Fri Mar 05, 2021 11:39 am I'm 60/40 stocks/bonds right now and I'm going to try to hold it there. Since the GFC I've fluctuated ...
What's a GFC?
Great Financial Crisis, i.e. the 2008-2009 debacle which lead to the "lost decade for stocks".
Just as a data point, the S+P (represented by VFINX) from Jan 2009 - Dec 2019 had a CAGR of over 14%

2008 - 2018 was much lower (7.13%) but hardly a "lost decade."

Admittedly, the early years were not pretty.
WillRetire
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Re: For those with bond heavy AAs...how you feeling?

Post by WillRetire »

OP: I'm feeling great! Thanks for asking! And how are you?!?

Stick with your IPS. Rebalance periodically.
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Sandtrap
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Re: For those with bond heavy AAs...how you feeling?

Post by Sandtrap »

Peaceful wrote: Fri Mar 05, 2021 11:39 am I'm 60/40 stocks/bonds right now and I'm going to try to hold it there. Since the GFC I've fluctuated between say 50/50 and sometimes even going down as low as 45% in my equities allocation. I've bumped it up a few percent over the past couple of years not so much that interest rates on fixed income have gone down, but more because of life changes--spouse got a more secure job, mortgage is substantially paid down (but not paid off yet), kids are older and getting through college, the total portfolio is larger.

I think most of us are best served (i.e. protected from the worst behavioral errors) with a portfolio anywhere between 40/60 and 60/40. I don't think I would ever want to go below 40% equities but who knows.

I don't think the low interest rates are a good justification to substantially increase equity risk, all other things being equal. Maybe 5-10%, which is essentially where I've ended up anyway.

March 2020 reminded me that I really really didn't like stock market crashes. At the time, in the moment, even though intellectually I "knew" that was supposedly when we were supposed to be loading up on equities, I was happy to have a good amount of fixed income and wished I'd had more. (Please refer to my signature.)
+1
Great points.

thanks!
j :D
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TexasBorn
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Re: For those with bond heavy AAs...how you feeling?

Post by TexasBorn »

WillRetire wrote: Wed Mar 10, 2021 7:37 am OP: I'm feeling great! Thanks for asking! And how are you?!?

Stick with your IPS. Rebalance periodically.
I’m feeling good about my bond heavy AA : )

It feels like now bonds will beat inflation over the next few to several years which was my goal.

Do I wish it was more than that? Sure. Will I change my plan because it’s not? No.

I still like the balance of bonds.
Dude2
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Re: For those with bond heavy AAs...how you feeling?

Post by Dude2 »

Admiral wrote: Wed Mar 10, 2021 7:35 am
Dude2 wrote: Wed Mar 10, 2021 6:27 am
samsoes wrote: Wed Mar 10, 2021 6:20 am
Peaceful wrote: Fri Mar 05, 2021 11:39 am I'm 60/40 stocks/bonds right now and I'm going to try to hold it there. Since the GFC I've fluctuated ...
What's a GFC?
Great Financial Crisis, i.e. the 2008-2009 debacle which lead to the "lost decade for stocks".
Just as a data point, the S+P (represented by VFINX) from Jan 2009 - Dec 2019 had a CAGR of over 14%

2008 - 2018 was much lower (7.13%) but hardly a "lost decade."

Admittedly, the early years were not pretty.
My apologies. I'm getting my decades confused. Apparently,
https://www.pattonfunds.com/remembering-a-lost-decade.html wrote:1999 – 2009 is called “The Lost Decade” by investors because the most widely followed stock market index, the S&P 500, returned -2% for this 10-year period (and this includes the reinvestment of dividends!). This is a reminder to investors that large U.S. stocks can go long periods of time without generating any gains.
I guess it was the tech bubble debacle that put us into that which was followed by the GFC debacle.
Then ’tis like the breath of an unfee’d lawyer.
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TexasBorn
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Re: For those with bond heavy AAs...how you feeling?

Post by TexasBorn »

Reviving my prior thread now 3 months later

lots more talk in recent days that "inflation isn't transitory"...

How are bond heavy portfolio holders feeling now?

We chose a bond heavy portfolio to protect the kid's college funds that were inherited and will start to be drawn down in several years.I have a better feeling now of not just beating inflation but also growing it a bit too now.



*Reminder, this thread wasn't meant to create arguments about if equities or bonds are better.
KlangFool
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Re: For those with bond heavy AAs...how you feeling?

Post by KlangFool »

OP,

Feeling great! Harvesting my equity gain from the March 2020 crash and subsequent rebalancing. Preparing to profit from the coming crash with my 40% bond allocation.

KlangFool
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Padlin
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Re: For those with bond heavy AAs...how you feeling?

Post by Padlin »

45/55. I used to worry more about my equities when I was 65/35 and all the chatter was about an impending drop then I do about my bonds right now. A small nudge to my bond balance is no big deal. I gave up performance chasing in 2000 so I'll do nothing.

It's interesting that something like half the respondents to a thread for those heavy in bonds are from folks heavy in equities.
Regards | Bob
hudson
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Three Months Later

Post by hudson »

hudson wrote: Fri Mar 05, 2021 11:34 am TexasBorn,

I'm 100% fixed.
I ignore all predictions and talk on interest rates.
When a fixed income product expires, I look for and take the best available.
I plan to try and match bond durations with when I plan to spend the proceeds.
Of course, I'm always looking for a better deal, if it's AAA/AA/A quality and low expense.
TexasBorn...3 months later...
No change
Except for TIPS and regular treasuries. I don't see a lot of options.
I'm not going to buy any stocks.
If I had money to invest today, I'd consider individual treasuries including TIPS or funds/ETFs holding the same. I would duration match.
I'd take a hard look at high quality and low expense muni funds/ETFS like VWIUX, VWLUX, BMBIX, MUB, or VTEB. Besides VWLUX are there any high quality/low expense long muni funds. If I'm going to duration match, I'll need some longer munis.
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TexasBorn
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Re: For those with bond heavy AAs...how you feeling?

Post by TexasBorn »

Padlin wrote: Mon Jun 14, 2021 1:43 pm
It's interesting that something like half the respondents to a thread for those heavy in bonds are from folks heavy in equities.
I agree!!

But thanks for the other part of your response too.
manuvns
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Re: For those with bond heavy AAs...how you feeling?

Post by manuvns »

i was feeling good until i saw this today on market watch ,

https://www.marketwatch.com/story/dimon ... op_stories
Thanks!
manuvns
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Re: For those with bond heavy AAs...how you feeling?

Post by manuvns »

KlangFool wrote: Mon Jun 14, 2021 12:31 pm OP,

Feeling great! Harvesting my equity gain from the March 2020 crash and subsequent rebalancing. Preparing to profit from the coming crash with my 40% bond allocation.

KlangFool
be ready for correction to your bond assets as well .
Thanks!
KlangFool
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Re: For those with bond heavy AAs...how you feeling?

Post by KlangFool »

manuvns wrote: Mon Jun 14, 2021 4:20 pm
KlangFool wrote: Mon Jun 14, 2021 12:31 pm OP,

Feeling great! Harvesting my equity gain from the March 2020 crash and subsequent rebalancing. Preparing to profit from the coming crash with my 40% bond allocation.

KlangFool
be ready for correction to your bond assets as well .
manuvns,

I had done that too. I harvested 120K from my portfolio and pay down my mortgage.

I am prepared for whatever may come next. Have you bought your share of physical Gold/Silver?

KlangFool
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TexasBorn
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Re: For those with bond heavy AAs...how you feeling?

Post by TexasBorn »

manuvns wrote: Mon Jun 14, 2021 4:19 pm i was feeling good until i saw this today on market watch ,

https://www.marketwatch.com/story/dimon ... op_stories
If you don’t need to touch the “principal”, then won’t you enjoy higher returns for a bit?
BigJohn
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Re: For those with bond heavy AAs...how you feeling?

Post by BigJohn »

I went to 50% TIPS a while back so feeling fine. Who knows whether this inflation spurt is transitory or not but I’m making no changes.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
manuvns
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Re: For those with bond heavy AAs...how you feeling?

Post by manuvns »

BigJohn wrote: Mon Jun 14, 2021 5:11 pm I went to 50% TIPS a while back so feeling fine. Who knows whether this inflation spurt is transitory or not but I’m making no changes.
don't count on stock market pullback , people continue to buy stock like crazy

https://www.bloomberg.com/news/articles ... r-warnings
Thanks!
LeftCoastIV
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Re: For those with bond heavy AAs...how you feeling?

Post by LeftCoastIV »

TexasBorn wrote: Mon Jun 14, 2021 4:36 pm
manuvns wrote: Mon Jun 14, 2021 4:19 pm i was feeling good until i saw this today on market watch ,

https://www.marketwatch.com/story/dimon ... op_stories
If you don’t need to touch the “principal”, then won’t you enjoy higher returns for a bit?
I think the point is that buying bonds exposes you to price declines if/as rates increase. And since rates are so low, a price decline can wipe out any yield, or more.
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HomerJ
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Re: For those with bond heavy AAs...how you feeling?

Post by HomerJ »

LeftCoastIV wrote: Thu Jun 17, 2021 1:29 pm
TexasBorn wrote: Mon Jun 14, 2021 4:36 pm
manuvns wrote: Mon Jun 14, 2021 4:19 pm i was feeling good until i saw this today on market watch ,

https://www.marketwatch.com/story/dimon ... op_stories
If you don’t need to touch the “principal”, then won’t you enjoy higher returns for a bit?
I think the point is that buying bonds exposes you to price declines if/as rates increase. And since rates are so low, a price decline can wipe out any yield, or more.
Bond FUNDs are self-correcting. Rate changes do not hurt bond fund holders over the average duration of the fund.

If rates go up, yes, your bond funds will go down in value.. But rates went up, so they will start paying out more, and you'll break even after a short while (unless we're talking about long-term bond funds), and you'll end up with more.

If rates go down, yes, your bond funds will go up in value... But rates when down, so they will start paying out less, so the gain in your fund is just making up for the smaller yield.

Rates going up is no reason to abandon bond funds... I WANT rates to go up... I'll take the small temporary hit to have bond funds paying 3%-4% a year again someday.

Bond funds are pretty steady, in all interest rate environments... rates going up or down, bond funds are still good.

Inflation is real danger for bond funds... Not rising interest rates.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
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TexasBorn
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Re: For those with bond heavy AAs...how you feeling?

Post by TexasBorn »

HomerJ wrote: Thu Jun 17, 2021 1:44 pm Inflation is real danger for bond funds... Not rising interest rates.
Could you elaborate more on your thoughts about this with the “fear” of rising inflation?
KlangFool
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Re: For those with bond heavy AAs...how you feeling?

Post by KlangFool »

HomerJ wrote: Thu Jun 17, 2021 1:44 pm
Inflation is real danger for bond funds... Not rising interest rates.
HomerJ,

It is only a problem if someone is 100% bond fund. Neither of us is in that category. So, it is not a problem.

It is a bad idea to be 100% in anything anyhow.

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JustGotScammed
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Re: For those with bond heavy AAs...how you feeling?

Post by JustGotScammed »

TexasBorn wrote: Fri Mar 05, 2021 11:22 am With the current climate of yields inching up, and now Powell saying they’ll keep rates low...

If you have a portfolio heavy in bonds, how are you feeling right now? What’s your opinion for 1 year? 3 years? 5 years etc?

I have one portfolio that is 70% bonds so I’m intrigued what others thoughts are.
I strongly recommend 0% allocation to bonds. Anything paying out under 3.5% is as close to a guaranteed loss of purchasing power as you'll ever encounter. A few dozen MegaCorp stocks are just as safe and pay out dividends that are sometimes higher than bond interest, plus you get capital gains. Bonds are, unfortunately at the current rates prevailing in the United States, a loser's game.
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ruralavalon
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Re: For those with bond heavy AAs...how you feeling?

Post by ruralavalon »

LeftCoastIV wrote: Thu Jun 17, 2021 1:29 pm
TexasBorn wrote: Mon Jun 14, 2021 4:36 pm
manuvns wrote: Mon Jun 14, 2021 4:19 pm i was feeling good until i saw this today on market watch ,

https://www.marketwatch.com/story/dimon ... op_stories
If you don’t need to touch the “principal”, then won’t you enjoy higher returns for a bit?
I think the point is that buying bonds exposes you to price declines if/as rates increase. And since rates are so low, a price decline can wipe out any yield, or more.
The larger point is that stocks still are riskier than bonds.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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HomerJ
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Re: For those with bond heavy AAs...how you feeling?

Post by HomerJ »

JustGotScammed wrote: Thu Jun 17, 2021 2:23 pm
TexasBorn wrote: Fri Mar 05, 2021 11:22 am With the current climate of yields inching up, and now Powell saying they’ll keep rates low...

If you have a portfolio heavy in bonds, how are you feeling right now? What’s your opinion for 1 year? 3 years? 5 years etc?

I have one portfolio that is 70% bonds so I’m intrigued what others thoughts are.
I strongly recommend 0% allocation to bonds. Anything paying out under 3.5% is as close to a guaranteed loss of purchasing power as you'll ever encounter. A few dozen MegaCorp stocks are just as safe and pay out dividends that are sometimes higher than bond interest, plus you get capital gains. Bonds are, unfortunately at the current rates prevailing in the United States, a loser's game.
The highlighted phrase is not true.

Bonds are not returning much, even losing slightly in real terms, but they won't drop 50% in a year, and a few dozen MegaCorp absolutely could do that and HAVE done that in the past.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
young-ish
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Re: For those with bond heavy AAs...how you feeling?

Post by young-ish »

JustGotScammed wrote: Thu Jun 17, 2021 2:23 pm
I strongly recommend 0% allocation to bonds. Anything paying out under 3.5% is as close to a guaranteed loss of purchasing power as you'll ever encounter. A few dozen MegaCorp stocks are just as safe and pay out dividends that are sometimes higher than bond interest, plus you get capital gains. Bonds are, unfortunately at the current rates prevailing in the United States, a loser's game.
Do you hold a 100% stock portfolio? If so your risk tolerance may be a lot higher than others on this forum. Many here have little need to take large risks with their life savings.
BigJohn
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Re: For those with bond heavy AAs...how you feeling?

Post by BigJohn »

manuvns wrote: Thu Jun 17, 2021 10:36 am
BigJohn wrote: Mon Jun 14, 2021 5:11 pm I went to 50% TIPS a while back so feeling fine. Who knows whether this inflation spurt is transitory or not but I’m making no changes.
don't count on stock market pullback , people continue to buy stock like crazy

https://www.bloomberg.com/news/articles ... r-warnings
Not counting on it... I went to 50% TIPS while keeping my overall assets allocation the same.
"The greatest enemy of a good plan is the dream of a perfect plan" - Carl Von Clausewitz
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HomerJ
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Re: For those with bond heavy AAs...how you feeling?

Post by HomerJ »

TexasBorn wrote: Thu Jun 17, 2021 2:02 pm
HomerJ wrote: Thu Jun 17, 2021 1:44 pm Inflation is real danger for bond funds... Not rising interest rates.
Could you elaborate more on your thoughts about this with the “fear” of rising inflation?
Inflation "fears" could be wrong. In my opinion, are likely wrong. We got a spike in airline tickets and new car prices from a year ago. What was happening a year ago with the airlines? Anyone remember?

There's a supply and demand issue from coming out of the pandemic. That will settle down at some point in the near future. So inflation will probably settle down too.

But hey, no one knows. Maybe we'll see higher inflation for a while... But then the Fed will probably raise interest raises, which will hurt bond funds at first, but it will be good for them in the long run.

I have 50% of my money in intermediate-term bonds... Mostly Total Bond Market and Intermediate Treasuries Fund. A stable fund in my 401k. 5% of my portfolio (so 10% of my bonds) is in Ibonds, so those are inflation protected. I keep adding to those each year.

I don't have any individual TIPs, nor do I have a TIPs fund. Maybe I should.

I'm not too worried about a slow drain on my cash reserves right now from low inflation. It's only a 1%-2% a year drain. Which in the long run hurts, but in the short-run is manageable. Especially since the stock side of my portfolio has done so well.... I can afford a small loss on the bond side, and still be way ahead of my goals.
A Goldman Sachs associate provided a variety of detailed explanations, but then offered a caveat, “If I’m being dead-### honest, though, nobody knows what’s really going on.”
LeftCoastIV
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Re: For those with bond heavy AAs...how you feeling?

Post by LeftCoastIV »

HomerJ wrote: Thu Jun 17, 2021 1:44 pm
Bond FUNDs are self-correcting. Rate changes do not hurt bond fund holders over the average duration of the fund.

If rates go up, yes, your bond funds will go down in value.. But rates went up, so they will start paying out more, and you'll break even after a short while (unless we're talking about long-term bond funds), and you'll end up with more.

If rates go down, yes, your bond funds will go up in value... But rates when down, so they will start paying out less, so the gain in your fund is just making up for the smaller yield.

Rates going up is no reason to abandon bond funds... I WANT rates to go up... I'll take the small temporary hit to have bond funds paying 3%-4% a year again someday.

Bond funds are pretty steady, in all interest rate environments... rates going up or down, bond funds are still good.

Inflation is real danger for bond funds... Not rising interest rates.
There is also the argument that *expected* rate increases and *expected* inflation are already built into NAV. In that sense, only *unexpected* moves should drive NAV changes.

That said, I'm considering DCA'ing into bond funds as the yields are so puny that even small moves in NAV make them inferior to high-yield savings. Perhaps that's just a phycological mechanism, as bond funds in essence DCA as a part of their normal function as they purchase new bond issues.
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Re: For those with bond heavy AAs...how you feeling?

Post by UpperNwGuy »

HomerJ wrote: Thu Jun 17, 2021 4:15 pm I have 50% of my money in intermediate-term bonds... Mostly Total Bond Market and Intermediate Treasuries Fund. A stable fund in my 401k. 5% of my portfolio (so 10% of my bonds) is in Ibonds, so those are inflation protected. I keep adding to those each year.

I don't have any individual TIPs, nor do I have a TIPs fund. Maybe I should.

I'm not too worried about a slow drain on my cash reserves right now from low inflation. It's only a 1%-2% a year drain. Which in the long run hurts, but in the short-run is manageable. Especially since the stock side of my portfolio has done so well.... I can afford a small loss on the bond side, and still be way ahead of my goals.
I follow the same overall approach as HomerJ but with a 70/30 allocation and no iBonds.
dcabler
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Re: For those with bond heavy AAs...how you feeling?

Post by dcabler »

nisiprius wrote: Wed Mar 10, 2021 7:11 am I'm feeling fine. I'm not kidding about that, and that's not whistling past the graveyard. It seems to me that lately people have been going nuts with recency and short-term thinking.

Recall that the Total Bond fund has a duration of 6.6 years, and that Vanguard says that it "may be appropriate for investors with medium-term investment horizons (4 to 10 years)." Let's round those and say "five years."

Recall that because of the pull to maturity, with bonds, not only is it true that what goes up must come down, it is also true that what goes down must go up... and it does it on schedule. This is a result of the fundamental nature of bonds as contracts to pay specific numbers of dollars on specific days--not any somewhat-vague "tendency to mean reversion."

With that in mind, I expected and I expect my bond funds to do three things.

a) to make money
b) to make more money than a money market mutual fund or a fully-liquid bank account*
c) to have ups and downs lasting a few years, yet to be very stable and reliable over holding periods of five years or so

So let's put on "five-year glasses." This is Vanguard Total Bond in blue, and a money market fund in orange.

Source

Image

I see a general upward loft, corresponding to the general level of the ten-year interest rate. I see it bending down--but not leveling--corresponding to the general decline in interest rates. And I see superimposed on that ups and downs. Those ups and downs aren't negligible, the curve is very different from the zero-volatility money market fund (orange line). But they only last a couple of years and they are small compared with the general rise of the fund. Waves on a rising tide, and the tide is rising more slowly but is still rising.

I also see that for the last couple of years the fund has sort of outperformed a smoothed line, there's been a bulge upward. But I call it "undeserved" because it's a departure from general expectation. It happens to be a smallish upward excursion, and there have been similar upward and downward excursions all along. I rather imagined that I'd have to give some of it back, and at this point I don't interpret it as anything else.

Since inception, there has never been a five-year period over which Total Bond failed to make money, and the last five years is no exception. Over the last five years, every $10,000 I had in Total Bond made $1,800 compared to $550 in a money market fund, three times as much. Bank accounts were better, I don't want to bother to get an actual number but "money in the bank" would have averaged perhaps 1.5%-2% per year or very roughly $750-$1,000.

And course the money I had in stocks has made fabulously more.

The point is that everything has been behaving pretty much as expected. I look at the totals on my Vanguard statement for my Total Bond fund and as long as I'm not looking, you know, day by day or month by month or year-to-date (when the appropriate period is about five years) I don't see anything alarming.

My other fund, Vanguard Inflation-Protected Securities--pretty much the same. Definitely rougher-edged, though, and not quite as convincing in terms of seeing a smooth curve underneath the ripples.

Image

*It is possible that bank CDs could be superior in the sense of "less risk, almost as much return."
Wonder what the second graph would look like in real, not nominal dollars...

Cheers.
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Re: For those with bond heavy AAs...how you feeling?

Post by HansT »

>> dcabler: Wonder what the second graph would look like in real, not nominal dollars...

Not much difference, there hasn't been any meaningful inflation in that time period.

>> nisiprius: I'm feeling fine. I'm not kidding about that, and that's not whistling past the graveyard.

Well of course that is. Showing bond returns during a *40 year bull run in rates* isn't very predictive when rates now stand at an all time low. Rates do mean revert, and they're currently at historically extreme values.

>> ruralavalon: The larger point is that stocks still are riskier than bonds.

Well, if you define risk as return volatility, yes. If you define risk as shortfall probability, then bonds are currently much, much riskier than stocks.

>> JustGotScammed: I strongly recommend 0% allocation to bonds.

That's the smart money.
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drumboy256
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Re: For those with bond heavy AAs...how you feeling?

Post by drumboy256 »

My LTT are kicking butt!! :sharebeer
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Retired Bill
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Re: For those with bond heavy AAs...how you feeling?

Post by Retired Bill »

Reading Jason Zweig's column of 10/01/2021 in the WSJ reminded me once again the start of this 40 year bull market in bonds, and U.S. 30 year bonds bull market in particular. Today it is hard to believe that 20 yr US Bonds were sold by U.S. Treasury to yield 15.78% on 9-30-1981. And, as the column states that wasn't high enough to produce an after tax return to keep one ahead of inflation! My AA has been a work in process over the years. I knew next to nothing 40 years ago about long-term investing. Was self-employed in 1981 and earnings that year at $30,833 but decreased to $24,132 in 1982, and $21,834 in 1983. My small business clients were going broke faster than I could grow the business was reason income declined, but did turn around in 1984 and following years. During Nov 1981 our second child was born. Traditional IRA's annual contribution limited to $1,500 per person, but going up to $2,000 starting 1982, and stayed at that level to 2001.

It was a struggle, but was able to contribute $2000 for both spouses on Jan 22, 1982, to the Trad IRA's. We invested the IRA contribution in a 10yr FDIC insured CD's that paid 15.75% annual interest compounded daily Did same thing for years 1983-1986 as rates still could be obtained at over 10%. So was fixed income heavy at 100% AA for those early years on the journey to a secure retirement. During this time started reading more to get educated about investing and retirement planning. The internet opened up access to information unlikely I would have located otherwise. After a detour trying individual stocks with a discount broker, decided Vanguard Balanced Index Fund was a better way with less effort and more diversification to maintain a 60/40 AA. As CD's matured, the proceeds along with annual IRA contributions eventually got the AA to 60/40 with bulk in the Vanguard Balanced Index Fund.

Skipping over the influences of Fama, French, Sharpe, Buffet, Bogle, and Merriman on my investing style, the AA has drifted to 44% large cap blend, 43% small cap (mostly value, and 13% cash over the pass 30 years. So to answer the question, "For those with bond heavy AAs...how you feeling?" I was feeling uncertain 40 years ago when heavy in fixed income investments, but thought 10%+ would be better than equities would produce over the next 10 years (a long time when in my early 30's) Today I'm feeling the bull market in bonds is closer to its end or may have already ended (hindsight will give the answer some day). I'm also feeling many equities are over valued and returns could be less than long-term expected returns over my remaining lifetime. Either way, I feel very blessed the investment portfolio would cover 160X annual expenses in excess of social security today. Feeling very blessed indeed!
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Re: For those with bond heavy AAs...how you feeling?

Post by sailaway »

TexasBorn wrote: Mon Jun 14, 2021 2:30 pm
Padlin wrote: Mon Jun 14, 2021 1:43 pm
It's interesting that something like half the respondents to a thread for those heavy in bonds are from folks heavy in equities.
I agree!!

But thanks for the other part of your response too.
Well, I got the impression you might not be so heavy on bonds overall from the OP, where you said you had one portfolio that was 70% bonds. So do we, but the total portfolio comes to 70/30.
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Re: For those with bond heavy AAs...how you feeling?

Post by Parkinglotracer »

Retired Bill wrote: Sat Oct 02, 2021 4:20 pm Reading Jason Zweig's column of 10/01/2021 in the WSJ reminded me once again the start of this 40 year bull market in bonds, and U.S. 30 year bonds bull market in particular. Today it is hard to believe that 20 yr US Bonds were sold by U.S. Treasury to yield 15.78% on 9-30-1981. And, as the column states that wasn't high enough to produce an after tax return to keep one ahead of inflation! My AA has been a work in process over the years. I knew next to nothing 40 years ago about long-term investing. Was self-employed in 1981 and earnings that year at $30,833 but decreased to $24,132 in 1982, and $21,834 in 1983. My small business clients were going broke faster than I could grow the business was reason income declined, but did turn around in 1984 and following years. During Nov 1981 our second child was born. Traditional IRA's annual contribution limited to $1,500 per person, but going up to $2,000 starting 1982, and stayed at that level to 2001.

It was a struggle, but was able to contribute $2000 for both spouses on Jan 22, 1982, to the Trad IRA's. We invested the IRA contribution in a 10yr FDIC insured CD's that paid 15.75% annual interest compounded daily Did same thing for years 1983-1986 as rates still could be obtained at over 10%. So was fixed income heavy at 100% AA for those early years on the journey to a secure retirement. During this time started reading more to get educated about investing and retirement planning. The internet opened up access to information unlikely I would have located otherwise. After a detour trying individual stocks with a discount broker, decided Vanguard Balanced Index Fund was a better way with less effort and more diversification to maintain a 60/40 AA. As CD's matured, the proceeds along with annual IRA contributions eventually got the AA to 60/40 with bulk in the Vanguard Balanced Index Fund.

Skipping over the influences of Fama, French, Sharpe, Buffet, Bogle, and Merriman on my investing style, the AA has drifted to 44% large cap blend, 43% small cap (mostly value, and 13% cash over the pass 30 years. So to answer the question, "For those with bond heavy AAs...how you feeling?" I was feeling uncertain 40 years ago when heavy in fixed income investments, but thought 10%+ would be better than equities would produce over the next 10 years (a long time when in my early 30's) Today I'm feeling the bull market in bonds is closer to its end or may have already ended (hindsight will give the answer some day). I'm also feeling many equities are over valued and returns could be less than long-term expected returns over my remaining lifetime. Either way, I feel very blessed the investment portfolio would cover 160X annual expenses in excess of social security today. Feeling very blessed indeed!

160X annual expenses seems like a pretty comfortable position to be in.
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Re: For those with bond heavy AAs...how you feeling?

Post by AnnetteLouisan »

10/90 here. I’m feeling good. I didn’t care for my Sept 30 401k numbers but the bonds played their role and I was mildly annoyed rather than up all night panicking.

At the same time, I’m just slightly miffed that I’m not 36 w $7M like a lot of the folks here, when perhaps I could have $7M today if I’d taken a proper AA from the start. But don’t mind me. I’m fine.
Last edited by AnnetteLouisan on Sun Oct 10, 2021 11:03 am, edited 2 times in total.
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Re: For those with bond heavy AAs...how you feeling?

Post by Beensabu »

45/55. Pretty good. I had a positive Q3 return. Looks like it's working so far. We'll see.
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Re: For those with bond heavy AAs...how you feeling?

Post by Broken Man 1999 »

Not sure what % of bonds make an AA "bond heavy."

At any rate, we are currently 57% equities/43% bonds.

I am feeling fine with our ST/IT/LT Treasury Index holdings. And, the yields right now on our I-bonds are certainly good.

A couple of months ago I added some LTT, and I still have capital gains on my one purchase.

All in all, not a bad year.

The only other bond holdings I have added this year have been I-bonds. Kinda hard to pass up at the present.

Broken Man 1999
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Re: For those with bond heavy AAs...how you feeling?

Post by AnnetteLouisan »

friar1610 wrote: Fri Mar 05, 2021 12:48 pm
HomerJ wrote: Fri Mar 05, 2021 12:15 pm
Oh, and I've been 50/50 for...

I love 50/50 because I'm not bond heavy or stock heavy. I'm never wrong, and I'm always happy.
^^ This.
😂😂😂 Love this!
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Re: For those with bond heavy AAs...how you feeling?

Post by nisiprius »

dcabler wrote: Fri Jun 18, 2021 6:41 am...Wonder what the second graph would look like in real, not nominal dollars...
Like this.

Vanguard Inflation-Protected Securities, red. Total Bond, blue

Image
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
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Re: For those with bond heavy AAs...how you feeling?

Post by hudson »

Thanks Nisiprius!
I can see the Lehman Brothers dip in Sep. 2008. https://en.wikipedia.org/wiki/Bankruptc ... ganization.
I'm all fixed income.
I'm OK for now. I may not be in early 2024 when my fixed holdings start expiring.
I guess in early 2024, I'll look around and go with the best available.
I speculate that that might be high quality munis and duration matched TIPS.
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Re: For those with bond heavy AAs...how you feeling?

Post by ruralavalon »

Our asset allocation includes 50% fixed income, and doesn't feel heavy. Our entire fixed income allocation is in Vanguard Intermediate-term Bond Index Fund (VBILX).

We are feeling fine :D , thanks for asking.

nisiprius wrote: Wed Mar 10, 2021 7:11 am I'm feeling fine. I'm not kidding about that, and that's not whistling past the graveyard. It seems to me that lately people have been going nuts with recency and short-term thinking.
. . . . .
"[G]oing nuts", is not the correct technical term :wink: .

Rate anxiety, it seems, is a common ailment.
Mayo Clinic wrote:Common anxiety signs and symptoms include:
[1] Feeling nervous, restless or tense
[2] Having a sense of impending danger, panic or doom . . .
[3] Trouble concentrating or thinking about anything other than the present worry . . .
[4] Having trouble sleeping. . .
[5] Having difficulty controlling worry
source

Treatment for rate anxiety:
(1) stop reading, watching, or listening to financial news;
(2) read a book, watch a movie, go for a walk, exercise, do anything else with your time; and
(3) invest for the long-term.

Rising interest rates are good for the long-term bond fund investor. I hope interest rates do increase (so says a retiree with zero debt).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: For those with bond heavy AAs...how you feeling?

Post by RickyGold »

ruralavalon wrote: Sun Oct 03, 2021 6:49 am
Rising interest rates are good for the long-term bond fund investor. I hope interest rates do increase (so says a retiree with zero debt).
Why are rising rates good for a long time holder of a Total Bond Fund?
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Re: For those with bond heavy AAs...how you feeling?

Post by KingRiggs »

RickyGold wrote: Mon Oct 11, 2021 4:44 am
ruralavalon wrote: Sun Oct 03, 2021 6:49 am
Rising interest rates are good for the long-term bond fund investor. I hope interest rates do increase (so says a retiree with zero debt).
Why are rising rates good for a long time holder of a Total Bond Fund?
As long as the holding period is long enough, old bonds will expire and be replaced with new ones at the higher rate. Essentially, if you hold the fund longer than its stated duration, rising interest rates are a wash at minimum, and a benefit in the best case.
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Re: For those with bond heavy AAs...how you feeling?

Post by ruralavalon »

KingRiggs wrote: Mon Oct 11, 2021 6:26 am
RickyGold wrote: Mon Oct 11, 2021 4:44 am
ruralavalon wrote: Sun Oct 03, 2021 6:49 am
Rising interest rates are good for the long-term bond fund investor. I hope interest rates do increase (so says a retiree with zero debt).
Why are rising rates good for a long time holder of a Total Bond Fund?
As long as the holding period is long enough, old bonds will expire and be replaced with new ones at the higher rate. Essentially, if you hold the fund longer than its stated duration, rising interest rates are a wash at minimum, and a benefit in the best case.
This.

So invest for the long-term, not based on conditions of the moment.

The effective duration of Vanguard Total Bond Market Index Fund (VBTLX) is 6.94 years.

We don't need to spend all of our money this year, next year, etc. It will be spread out over the rest of our lifetimes (more if we leave an inheritance for our children, as is probable), so conditions of the moment don't matter very much.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
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Re: For those with bond heavy AAs...how you feeling?

Post by RickyGold »

ruralavalon wrote: Mon Oct 11, 2021 6:52 am
KingRiggs wrote: Mon Oct 11, 2021 6:26 am
RickyGold wrote: Mon Oct 11, 2021 4:44 am
ruralavalon wrote: Sun Oct 03, 2021 6:49 am
Rising interest rates are good for the long-term bond fund investor. I hope interest rates do increase (so says a retiree with zero debt).
Why are rising rates good for a long time holder of a Total Bond Fund?
As long as the holding period is long enough, old bonds will expire and be replaced with new ones at the higher rate. Essentially, if you hold the fund longer than its stated duration, rising interest rates are a wash at minimum, and a benefit in the best case.
This.

So invest for the long-term, not based on conditions of the moment.

The effective duration of Vanguard Total Bond Market Index Fund (VBTLX) is 6.94 years.

We don't need to spend all of our money this year, next year, etc. It will be spread out over the rest of our lifetimes (more if we leave an inheritance for our children, as is probable), so conditions of the moment don't matter very much.
Excellent, thank you ruralavalon and KingRiggs, very helpful posts.
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Re: For those with bond heavy AAs...how you feeling?

Post by RickyGold »

I think this "bond heavy" thread on rising rates is very interesting.

I have the 35/65 three-fund portfolio, and therefor resemble the "bond heavy" investor. So if I am concerned about rising rates impacting my total bond fund, it seems these are my options:

1. Do nothing, ignore the noise, stick to the plan.

2. If rising rates cause my bonds to drop, I could view this as a "buying" or "rebalancing opportunity".

3. I could add a TIPS fund as part of my bond holdings (maybe 20-50% TIPS?).

4. I could up the percentage of my equity allocation .... so maybe go from 35% stocks to 40%?

5. Buy gold or other commodities.

6. Buy a floating rate bond fund.

I wonder if there are any other options?

But for now, I think I'm just staying the course and doing nothing. I've never been good at timing the market!
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Re: For those with bond heavy AAs...how you feeling?

Post by ruralavalon »

RickyGold wrote: Mon Oct 11, 2021 7:34 am I think this "bond heavy" thread on rising rates is very interesting.

I have the 35/65 three-fund portfolio, and therefor resemble the "bond heavy" investor. So if I am concerned about rising rates impacting my total bond fund, it seems these are my options:

1. Do nothing, ignore the noise, stick to the plan.

2. If rising rates cause my bonds to drop, I could view this as a "buying" or "rebalancing opportunity".

3. I could add a TIPS fund as part of my bond holdings (maybe 20-50% TIPS?).

4. I could up the percentage of my equity allocation .... so maybe go from 35% stocks to 40%?

5. Buy gold or other commodities.

6. Buy a floating rate bond fund.

I wonder if there are any other options?

But for now, I think I'm just staying the course and doing nothing. I've never been good at timing the market!
I savings bonds is another option, better than adding a TIPS fund.

"The composite rate for I bonds issued from May 2021 through October 2021 is 3.54 percent. This rate applies for the first six months you own the bond." Treasury Direct.

"Do nothing, ignore the noise, stick to the plan" is my usual preference.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
RickyGold
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Re: For those with bond heavy AAs...how you feeling?

Post by RickyGold »

ruralavalon wrote: Mon Oct 11, 2021 7:46 am
RickyGold wrote: Mon Oct 11, 2021 7:34 am I think this "bond heavy" thread on rising rates is very interesting.

I have the 35/65 three-fund portfolio, and therefor resemble the "bond heavy" investor. So if I am concerned about rising rates impacting my total bond fund, it seems these are my options:

1. Do nothing, ignore the noise, stick to the plan.

2. If rising rates cause my bonds to drop, I could view this as a "buying" or "rebalancing opportunity".

3. I could add a TIPS fund as part of my bond holdings (maybe 20-50% TIPS?).

4. I could up the percentage of my equity allocation .... so maybe go from 35% stocks to 40%?

5. Buy gold or other commodities.

6. Buy a floating rate bond fund.

I wonder if there are any other options?

But for now, I think I'm just staying the course and doing nothing. I've never been good at timing the market!
I savings bonds is another option, better than adding a TIPS fund.

"The composite rate for I bonds issued from May 2021 through October 2021 is 3.54 percent. This rate applies for the first six months you own the bond." Treasury Direct.

"Do nothing, ignore the noise, stick to the plan" is my usual preference.
Yes, forgot about I-bonds....thanks again!
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TexasBorn
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Re: For those with bond heavy AAs...how you feeling?

Post by TexasBorn »

Right now my “70% bonds” is holding at a 6% return after two years. Yes stocks are way up which has caused my AA to actually drop to 65% bonds.

I’m thinking about rebalancing but don’t really want to pay the taxes: /

This portfolio is not one I want to buy more into bonds on to “rebalance”. It’s the college funds and I don’t want to contribute more and mix funds…

I’m still feeling good about bonds and looking forward to some interest rate increases coming. I don’t plan to withdraw down funds for another 5 years.
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