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> I can see a reason for folks that are closer to retirement making a more rapid adjustment to bonds. But if you're in your 20s, do you think it makes sense?
No, the 10-yr Treasury yields 1.6% and the least safe investment grade bonds (call it solid mid-cap company issued debt) yields only 3%. That's barely keeping up with inflation. If inflation and/or interest rates rise, you can actually lose money in bond funds.
There is far more upside in stocks over the next 10 years and more likely emerging market stocks.
We repositioned our portfolio (with the manager). We took profits in some of the equity positions and moved the cash into bonds ... mainly munis. Our medium term view is that the short term fiscal cliff issue will be kicked down the road a way by Congress and that interest rates are unlikely to rise in the next year. We still have a balanced portfolio (equity/bonds) but we adjusted the weighting more towards the bonds.
> I can see a reason for folks that are closer to retirement making a more rapid adjustment to bonds. But if you're in your 20s, do you think it makes sense?
No, the 10-yr Treasury yields 1.6% and the least safe investment grade bonds (call it solid mid-cap company issued debt) yields only 3%. That's barely keeping up with inflation. If inflation and/or interest rates rise, you can actually lose money in bond funds.
There is far more upside in stocks over the next 10 years and more likely emerging market stocks.
bonds now are only about capital gains. i cant imagine many folks buying them with the intention of holding them long term for that interest payment.
im 97% different types of bond funds now but that will change as the big picture changes over the near term. with a 3-4% yield and up 9% ytd they are doing quite well even at this stage.
they may still have some time to go before the party is over.
for anyone who thinks things will get worse before they get better a long term bond fund or even a zero coupon long term bond fund can produce amazing capital gains if rates on the long end fall even 1%. the long bond fund can see a 30% gain and the zero coupon 50% more than even the long term fund.
we are talking serious gains with a 1 point drop .
i think near term we stand a bigger chance of long term rates falling a point then rising a point.
I'm 100% stocks for my 401k and will keep it that way as I will not be needing the money for 35-40 more years.
I am 100% stocks as well in my 401k. I was recently 70% stocks and 30% bonds, but I did not understand why I needed bonds, so I changed back to 100% stocks (some large, mid, small, and international funds at low cost). I will leave like this as I think the market is doing fine and will make some new highs soon. And if it doesn't, it is what it is!! But I want own bonds, cause I don't understand it. Overtime market will be fine.
Excellent idea - read "The Little Book of Common Sense Investing" - Bogle, "The Four Pillars of Investing" - Bernstein, "All About Asset Allocation" - Bogle or "The Only Book for Successful Investing - Swedroe", read them all or just one, then develop an investment policy statement and asset allocation plan and stick to it. Basing your investment strategies based on potential legislation is like driving a car with your eyes closed, sooner or later you are apt to either hit something or go off the road completely.
Excellent idea - read "The Little Book of Common Sense Investing" - Bogle, "The Four Pillars of Investing" - Bernstein, "All About Asset Allocation" - Bogle or "The Only Book for Successful Investing - Swedroe", read them all or just one, then develop an investment policy statement and asset allocation plan and stick to it. Basing your investment strategies based on potential legislation is like driving a car with your eyes closed, sooner or later you are apt to either hit something or go off the road completely.
Good Luck.
I agree. I'm 25% in bonds (global bond fund, where there is a better chance of getting half decent long term returns) and 75% in stocks. My 401K is set up to rebalance automatically every quarter.
Most times I ever tried to get in and out of asset classes quickly it usually didn't go well.
I finally learned to leave well enough alone and I also learned I didn't have the stomach for a 100% stock portfolio. So now I have 25% in bonds and 55% of my stocks are in a low volatility funds (at least low volatility for stock funds).
Alot of people seem to think interest rates are going to be going up.
5% or 6% I think QE-infinity has pretty much nixed that, we'll be lucky to see 2%
I think it depends o the type of agreement. Certainly as we see now Equities are seen as too risky and volumes are low.thatw as even before the cliff.I am not sure that since the crash we will see volumes high for many years. Maybe rises and then fall to adjust as most seem to be traders buiyngthen selligquickly. Long term investors are fewer.On eonly has to remmber that it took a gneration before mnay got back intot eh equities and whenh interest rates rise we will really find out what risk people are willing to take agian. Many may be unwilling with interest not supressed by FED policy.
Today the Dow hit 14,000. It seems that stocks are reaching a peak. Nobody knows, but it's a gut feeling. Interest rates are pretty low. What is a person suppose to do?? Stay in stocks or move to Bonds or ???
I have:
60% in the T. Rowe Price Small Cap (PRSVX)
18% in Vanguard Bond Market Index Signa (VBTSX)
11% T. Rowe Price New Horizon (PRNHX)
8% FMI Common Stock (FMIMX)
My balance is around $280k and I'm 41 years old.
What do you guys/gals think, why should I stay in stocks if they are peaking?
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