Is it time to sell out of bond funds?

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case_of_ennui
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Re: Is it time to sell out of bond funds?

Post by case_of_ennui »

BitTooAggressive wrote: Sat Apr 27, 2024 1:33 pm
Exchme wrote: Sat Apr 27, 2024 8:17 am
BitTooAggressive wrote: Sat Apr 27, 2024 4:38 am
Exchme wrote: Fri Apr 26, 2024 8:37 am No one knows the future. Being diversified means that part of your portfolio is always disappointing, but the key thing is no one can know ahead of time which part.

Folks tend to think of markets like weather, when they see a storm coming, they want to go inside, so they start guessing about the future, jumping in and out. But markets are better thought of as the collective wisdom and knowledge about the future of everyone else, including professionals. You have about the same chance of beating that as you would racing against Olympic athletes. Buying and holding broad market funds allow you to profit from that wisdom instead of racing against it.

Stick to your plan and let the future play out.
You do know the future however. When bonds are paying almost zero yield and more supply is flooding in and stimulus is being issued….Good luck with that.
Whatever you or I see is also obvious to everyone, including people with powerful contacts and PhDs with econometric models that trade in milliseconds. I learned long ago that I could no more beat that system than I could win a race against Usain Bolt. You do you, but for me the Boglehead way is a path to at least get a decent return.
And even banks got caught holding long bonds in an almost zero rate interest environment. You did not have to be some genius to know it was coming. I saw it coming… did I know exactly when of course not. But people were dumb or greedy to take so much duration risk with the huge potential downside and little upside. The risk was not worth the return IMO. What is the saying pickup nickels in front of a steamroller?
This seems like a hindsight is 20/20 deal. I was reading heated conversations on forums a few years ago about implications of rates going negative.
boomer543
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Re: Is it time to sell out of bond funds?

Post by boomer543 »

PGHunt24 wrote: Fri Apr 26, 2024 9:32 am They did not expand on the possible outcomes of the bond fund as I was a novice investor.
As a PAS client of the same age the EXACT same thing happened to me with the bonds down (and not recovered) and stocks up. And I flat don’t like it. Kind of a lingering bitter taste in the mouth, BUT this is an emotional reaction for me. When I went with Vanguard PAS I went in with a time horizon of 10 years (now 3 years in) so this current loss in bonds is hopefully a speed bump which for you and me has been more than offset by equity gains. So my advice to you and me is “stay the course”. Adjust your mental time horizon to a longer time frame so we can weather the inevitable ups and downs. And remember your entire portfolio is net positive.
muffins14
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Re: Is it time to sell out of bond funds?

Post by muffins14 »

TheRoundHeadedKid wrote: Sat Apr 27, 2024 11:40 am 50/50 portfolio seems too aggressive for a 73-year-old. Maybe adjust the asset allocation to one you can feel comfortable with, probably a lot more cash, and lot less bonds and equities.
Obviously these are just personal opinions, but my opinion differs here. The person could be alive for 20-30 more years. I feel like 50/50 is reasonable, but depends on how big the portfolio is.

If I were 73 and had like 20-25x expenses, I would have a TIPS ladder for all my basic needs (housing, food, taxes), especially at todays high real rates.
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dagsboro
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Re: Is it time to sell out of bond funds?

Post by dagsboro »

I guess it's safe to say that, as a culture, we are very impatient for positive results. That's why a 20 year horizon for indexed total equities is my preference and even that I have always tempered with intermediate bond funds. I suggested to a 35 year old Vanguard adviser years ago that I was just as interested in the return of my funds as I was in the return on my funds. Of course we all have differing appetites for risk and that's why an adviser must closely analyze their customers' wants and needs, plus that of their significant others.
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ruralavalon
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Re: Is it time to sell out of bond funds?

Post by ruralavalon »

muffins14 wrote: Fri May 10, 2024 8:30 am
TheRoundHeadedKid wrote: Sat Apr 27, 2024 11:40 am 50/50 portfolio seems too aggressive for a 73-year-old. Maybe adjust the asset allocation to one you can feel comfortable with, probably a lot more cash, and lot less bonds and equities.
Obviously these are just personal opinions, but my opinion differs here. The person could be alive for 20-30 more years. I feel like 50/50 is reasonable, but depends on how big the portfolio is.

If I were 73 and had like 20-25x expenses, I would have a TIPS ladder for all my basic needs (housing, food, taxes), especially at todays high real rates.
Asset allocation is a very personal decision which must be based on each investors,on individual ability, willingness and need to take risk. It depends on more than just age.

I am age 78, retired, no pension or annuity, my asset allocation is 60/40. Social Security benefits and Required Minimum Distributions (RMDs) are more than enough to cover my spending needs/wants.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link: Bogleheads® investment philosophy
gavinsiu
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Re: Is it time to sell out of bond funds?

Post by gavinsiu »

ruralavalon wrote: Fri May 10, 2024 8:55 am Obviously these are just personal opinions, but my opinion differs here. The person could be alive for 20-30 more years. I feel like 50/50 is reasonable, but depends on how big the portfolio is.

If I were 73 and had like 20-25x expenses, I would have a TIPS ladder for all my basic needs (housing, food, taxes), especially at todays high real rates.
Asset allocation is a very personal decision which must be based on each investors,on individual ability, willingness and need to take risk. It depends on more than just age.

I am age 78, retired, no pension or annuity, my asset allocation is 60/40. Social Security benefits and Required Minimum Distributions (RMDs) are more than enough to cover my spending needs/wants.
[/quote]

I think sometimes it's a psychological reason. Like you my 80+ year old mom lives on SS + RMD + pension and withdraw a small amount from her portfolio, which as slowly turn into a 30/70 stock/bond but started out as a 50/50 when she retired. She keeps wanting to convert more and more of it into cash because she feels that she might need the money in the future.

The problem is that the future need is not immediate but at some point in the future, when I asked her to elaborate on what those future cost could be, she only state that due to inflation, cost keeps going up. I have convinced her to hold TIPS instead since it has a better chance of doing what she wants. We do what we must to sleep better at night even if it's not perfect or optimal.
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eye.surgeon
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Re: Is it time to sell out of bond funds?

Post by eye.surgeon »

Vanguard recommending a 50/50 portfolio at your age is perfectly reasonable and they owe you no apologizes for that advice. In fact, historically that might have been considered too aggressive in equities. Hold the course, your bigger problem is more likely to be dying with more money than you needed so don't spend your days regretting what was a reasonable decision.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett
rockstar
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Re: Is it time to sell out of bond funds?

Post by rockstar »

This thread reminds of the song:

https://youtu.be/7hx4gdlfamo?si=9bP5kIeFWBL2P8cy

I struggle with this personally. I’ve sold off plenty of good positions way too soon. And I’ve held on to many too long.
WhiteMaxima
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Re: Is it time to sell out of bond funds?

Post by WhiteMaxima »

there are different kind of bond, short, medium and long term, inflation protected bond (tips). You lost money because probably hold a lot of long bond. It is already too late to sell.
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eye.surgeon
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Re: Is it time to sell out of bond funds?

Post by eye.surgeon »

WhiteMaxima wrote: Fri May 10, 2024 3:17 pm there are different kind of bond, short, medium and long term, inflation protected bond (tips). You lost money because probably hold a lot of long bond. It is already too late to sell.
VBTLX

Yield to maturity 4.8%
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Average effective maturity 8.5 years
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"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett
Northern Flicker
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Re: Is it time to sell out of bond funds?

Post by Northern Flicker »

PGHunt24 wrote: Fri Apr 26, 2024 8:10 am At age 73, I have been a Vanguard PAS client for 8 1/2 years. Was never an investor in the past, so the advisor put me in a 50/50 portfolio. Portfolio performance in 8 1/2 years is 5.8%. The only return is from my 50% stock ETF (VTI). Bond funds have been a waste of my money; little dividends and of course behind in NAV 10%. If I sell the bond funds, it will take many years to make back the NAV loss. Is it better to sell the bonds (50K loss) and move on and not have the grief, or is it better to liquidate the entire portfolio and pay cap gains tax, net the bond losses aginst those gains and go all fixed income.
Why did you hire VPAS?

Had your entire 50% fixed income allocation been in cash, the return would have been 6.29% per year:

https://www.portfoliovisualizer.com/bac ... s0CmaGYMHH

That is hardly a remonstrance of bonds. Be sure to consider total return including interest payments, and not just change in NAV of a bond fund.
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PGHunt24
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Re: Is it time to sell out of bond funds?

Post by PGHunt24 »

rockstar wrote: Fri May 10, 2024 2:24 pm This thread reminds of the song:

https://youtu.be/7hx4gdlfamo?si=9bP5kIeFWBL2P8cy

I struggle with this personally. I’ve sold off plenty of good positions way too soon. And I’ve held on to many too long.
I love the song comparison! Thanks for the advice and the song!
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PGHunt24
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Re: Is it time to sell out of bond funds?

Post by PGHunt24 »

Northern Flicker wrote: Fri May 10, 2024 6:32 pm
PGHunt24 wrote: Fri Apr 26, 2024 8:10 am At age 73, I have been a Vanguard PAS client for 8 1/2 years. Was never an investor in the past, so the advisor put me in a 50/50 portfolio. Portfolio performance in 8 1/2 years is 5.8%. The only return is from my 50% stock ETF (VTI). Bond funds have been a waste of my money; little dividends and of course behind in NAV 10%. If I sell the bond funds, it will take many years to make back the NAV loss. Is it better to sell the bonds (50K loss) and move on and not have the grief, or is it better to liquidate the entire portfolio and pay cap gains tax, net the bond losses aginst those gains and go all fixed income.
Why did you hire VPAS?

Had your entire 50% fixed income allocation been in cash, the return would have been 6.29% per year:

https://www.portfoliovisualizer.com/bac ... s0CmaGYMHH

That is hardly a remonstrance of bonds. Be sure to consider total return including interest payments, and not just change in NAV of a bond fund.
"I'm not a smart man" (Forest Gump) After I looked up "remonstrance " I got it! Thanks for the words of wisdom!
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