For those retired, what's your plan for non-stock part of your portfolio when interest rates start dropping?

[devillif311]

That’s a lot of market timing and you seem very very certain how do you know these things? And why would you hang around a forum of buy and hold index fund investors if you’re a market timing trader? I don’t mean that as a criticism just wondering if I’m completely missing the point of your post or not understanding it?

I wonder this too. Kind of like posting on a diet and exercise forum about how you love to lay on the couch and eat chocolate cake and you don’t gain a pound!

I think traders on here are trying to prove to the buy and hold crowd that their method is better but they fail every time on the long term

[GottaLottaNada]

It's more Market Awareness than Market Timing. The Rising Rates were clearly telegraphed by Chairman Powell. That move was the only trade I'd made in the past 2 years, quite easy to do with one mouse click.

Bogleheads isn't the only Financial website I follow. I thought I'd share my experiences with the group.

But evidently, chocolate cake isn't for everyone.

[ruralavalon]

It's more Market Awareness than Market Timing. The Rising Rates were clearly telegraphed by Chairman Powell. That move was the only trade I'd made in the past 2 years, quite easy to do with one mouse click.

Bogleheads isn't the only Financial website I follow. I thought I'd share my experiences with the group.

But evidently, chocolate cake isn't for everyone.

I'd prefer chocolate cake with vanilla ice cream . But it's not good for me .

[UpperNwGuy]

For those retired, what's your plan for non-stock part of your portfolio when interest rates start dropping?

I am retired. My plan is to do nothing. The non-stock part of my portfolio is entirely intermediate-term treasury bond funds.

[cableguy]

Get your 2,3,4 year CD's at 4% while they're hot! FDIC insured....Call Protected. Simple.....you get your principle back...you earn interest. I'm rolling over CD's I bought 4 years ago that had 1% interest. Not sure we are heading back to those low rates but nothing wrong with grabbing some 4%'s while you can...

[WoodSpinner]

My Rollover IRA is where I do my trading on market swings. The rest of my Trad IRA and Roth are pretty much fully invested.

When Powell started talking about raising Fed Funds in 2022, I sold half of my QQQ and SMH and emptied my Bond Fund, rising Rates are almost never good for these kinds of assets. I went from about 85/15 to 40% MM. That was aprox $160K that avoided the Bond Washout. I've been happily collecting 5% on Fidelity's FZDXX for the interim.

I buy back into TLT, the Long Treasury ETF every time it dips below $90. The Long Treasuries seem to react favorably to even the "thought" of Lower Rates. I've been nibbling back into QQQ and IWM on the dips also. If the Rate-o-meter does actually fall, I will add to the equity ETF's as needed.

Out of curiosity, have you considered the impact of your Market Timing Decision on your Net Worth? Perhaps compare today versus stying invested?

WoodSpinner

[GAAP]

My fixed income is duration-matched. Rate changes don't affect my plans.

[Dottie57]

My plan is to keep what I currently have...total bond and another vanilla intermediate term bond fund.

Ditto. I just don't have the bandwidth to try to guess what is happening next.

+1

[bloom2708]

Rates won't go from 5.25 to .5 this month.

A ~5.2% 3 month Treasury is fine. A ~4.7% 3 month Treasury isn't so bad. Assuming a .5% drop.

Inflation is not going away with the levels of Federal spending and debt accumulation.

This does feel like fall 2007 when former President O was campaigning the economy down. It worked. I never quite understood the change and then 2008, 2009 collapse. Never let a good crisis go to waste I guess.

I paid off our mortgage in July 2007 as it was down to $70k. Sleep well at night stuff.

Maybe a 2007 to 2009 collapse puts inflation in check.

I guess people don't have to change their strategy for fixed based on a Fed drop. Carry on.

[Tyler Aspect]

I have updated my bond portfolio to be California situational specific.

50% VGIT (Intermediate term government)
30% VCIT (Intermediate term corporate)
20% VMBS (Intermediate term mortgage backed)

This is intended to simulate BND, while I locate VGIT in a taxable account (California tax free), and the other two in a tax deferred account.

[FellsGuy]

So what am I going to do, buy quality. If I have learned one thing from this forum especially around Bonds is split the middle on duration and buy top quality credit or even pure US Treasury risk. Equities are for risk and my bond fund is my castle keep values up and down don’t matter I’m not selling just collecting the interest payments each month…or as Nisiprius said taking what the market serves up, if I knew where interest rates where going I’d keep it to myself.
Junk bonds, long bonds, sovereign bonds, high yield bonds no interest but that’s me I’m sure they’re an important investment strategy for some people…

[nisiprius]

I'm about to agree with toddthebod... I think. Main reason I'm posting is to show correlations--meaningless or meaningful--over a longer period of time.

36-month correlations have been as high as 0.65 and as low as -0.8.



The point is that some people in this forum staked their investments on a belief that stocks and bonds "have" negative correlation. That something changed in 2000, whatever went before, they now "have" negative correlation, and it can be expected to persist. HEDGEFUNDIE seemed to think that the negative correlation from 2000 on represented a fundamental change tied to identifiable Fed policy that could be expected to persist.

You can look at the data two ways. If you use long periods of time, stocks and bonds have been uncorrelated, near zero. I think that's the right way.

If you want to use shorter periods of time and treat sampling fluctuation as representing something real, then it has had alternating many-decade-long periods of positive and negative correlation, and you shouldn't forget or ignore the periods of positive correlation.

[Wash.Invest]

Nearing Advanced age retirement (age 70+) already 20+ yrs as retired (equation / allocation is very different during lifetime changes.)

30% of equities side of ~60/40 are heading into "leveraged ETF" portfolio - far better resilience to downturns than traditional market ETFs.

Cash / income side... Been liquidating income properties and carrying back 7-10% RE notes with 20-30 yr terms. (Risks possible, but mitigated)

Payments over time really assists in taxation of 300+% equity gains + depreciation recapture.

Walk away with little net and huge tax + IRMAA penalty.... Or. Spread it over 30 yrs

[toddthebod]

Main reason I'm posting is to show correlations--meaningless or meaningful--over a longer period of time.

36-month correlations have been as high as 0.65 and as low as -0.8.

My first problem with graphs like that, again, is that it overstates the case as it is. If you are charting rolling 36 month correlations, then January 2024 and February 2024 share 35 out of 36 data points.

My second problem is that if you two populations that are generally uncorrelated, you expect some samples to appear correlated just by chance.

My third problem is that if you have something that is positively correlated for a while, then negatively correlated for a while, etc., what's the practical difference between that and being uncorrelated, especially when "a while" is less than your investment horizon (and less than the duration of the bonds)?

I mean, if I invest in bonds because "they are uncorrelated with stocks," is it a counter-argument to come back and say, "well actually, they might be positively or negatively correlated over the next few years"? Heck, the only time being correlated is really a problem is if they are positively correlated during a time when they are both losing money, and that's extremely rare.

I'm about to agree with toddthebod... I think.

I hope you don't mean that like it's a bad thing!

[Back Dr]

I wouldn’t pick a fixed income strategy that changes as rates change. No one knows what the future brings. I am 65/35 with some mm funds, ibonds from year 2000, some tsp G fund, and mostly a 5 year treasury ladder. My goal is to pick a fixed income strategy that I can use to stay the course thru the ups and downs. I think Using CDs of various durations is a great idea to navigate the unknown interest rate future.

I agree. I like to know with certainty what my FI portion of portfolio is earning thus I am not a bond fund fan.

[dcabler]

Main reason I'm posting is to show correlations--meaningless or meaningful--over a longer period of time.

36-month correlations have been as high as 0.65 and as low as -0.8.

My first problem with graphs like that, again, is that it overstates the case as it is. If you are charting rolling 36 month correlations, then January 2024 and February 2024 share 35 out of 36 data points.

My second problem is that if you two populations that are generally uncorrelated, you expect some samples to appear correlated just by chance.

My third problem is that if you have something that is positively correlated for a while, then negatively correlated for a while, etc., what's the practical difference between that and being uncorrelated, especially when "a while" is less than your investment horizon (and less than the duration of the bonds)?

I mean, if I invest in bonds because "they are uncorrelated with stocks," is it a counter-argument to come back and say, "well actually, they might be positively or negatively correlated over the next few years"? Heck, the only time being correlated is really a problem is if they are positively correlated during a time when they are both losing money, and that's extremely rare.

I'm about to agree with toddthebod... I think.

I hope you don't mean that like it's a bad thing!

Yes, rolling charts overstate how often non-zero correlations might happen, but to show that stocks and bonds can be either positively or negatively correlated in a single sampling period, one only needs to look at any group of points from the graph separated by 36 months. It can happen and it does happen. Nobody complained when they were positively correlated and making money, which isn't all that rare. There should have always been an expectation that the opposite could also happen.

With noisy data, yes, one can expect that short bursts of both positive and negative correlation can happen. By chance? Perhaps, but that was never the point. The point was that there are investors who had a certain expectation about the behavior of stocks vs. bonds over whatever mental time period they chose to think about it. Perhaps they were anchored on what happened in 2008, for example. And, more recently, those expectations weren't met and they're now questioning why they own bonds at all. Those of us who take the longer view don't care about that at all, nor are we tempted to market time based on it.

Cheers.

[BitTooAggressive]

I hold the TSP G fund and Dodge and Cox Global Bond in a 2:1 ratio since 2014.
The ah-ha moment was 2011 when 10-year Treasuries went under 2%. I couldn't stomach holding duration/interest risk.
Prior to 2014 I was 2:1 in TSP G and Dodge and Cox income fund and swapped out the latter to D&C Global Bond whent it was introduced in 2014.

I'm very pleased with the performance and the overall low volatility of the blended duration of 2 years.

Good for you. It made no sense to expose yourself to the massive duration risk of almost zero interest rates.

[BitTooAggressive]

The only change I made was a good while ago to dump my short term tips and switch to nominal short term bonds. Will probably go back to a more balanced short term bond approach in a few years.

[BitTooAggressive]

Main reason I'm posting is to show correlations--meaningless or meaningful--over a longer period of time.

36-month correlations have been as high as 0.65 and as low as -0.8.

My first problem with graphs like that, again, is that it overstates the case as it is. If you are charting rolling 36 month correlations, then January 2024 and February 2024 share 35 out of 36 data points.

My second problem is that if you two populations that are generally uncorrelated, you expect some samples to appear correlated just by chance.

My third problem is that if you have something that is positively correlated for a while, then negatively correlated for a while, etc., what's the practical difference between that and being uncorrelated, especially when "a while" is less than your investment horizon (and less than the duration of the bonds)?

I mean, if I invest in bonds because "they are uncorrelated with stocks," is it a counter-argument to come back and say, "well actually, they might be positively or negatively correlated over the next few years"? Heck, the only time being correlated is really a problem is if they are positively correlated during a time when they are both losing money, and that's extremely rare.

I'm about to agree with toddthebod... I think.

I hope you don't mean that like it's a bad thing!

Yes, rolling charts overstate how often non-zero correlations might happen, but to show that stocks and bonds can be either positively or negatively correlated in a single sampling period, one only needs to look at any group of points from the graph separated by 36 months. It can happen and it does happen. Nobody complained when they were positively correlated and making money, which isn't all that rare. There should have always been an expectation that the opposite could also happen.

With noisy data, yes, one can expect that short bursts of both positive and negative correlation can happen. By chance? Perhaps, but that was never the point. The point was that there are investors who had a certain expectation about the behavior of stocks vs. bonds over whatever mental time period they chose to think about it. Perhaps they were anchored on what happened in 2008, for example. And, more recently, those expectations weren't met and they're now questioning why they own bonds at all. Those of us who take the longer view don't care about that at all, nor are we tempted to market time based on it.

Cheers.

Most know that bond prices are correlated to interest rate movements. Anything else is purely chance. The stock market maybe correlated to the color of shirt I wear everyday, but we should not expect that correlation to continue as there is absolutely no cause/effect.

[GAAP]

Most know that bond prices are correlated to interest rate movements. Anything else is purely chance. The stock market maybe correlated to the color of shirt I wear everyday, but we should not expect that correlation to continue as there is absolutely no cause/effect.

I'm not convinced that most here know that bond prices are correlated to interest rate movements, let alone the general investing public. I do think that many -- possibly even most -- investors believe that "bonds go up when stocks go down".

[BitTooAggressive]

Most know that bond prices are correlated to interest rate movements. Anything else is purely chance. The stock market maybe correlated to the color of shirt I wear everyday, but we should not expect that correlation to continue as there is absolutely no cause/effect.

I'm not convinced that most here know that bond prices are correlated to interest rate movements, let alone the general investing public. I do think that many -- possibly even most -- investors believe that "bonds go up when stocks go down".

Agree, sadly. You would think almost everyone learned from their 60/40 portfolios getting smashed the last few years if their bonds were long or intermediate duration.

[trueson1]

I have and plan and I stick to it. Interest rate fluctuations are a blip.

[toddthebod]

With noisy data, yes, one can expect that short bursts of both positive and negative correlation can happen. By chance? Perhaps, but that was never the point. The point was that there are investors who had a certain expectation about the behavior of stocks vs. bonds over whatever mental time period they chose to think about it. Perhaps they were anchored on what happened in 2008, for example. And, more recently, those expectations weren't met and they're now questioning why they own bonds at all. Those of us who take the longer view don't care about that at all, nor are we tempted to market time based on it.

My point is that sometimes stocks and bonds both do well, sometimes they both do poorly, sometimes one does well and one does poorly, i.e., they are uncorrelated, and arguing that over short periods of time, sometimes stocks and bonds both do well and sometimes they both do poorly and sometimes one does well and one does poorly is not a counterargument, and asking for bonds to always do well when stocks do poorly is completely unrealistic (and yes, a lot of people have posted on here in the past saying they thought they were negatively correlated, which, when you think about it, would make bonds a very unattractive investment).

[friar1610]

In my opinion,retirees who no longer have earned (and thus inflation-sensitive) income should concentrate on income flow, not on the market value of the investments that produce that income. It clarifies our discussion to focus on income. That argues for long-term bonds - I use VWLUX (Vanguard Long-Term Tax-Exempt) due to our tax bracket. I am indifferent to the market value, as I don't intend to sell. Note that for someone in the accumulation phase VWIUX (intermediate term) would be the usual recommendation. We have a ladder of Ibonds (the 1998-2001s, paying 3% to 3.6% real) to be sold 2025-2031 (when the last mature) providing $70,000 to $80,000 per year added income. Individual TIPS maturing 2032-2033 provide the same for these years. 2033 is my wife's age 92 (I'll be gone by then). Thereafter our son will begin selling from our stock and muni bond funds,
in which we have enough capital to support my wife for many years.

We hold only 30% equities - you can read the Morningstar article "How Rising Interest Rates Affect Your Retirement Plan" (February 23, 2024) for the
claim (substantiated elsewhere) that the highest safe withdrawal rates over both short and long periods correspond to between 20% and 40% equities. Thus, 30% equities fits our emphasis on income flow. Bequests would demand higher equity weighting, but we have provided that by large gifts before death and a Roth IRA (equity-heavy) that passes to our children on my death.

Could you share a link? Thank you.

EDITED TO ADD: FOUND IT! https://www.morningstar.com/portfolios/ ... ement-plan

[RyeBourbon]

Bonds. TIPS and STRIPS. Some T-bills for the next year of spending.

[heyyou]

Ignorance is bliss.
My preference is to not quickly react to rate changes. Yes, that may cost me some minor loss of future income, but on a rate decrease, since I won't see a subtraction from my account, there is a comfortable lack of any sense of immediate loss.

[livesoft]

Today I noticed my bond funds have a YTD return of about 5%. That compares to money market fund VMFXX with its mere 3.67%. I guess being in bond funds instead of a HYSA or MMF was OK so far in 2024.

[RickBoglehead]

Today I noticed my bond funds have a YTD return of about 5%. That compares to money market fund VMFXX with its mere 3.67%. I guess being in bond funds instead of a HYSA or MMF was OK so far in 2024.

I think you misread.... None of my bond funds have YTD that high. Which funds?

[livesoft]

Today I noticed my bond funds have a YTD return of about 5%. That compares to money market fund VMFXX with its mere 3.67%. I guess being in bond funds instead of a HYSA or MMF was OK so far in 2024.

I think you misread.... None of my bond funds have YTD that high. Which funds?

Well. QCBMPX, BND, and SPAB. The only one of those that is buy&hold is QCBMPX. I have made some trades in/out of equities with the 2 others. I am NOT counting the gains in equities made with those trades.

Link to QCBMPX: https://www.tiaa.org/public/investment- ... ker=QCBMPX

[RickBoglehead]

Get your 2,3,4 year CD's at 4% while they're hot! FDIC insured....Call Protected. Simple.....you get your principle back...you earn interest. I'm rolling over CD's I bought 4 years ago that had 1% interest. Not sure we are heading back to those low rates but nothing wrong with grabbing some 4%'s while you can...

In principle, it's principal...

[Gnirk]

I stay the course. As Jack said “ don’t just do something, stand there!”.

[RickBoglehead]

Today I noticed my bond funds have a YTD return of about 5%. That compares to money market fund VMFXX with its mere 3.67%. I guess being in bond funds instead of a HYSA or MMF was OK so far in 2024.

I think you misread.... None of my bond funds have YTD that high. Which funds?

Well. QCBMPX, BND, and SPAB. The only one of those that is buy&hold is QCBMPX. I have made some trades in/out of equities with the 2 others. I am NOT counting the gains in equities made with those trades.

Link to QCBMPX: https://www.tiaa.org/public/investment- ... ker=QCBMPX

BND YTD is 3.21%.
SPAB is 4.36%.
QCBMPX says 0.12%.

None are 5%.

[livesoft]

BND YTD is 3.21%.
SPAB is 4.36%.
QCBMPX says 0.12%.

None are 5%.

Let me help you:



As for BND and SPAB, I told you that I made some trades that increased MY year-to-date performance. I guess I should apologize that QCBMPX is not 5% since it is actually MORE than 5%.

Vanguard has YTD 4.48% for BND
https://investor.vanguard.com/investmen ... rofile/bnd

[RickBoglehead]

BND YTD is 3.21%.
SPAB is 4.36%.
QCBMPX says 0.12%.

None are 5%.

Let me help you:



As for BND and SPAB, I told you that I made some trades that increased MY year-to-date performance. I guess I should apologize that QCBMPX is not 5% since it is actually MORE than 5%.

Vanguard has YTD 4.48% for BND
https://investor.vanguard.com/investmen ... rofile/bnd

I was on a tablet, and clicked on the link you provided to QCBMPX, which clearly shows a return of 0.12YTD. When you click that link on a PC it shows the 5.1%.

As to the others, I posted the YTD as of 8/31/24.

BND as of 8/31/24 YTD is 3.21%. BND YTD as of 9/6/24 is 4.48%.

[livesoft]

I was on a tablet, and clicked on the link you provided to QCBMPX, which clearly shows a return of 0.12YTD. When you click that link on a PC it shows the 5.1%.

As to the others, I posted the YTD as of 8/31/24.

BND as of 8/31/24 YTD is 3.21%. BND YTD as of 9/6/24 is 4.48%.

Thanks for checking back!

[rkhusky]

I won’t be making any changes. I used the same strategy back when rates were low before, and then when they went higher, so if they go lower again, why would I change.