Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
exodusNH
Posts: 932
Joined: Wed Jan 06, 2021 8:21 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by exodusNH »

invest2bfree wrote: Tue Sep 07, 2021 8:09 am
Beensabu wrote: Tue Sep 07, 2021 12:16 am
invest2bfree wrote: Fri Aug 27, 2021 9:31 am How can you justify what happened in 2000-2017 where s&P ran out of money.
VDIGX literally held most of its value?

https://www.portfoliovisualizer.com/bac ... tion3_3=40
Change your start date to 2001. What do you see?

The difference comes down to them moving in different directions during 2000. That's it.

So why? Why did they move in different directions that one year? Do you know? How likely is it that situation will be duplicated in the future? How likely is it for dividend funds to suddenly have low correlation with the market right when you need them to?

You know what else held most of its value from 2000-2017? A 60/40 portfolio with Total Bond, which is what you previously had.
invest2bfree wrote: Mon Sep 06, 2021 11:12 pm My nightmare scenario is my vt is down 50% and I lose my job at the same time. Then panic sets in.
Other kinds of stocks are not a substitute for bonds.

Bonds will not protect us this time. Bond yields were 5% in 2000 and they are 1.3% right now. Max bonds may do is behave like cash. Worse if inflation rears its ugly head.

Iam counting that value and international hold up better in the next sell off.
Cost of capital was vastly higher in 2000. Federal funds rate was over 6%.

But, hey, you already made the change. Now we just have to see how it plays out.
User avatar
Beensabu
Posts: 1204
Joined: Sun Aug 14, 2016 3:22 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by Beensabu »

invest2bfree wrote: Tue Sep 07, 2021 8:09 am
Beensabu wrote: Tue Sep 07, 2021 12:16 am You know what else held most of its value from 2000-2017? A 60/40 portfolio with Total Bond, which is what you previously had.
invest2bfree wrote: Mon Sep 06, 2021 11:12 pm My nightmare scenario is my vt is down 50% and I lose my job at the same time. Then panic sets in.
Other kinds of stocks are not a substitute for bonds.
Bonds will not protect us this time. Bond yields were 5% in 2000 and they are 1.3% right now. Max bonds may do is behave like cash. Worse if inflation rears its ugly head.
Short-term bonds may behave like cash.

Intermediate-term bonds will be fine if held at least slightly longer than the duration of the fund.

Even if we do get persistent higher than normal inflation for more than the short-term (and nobody knows for sure if we will or we won't), the effect of that on a 60/40 portfolio would be nothing like the effect of an equities crash on a 100/0 portfolio.
I am counting that value and international hold up better in the next sell off.
You are making a bet. But you have not provided any reasoning for placing the bet beyond a backtest result that is clearly due to a particular dividend fund moving in a different direction than a S&P 500 fund over the course of one year in one of the two most recent major extended crashes.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
sycamore
Posts: 2904
Joined: Tue May 08, 2018 12:06 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by sycamore »

invest2bfree wrote: Tue Sep 07, 2021 8:09 am
Beensabu wrote: Tue Sep 07, 2021 12:16 am
invest2bfree wrote: Fri Aug 27, 2021 9:31 am How can you justify what happened in 2000-2017 where s&P ran out of money.
VDIGX literally held most of its value?

https://www.portfoliovisualizer.com/bac ... tion3_3=40
Change your start date to 2001. What do you see?

The difference comes down to them moving in different directions during 2000. That's it.

So why? Why did they move in different directions that one year? Do you know? How likely is it that situation will be duplicated in the future? How likely is it for dividend funds to suddenly have low correlation with the market right when you need them to?

You know what else held most of its value from 2000-2017? A 60/40 portfolio with Total Bond, which is what you previously had.
invest2bfree wrote: Mon Sep 06, 2021 11:12 pm My nightmare scenario is my vt is down 50% and I lose my job at the same time. Then panic sets in.
Other kinds of stocks are not a substitute for bonds.

Bonds will not protect us this time. Bond yields were 5% in 2000 and they are 1.3% right now. Max bonds may do is behave like cash. Worse if inflation rears its ugly head.

Iam counting that value and international hold up better in the next sell off.
Curious what you mean by "Bonds will not protect us this time" ? Protect from what: rising interest rates, stock market crashes, inflation, ourselves, zombie apocalypse? :)

It sounds like you think bonds were good at some things, but no longer. Is there anything left that bonds are good for? I think so. Do you think bonds are completely useless?
User avatar
LilyFleur
Posts: 2143
Joined: Fri Mar 02, 2018 10:36 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by LilyFleur »

mrspock wrote: Fri Aug 27, 2021 12:01 pm I don’t get this play at all. SCHB
( or SCHX) plus a combo of SCHY/SCHD maybe… but this makes no sense. You lost all yours of your tech exposure, dramatically changing your equity composition.

It’s like being in 1910 and dumping Ford and Coca Cola. Doesn’t make much sense.
I own both SCHB and SCHD (about 5% and 6% of my portfolio). I like that sometimes they move in tandem, and sometimes not.

I don't get very wound up about the taxes on dividends. I view it as a way of pre-paying some of my taxes during the next decade before the RMDs hit, when, depending on earnings, I will experience much larger tax bills. And, I have been using the dividends to pay bills in semi-retirement.
SteadyOne
Posts: 494
Joined: Fri Mar 22, 2019 5:26 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by SteadyOne »

"Having investments in dividend stocks would help me ride this downturn better."

Are you really serious about it?

In 2009 crash scenario dividend and non-dividend stock may decline 50% regardless. And dividend paying stocks may become non-dividend paying stocks at a moment notice.
“Every de­duc­tion is al­lowed as a mat­ter of leg­isla­tive grace.” US Federal Court
rosalee
Posts: 53
Joined: Sat Oct 17, 2020 7:17 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by rosalee »

My dividend was chopped one night last month from 44 cents to 1 penny per share. I, of course, did not see this coming and even numerous financial commentators believed HMLP had a strong balance sheet and reasonable future.

I sold my shares and took a loss. The share price continues down. It appears to me that HMLP had a good plan but many cards to hold to make it work. Some party would not sign a letter of credit and oops, no forward cash to pay the bills.
User avatar
HanSolo
Posts: 726
Joined: Thu Jul 19, 2012 3:18 am

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by HanSolo »

invest2bfree wrote: Tue Sep 07, 2021 8:09 am Iam counting that value and international hold up better in the next sell off.
They might, or they might not. In 1Q 2020, value didn't hold up too well at all.

As long as you're aware that you might be wrong, or off by quite a lot, then I suppose that's OK.
VBIAX and chill (in taxable)
skipkapur
Posts: 1
Joined: Wed Oct 13, 2021 4:41 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by skipkapur »

Surprisingly, I am doing the same. I also own ITOT.

Dividend ETFs are not the same as bond funds/ETFs. But, I have difficulty owning a bond fund when interest rates have nowhere to go but up.

I am prepared for 40 - 50% drawdowns. But, the quality of the holdings are extremely high and if the ETFs are not sold, they will rebound.
User avatar
HanSolo
Posts: 726
Joined: Thu Jul 19, 2012 3:18 am

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by HanSolo »

skipkapur wrote: Wed Oct 13, 2021 4:58 pm But, I have difficulty owning a bond fund when interest rates have nowhere to go but up.
Does that mean you haven't been in bonds at all since 2002?

Oh, and welcome to the forum!
VBIAX and chill (in taxable)
User avatar
burritoLover
Posts: 997
Joined: Sun Jul 05, 2020 12:13 pm

Re: Moved From a 60/40 VT/BND to 50/50 SCHD/SCHY

Post by burritoLover »

skipkapur wrote: Wed Oct 13, 2021 4:58 pm Surprisingly, I am doing the same. I also own ITOT.

Dividend ETFs are not the same as bond funds/ETFs. But, I have difficulty owning a bond fund when interest rates have nowhere to go but up.

I am prepared for 40 - 50% drawdowns. But, the quality of the holdings are extremely high and if the ETFs are not sold, they will rebound.
Well, that’s an argument for a higher stock allocation irrespective of a dividend tilt. If you aren’t near retirement and and 50% drawdowns don’t cause you to panic sell, then you should have a higher stock allocation but a dividend concentrated portfolio is not doing anything for you other than being less diversified.
"Your money is like a bar of soap. The more you handle it, the less you’ll have." - Gene Fama
Post Reply