Why not 100% PSLDX? [PIMCO StocksPLUS Long Duration Fund]

[Raraculus]

Once again Vanguard is the laggard in reporting up to date information. 2 days later and they still haven't updated the proper share quantity.

Upon seeing my Vanguard account yesterday, I'm channeling my inner Homer Simpson - "Woo Hoo! I'm rich!" It would have been way too nice to be true...

[LifeAquaticTenenbaum]

Hopefully Vanguard fixes total returns. As of today, still showing up as the 2x principal

[elvistcb]

Never been part of a split before. Do brokers usually update or am I stuck with 202% gain.

Sell and start over?

[lawyeredCLO]

Never been part of a split before. Do brokers usually update or am I stuck with 202% gain.

Sell and start over?

It will get updated. Just a tracking error.

[runninginvestor]

Never been part of a split before. Do brokers usually update or am I stuck with 202% gain.

Sell and start over?

It will get updated. Just a tracking error.

Idk, the cost basis for this fund has been weird for me since I've owned it. It's in an IRA so I don't really care, but it'll be interesting if and when it ever gets updated.

[elvistcb]

Thank you all for the replies. I just got the Morgan Stanley transfer for my E*trade account. I don’t think I’m interested in Morgan Stanley. I have all the PSLDX I want. I think I read Fidelity will take an in kind transfer, I just can’t buy it there?

[manlymatt83]

Thank you all for the replies. I just got the Morgan Stanley transfer for my E*trade account. I don’t think I’m interested in Morgan Stanley. I have all the PSLDX I want. I think I read Fidelity will take an in kind transfer, I just can’t buy it there?

What changed for you? I love E*Trade. I don’t think anything is changing.

[texasfight]

question guys - is PSLDX now no longer charging a $20 transaction fee on PSLDX?

[manlymatt83]

question guys - is PSLDX now no longer charging a $20 transaction fee on PSLDX?

What brokerage?

[DMoogle]

question guys - is PSLDX now no longer charging a $20 transaction fee on PSLDX?

The brokerages determine the transaction fees, not PIMCO. Etrade decided to remove the transaction fee pretty recently... like several months ago. Most other brokerages still charge them.

[texasfight]

question guys - is PSLDX now no longer charging a $20 transaction fee on PSLDX?

What brokerage?

Sorry I am an idiot. Meant to say Vanguard

[OuterBanks]

Vanguard is still charging $20 fee to buy.

[Invest2027]

I inquired with VG regarding the incorrect cost basis in my accounts after the reverse stock split for PSLDX on 3-24-23. After waiting 8 days I received the below boiler plate copy/paste reply:

"Upon review, companies have 45 days to see the terms of tax reporting
related to a corporate action. The cost basis of a security that has
resulted from a corporate action may change depending on the company's
reporting. We suggest you refer to the investor relations page of the
company and work with a tax advisor."

It looks like VG will potentially take until the 2nd week in May to make the updates regarding PSLDX cost basis. I happened to own PSLDX in my TSP MFW as well and somehow they managed to make the updates last month shortly after the the reverse split.

[ToBeOrNot]

Vanguard is still charging $20 fee to buy.

The fee is only on initial purchase. It didn’t cost me the $25 fee when I rebalanced recently purchasing additional shares.

[tcrez]

Does this fund borrow money at short term rates to own bonds at long term rates?

If so, given the downward slope of the yield curve, is it losing money daily on the bonds unless we see a big drop in long term rates?

[Talon_Trader]

I inquired with VG regarding the incorrect cost basis in my accounts after the reverse stock split for PSLDX on 3-24-23. After waiting 8 days I received the below boiler plate copy/paste reply:

"Upon review, companies have 45 days to see the terms of tax reporting
related to a corporate action. The cost basis of a security that has
resulted from a corporate action may change depending on the company's
reporting. We suggest you refer to the investor relations page of the
company and work with a tax advisor."

It looks like VG will potentially take until the 2nd week in May to make the updates regarding PSLDX cost basis. I happened to own PSLDX in my TSP MFW as well and somehow they managed to make the updates last month shortly after the the reverse split.

Hey I saw that you own PSLDX in your TSP. What are your thoughts on the MWF option? Are the fees are pretty high? Right now my TSP is all C-Fund.

[Invest2027]

Talon_Trader » Tue May 09, 2023 10:23 am

Invest2027 wrote: ↑Mon Apr 10, 2023 9:45 am
I inquired with VG regarding the incorrect cost basis in my accounts after the reverse stock split for PSLDX on 3-24-23. After waiting 8 days I received the below boiler plate copy/paste reply:

"Upon review, companies have 45 days to see the terms of tax reporting
related to a corporate action. The cost basis of a security that has
resulted from a corporate action may change depending on the company's
reporting. We suggest you refer to the investor relations page of the
company and work with a tax advisor."

It looks like VG will potentially take until the 2nd week in May to make the updates regarding PSLDX cost basis. I happened to own PSLDX in my TSP MFW as well and somehow they managed to make the updates last month shortly after the the reverse split.

Hey I saw that you own PSLDX in your TSP. What are your thoughts on the MWF option? Are the fees are pretty high? Right now my TSP is all C-Fund.

A quick google search will show the fees. They can be substantial especially for smaller account holders.

[Invest2027]

Well it has been well over 45 days now and I inquired again with VG last week regarding adjusting the cost basis of PSLDX post the reverse stock split. No answer so far from VG regarding my inquiry. For those of you that still hold PSLDX at VG, are your seeing an updated cost basis yet?

[armastevs]

Well it has been well over 45 days now and I inquired again with VG last week regarding adjusting the cost basis of PSLDX post the reverse stock split. No answer so far from VG regarding my inquiry. For those of you that still hold PSLDX at VG, are your seeing an updated cost basis yet?

Yep my Vanguard is still incorrectly displaying a 97% gain

[kevinf]

I wonder if selling the position and then immediately buying back in would fix the problem?

[OuterBanks]

If it’s in a Roth IRA I don’t know why cost basis would matter.

[caklim00]

Just saw an email from etrade about no transaction fee mutual funds and I see PSLDX is now no cost.

Anyone just using this fund as their bond component to their portfolio? Currently 100% equity (except for cash) mostly SCV tilted. Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

[firebirdparts]

Not me. I consider it a stock fund in my mental view of the universe.

[e5116]

Well I've had it since Jan/Feb (bought in two swaths) and am basically flat. I guess that's not too bad. I still like it as a long term hold.

I consider it like stock from a risk perspective, but count it as both from an asset allocation perspective (makes up more than 100% total).

[lawyeredCLO]

Just saw an email from etrade about no transaction fee mutual funds and I see PSLDX is now no cost.

Anyone just using this fund as their bond component to their portfolio? Currently 100% equity (except for cash) mostly SCV tilted. Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Absolutely. This is an efficient way to hold bonds.

[caklim00]

Just saw an email from etrade about no transaction fee mutual funds and I see PSLDX is now no cost.

Anyone just using this fund as their bond component to their portfolio? Currently 100% equity (except for cash) mostly SCV tilted. Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Absolutely. This is an efficient way to hold bonds.

Its going to be so hard to sell AVUV in my IRA for this. It feels like my baby

[PoorHomieQuan]

Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Why have you considered buying bonds? Normally bonds are added to a portfolio to reduce risk, but they reduce risk mainly by reducing the equity allocation. With PSLDX, you don't reduce the equity allocation. Leverage always adds risk. In particular, long term treasuries are inherently pretty risky.

[bgf]

Just saw an email from etrade about no transaction fee mutual funds and I see PSLDX is now no cost.

Anyone just using this fund as their bond component to their portfolio? Currently 100% equity (except for cash) mostly SCV tilted. Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Absolutely. This is an efficient way to hold bonds.

this is a good way to own bonds if you want a leveraged portfolio. for example, if your target portfolio is a 80/20 portfolio leveraged 1.3x, then you can probably get there with some combination of PSLDX and other funds. however, if your goal is simply to get a 80/20 portfolio by using PSLDX as your 'bond' allocation, i would strongly advise AGAINST that portfolio construction. you can get 80/20 for cheaper just going with VOO and BND. you can't get 1.3x exposure with those funds unless you use margin though, which is where PSLDX becomes as option.

[caklim00]

Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Why have you considered buying bonds? Normally bonds are added to a portfolio to reduce risk, but they reduce risk mainly by reducing the equity allocation. With PSLDX, you don't reduce the equity allocation. Leverage always adds risk. In particular, long term treasuries are inherently pretty risky.

I recall reading @vineviz mention in past the first 20% of bonds should be long term: viewtopic.php?t=287627

I'm not ready to move to 20% but I think I'm probably ready to go 10% bonds. Seems like this might be the most efficient route to go and not give up equity. My only thing is I'm very much a factor junkie so this would mean cutting back on US Small Cap Value (AVUV) since Roth IRA would be the only spot for PSLDX. So would put me at 100/10. Then plan would be to rebalance yearly with new contributions. I'm ok with letting things get off target. I've never been one to look at my allocation on a regular basis.

[PoorHomieQuan]

Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Why have you considered buying bonds? Normally bonds are added to a portfolio to reduce risk, but they reduce risk mainly by reducing the equity allocation. With PSLDX, you don't reduce the equity allocation. Leverage always adds risk. In particular, long term treasuries are inherently pretty risky.

I recall reading @vineviz mention in past the first 20% of bonds should be long term: viewtopic.php?t=287627

I'm not ready to move to 20% but I think I'm probably ready to go 10% bonds. Seems like this might be the most efficient route to go and not give up equity. My only thing is I'm very much a factor junkie so this would mean cutting back on US Small Cap Value (AVUV) since Roth IRA would be the only spot for PSLDX. So would put me at 100/10. Then plan would be to rebalance yearly with new contributions. I'm ok with letting things get off target. I've never been one to look at my allocation on a regular basis.

Before you extrapolate what Vineviz said about LTTs in a portfolio to PSLDX, I would suggest you ask him if it applies to leveraged LTTs. Because the interest rate risk destroyed PSLDX last year to the point that a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date. (This is the power of compounding losses.)

Vineviz also never said anything in that post about what the appropriate AA was. And I would again assert that the role of bonds in a portfolio is to lower risk by reducing equities (or at least diversify risk, keeping the overall risk level the same), so PSLDX is not quite the same.

[adamhg]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

[comeinvest]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

8205 / 11504 = 0.71...
11504 / 8205 = 1.40... PSLDX needs to generate ca. 40% excess returns based on end of last month's total return balance since end of Dec 2021. It will take some time. With 0.5% risk-free term premium and 1% corp bond credit risk premium after fees, it would take ca. 27 years (very rough calculation) at higher volatility and drawdown risk than VOO; not including volatility decay from leverage.

[adamhg]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

8205 / 11504 = 0.71...
11504 / 8205 = 1.40... PSLDX needs to generate ca. 40% excess returns based on end of last month's total return balance since end of Dec 2021. It will take some time. With 0.5% risk-free term premium and 1% corp bond credit risk premium after fees, it would take ca. 27 years (very rough calculation) at higher volatility and drawdown risk than VOO; not including volatility decay from leverage.

Sorry but what are 8205 vs 11504? I tried to search but couldn't find anything. Thought it's current value when starting at 10000, but VOO isn't up since Jan 2022 or Dec 2021.

https://www.portfoliovisualizer.com/bac ... ion1_1=100

[comeinvest]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

8205 / 11504 = 0.71...
11504 / 8205 = 1.40... PSLDX needs to generate ca. 40% excess returns based on end of last month's total return balance since end of Dec 2021. It will take some time. With 0.5% risk-free term premium and 1% corp bond credit risk premium after fees, it would take ca. 27 years (very rough calculation) at higher volatility and drawdown risk than VOO; not including volatility decay from leverage.

Sorry but what are 8205 vs 11504? I tried to search but couldn't find anything. Thought it's current value when starting at 10000, but VOO isn't up since Jan 2022 or Dec 2021.

https://www.portfoliovisualizer.com/bac ... ion1_1=100

Oops, sorry I ran PV mistakenly from 2021 to now instead of 2022 to now.
The numbers for 2022 to now are $6,526 for PSLDX and $8,933 for VOO, and the shortfall and the outperformance to catch up are 6,526 / 8,933 -> 0.73 and 8,933 / 6,526 -> 1.37. Almost the same ratios, and the same interpretation.

[PoorHomieQuan]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

As comeinvest pointed out, the performance discrepancy is very large. The only thing that could make it up is if long term rates drop to near zero again, even then I'm not sure it would be possible because of the double whammy of leveraged losses (selling bonds when they're down to cover the losses in equity futures).

If it were the case that psldx had a good chance of catching back up somehow, i.e. out performing VOO by double digit percent, I would say that sure, 100% psldx is a good idea, let's all do it.

The historical performance of PSLDX had to do with secularly dropping rates and there's seemingly little chance of that continuing in the future. Even after the carnage in LTTs this last year the long term rates aren't particularly high therefore have little room to drop. And as a buy and hold investment, I wouldn't want to hold this one through the next rate hike cycle. If you can time the market, go ahead, but then why not just trade TMV?

[comeinvest]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

As comeinvest pointed out, the performance discrepancy is very large. The only thing that could make it up is if long term rates drop to near zero again, even then I'm not sure it would be possible because of the double whammy of leveraged losses (selling bonds when they're down to cover the losses in equity futures).

If it were the case that psldx had a good chance of catching back up somehow, i.e. out performing VOO by double digit percent, I would say that sure, 100% psldx is a good idea, let's all do it.

The historical performance of PSLDX had to do with secularly dropping rates and there's seemingly little chance of that continuing in the future. Even after the carnage in LTTs this last year the long term rates aren't particularly high therefore have little room to drop. And as a buy and hold investment, I wouldn't want to hold this one through the next rate hike cycle. If you can time the market, go ahead, but then why not just trade TMV?

Overlaid bonds don't need declining rates, but they need term premia. Go to the mHFEA thread to find out more.

[PoorHomieQuan]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

As comeinvest pointed out, the performance discrepancy is very large. The only thing that could make it up is if long term rates drop to near zero again, even then I'm not sure it would be possible because of the double whammy of leveraged losses (selling bonds when they're down to cover the losses in equity futures).

If it were the case that psldx had a good chance of catching back up somehow, i.e. out performing VOO by double digit percent, I would say that sure, 100% psldx is a good idea, let's all do it.

The historical performance of PSLDX had to do with secularly dropping rates and there's seemingly little chance of that continuing in the future. Even after the carnage in LTTs this last year the long term rates aren't particularly high therefore have little room to drop. And as a buy and hold investment, I wouldn't want to hold this one through the next rate hike cycle. If you can time the market, go ahead, but then why not just trade TMV?

Overlaid bonds don't need declining rates, but they need term premia. Go to the mHFEA thread to find out more.

Sure, if you wait long enough. But the fact is that LTTs move a lot with rate changes and that is what has driven returns since PSLDX inception.

[bgf]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

Poor has no clue, and neither does anyone else. I think it would be highly path dependent on the two variable returns of SP500 and long term bonds AND the rebalancing luck of the fund managers. You can look at the YTM of the bonds, term premia, sp500 dividend or expected return, or whatever else, but there’s just no point in extrapolating ‘average’ expected returns over decades. Totally futile. Range of outcomes due to correlations and rebalancing would be very wide over that time scale.

If you want leveraged exposure to stocks and bonds go with PSLDX. You can’t invest in the rear view mirror. I would “like” to “break even” sooner rather than later but quite frankly it’s irrelevant. Invest looking forward.

thought experiment, investing period of 20 years:

scenario A) over the next year recession hits, sp500 drops 20-30% and flows that have been running into short term bonds over the past 6 months wake up to the ability to 'lock in' high yields for 10-20 years. flows shift to the long end of the curve. PSLDX rebalances along the way

scenario B) default is avoided, economy chugs along and flows slowly creep from short term bonds back into broad equities. long term bond end of the curve continues to creep up as risk of down turn decreases and long term inflation around 3-5% increases. PSLDX rebalances.

within the first year your rebalancing in these two scenarios will create substantially different outcomes over the next 19 years. while the order of compound returns does not matter in a stagnant portfolio, in a portfolio with deposits/withdrawals and rebalancing it matters quite a bit over the years.

[comeinvest]

...a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date.

That's a bold claim. Would love to hear how you arrived at that conclusion

Poor has no clue, and neither does anyone else. I think it would be highly path dependent on the two variable returns of SP500 and long term bonds AND the rebalancing luck of the fund managers. You can look at the YTM of the bonds, term premia, sp500 dividend or expected return, or whatever else, but there’s just no point in extrapolating ‘average’ expected returns over decades. Totally futile. Range of outcomes due to correlations and rebalancing would be very wide over that time scale.

If you want leveraged exposure to stocks and bonds go with PSLDX. You can’t invest in the rear view mirror. I would “like” to “break even” sooner rather than later but quite frankly it’s irrelevant. Invest looking forward.

thought experiment, investing period of 20 years:

scenario A) over the next year recession hits, sp500 drops 20-30% and flows that have been running into short term bonds over the past 6 months wake up to the ability to 'lock in' high yields for 10-20 years. flows shift to the long end of the curve. PSLDX rebalances along the way

scenario B) default is avoided, economy chugs along and flows slowly creep from short term bonds back into broad equities. long term bond end of the curve continues to creep up as risk of down turn decreases and long term inflation around 3-5% increases. PSLDX rebalances.

within the first year your rebalancing in these two scenarios will create substantially different outcomes over the next 19 years. while the order of compound returns does not matter in a stagnant portfolio, in a portfolio with deposits/withdrawals and rebalancing it matters quite a bit over the years.

Yes, the variance of final outcomes is very wide, and the uncertainty high (except for very long investment horizons) for a portfolio of leveraged equities and bonds. You can make meaningful estimates though, for example if you assume that the yield curve is static from now on, which would come down to saying you are agnostic of interest rates predictions. In the very long run, term premia will probably indeed dominate the effect of interest rate changes, which are range bound.
You can also make assumptions on credit risk premia, which have had pretty consistent patterns in history.
Then you can look at correlations, drawdowns, and historical interest rate cycles. If you read the mHFEA thread there is a lot of discussion on this. If you backtest for example from 1964 to now, you cover a wide variety of interest rate and economic regimes including all many sorts of market crashes. Surely corp bonds behave differently from treasuries, but the principle is the same - a leveraged equities/bonds strategy. Corp bonds are more correlated with equities which means you want to have a lower allocation than to treasuries; but you earn an additional return from the credit spread.
If you simulate ca. 30-60 years, the likelihood that you come out ahead of an unleveraged portfolio with PSLDX or mHFEA is very high. Single securities risk diversification and time diversification are the two free lunches of investing.
There is a concern that the term premia, which were unpredictable in history, disappeared for the rest of your investment life. You can read the related discussion in the mHFEA thread. It was suggested to further reduce the portfolio allocation to bonds from what seems optimal based on backtests, for that reason. I would think that this is less an issue with PLSDX than with mHFEA though. PSLDX has moderate equity market beta (including the corp bond correlation with equity markets), and has much less exposure to duration risk than mHFEA. It will probably also be much less dependent on the rebalancing strategy.
The drawbacks of PSLDX on the other hand are the expense ratio which is relatively small but positive; and the less efficient cost of leverage. Treasuries have the lowest cost of leverage. Also, STT (short-term treasuries via treasury futures or SOFR futures) might have superior risk-adjusted returns even in comparison to ITT.
I don't think that manager discretion on rebalancing and active management is material. The asset allocation (100% of NAV equities, 100% of NAV corp bonds) is pretty clearly defined, and rebalancing luck will average out over longer time periods.
This is my summary of a comparison between the strategies.
I personally go with mHFEA, mostly because of the expense ratio of PSLDX, and the less efficient leverage method, both of which are mathematically almost 100% sure drags on returns, which means they are uncompensated risk. I get it that PIMCO are the self-proclaimed bond experts, so they naturally had to come up with some leveraged or risk parity like product that involves corp bonds; but it seems conceptually rather nonsensical because of the inefficient implied cost of leverage, and as far as I am concerned they can play with their own money, not with mine If I wanted to avoid the risk of zero term premia, I would probably rather go with >100% equities and only a low allocation to treasury futures for insurance against macro crashes, basically a watered-down mHFEA, rather than handing PIMCO my money to fiddle with corp bonds just for the fun of it.

[ltgcc]

For whatever it's worth, I just opened a Roth IRA with Ally and bought some PSLDX. Seems to have been no charge (so far) to at least buy.

Just saw an email from etrade about no transaction fee mutual funds and I see PSLDX is now no cost.

Anyone just using this fund as their bond component to their portfolio? Currently 100% equity (except for cash) mostly SCV tilted. Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

[caklim00]

Have been considering adding some bonds and this seems like it might be a more efficient way to go rather than just selling equity and buying bonds.

Why have you considered buying bonds? Normally bonds are added to a portfolio to reduce risk, but they reduce risk mainly by reducing the equity allocation. With PSLDX, you don't reduce the equity allocation. Leverage always adds risk. In particular, long term treasuries are inherently pretty risky.

I recall reading @vineviz mention in past the first 20% of bonds should be long term: viewtopic.php?t=287627

I'm not ready to move to 20% but I think I'm probably ready to go 10% bonds. Seems like this might be the most efficient route to go and not give up equity. My only thing is I'm very much a factor junkie so this would mean cutting back on US Small Cap Value (AVUV) since Roth IRA would be the only spot for PSLDX. So would put me at 100/10. Then plan would be to rebalance yearly with new contributions. I'm ok with letting things get off target. I've never been one to look at my allocation on a regular basis.

Before you extrapolate what Vineviz said about LTTs in a portfolio to PSLDX, I would suggest you ask him if it applies to leveraged LTTs. Because the interest rate risk destroyed PSLDX last year to the point that a dollar placed in PSLDX on Jan 1, 2022 will probably never catch up with a dollar placed in VOO on the same date. (This is the power of compounding losses.)

Vineviz also never said anything in that post about what the appropriate AA was. And I would again assert that the role of bonds in a portfolio is to lower risk by reducing equities (or at least diversify risk, keeping the overall risk level the same), so PSLDX is not quite the same.

Unfortunately Vineviz turned off ability to receive DMs...