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I moved 30% of my 401k into a bond fund back in the summer anticipating a possible downturn (was a bit early on my prediction) from 100% stocks at the time. However, just this week, I changed my future investments back up to 80% stocks and 20% to the bond fund due to the recent pullback. Have to imagine even the politicians in Washington are smart enough to realize how vital it is to work together to figure this out before the end of the year.
My issue w/bond funds long-term is that interest rates have nowhere to go now but up from where we are at, and as interest rates rise, the value of bonds typically goes the opposite direction. I'm only using that fund in the short-term, b/c it's pretty steady and I knew we were likely in for a rocky ride this last half of the year.
I moved 30% of my 401k into a bond fund back in the summer anticipating a possible downturn (was a bit early on my prediction) from 100% stocks at the time. However, just this week, I changed my future investments back up to 80% stocks and 20% to the bond fund due to the recent pullback. Have to imagine even the politicians in Washington are smart enough to realize how vital it is to work together to figure this out before the end of the year.
My issue w/bond funds long-term is that interest rates have nowhere to go now but up from where we are at, and as interest rates rise, the value of bonds typically goes the opposite direction. I'm only using that fund in the short-term, b/c it's pretty steady and I knew we were likely in for a rocky ride this last half of the year.
See, that's the thing. Bond prices always move in the opposite direction than interest rates, and the rates are likely to go up, and that's why I am hesitant with bonds.
So, I wonder what people think is the best place to park your money if you believe the stocks are going to get hammered. It seems like they are not safe anywhere. I'll have to find out if Fidelity offers a cash/money market fund.
Bonds are a bad long-term investment but if you are selling because of the fiscal cliff, the budget does better and the economy does worse if the fiscal cliff happens or uncertainty pervades near-term- that is good for bond prices and indeed the 10-yr Treasury has run from 1.75 to 1.58 since the election.
Bonds are a bad long-term investment but if you are selling because of the fiscal cliff, the budget does better and the economy does worse if the fiscal cliff happens or uncertainty pervades near-term- that is good for bond prices and indeed the 10-yr Treasury has run from 1.75 to 1.58 since the election.
So, you think they might be a good investment for a year or so assuming the stocks get hit.
I am fairly convinced the DOW will fall big in 2013, but of course I could be wrong.
I think US economy is ok and stock market will rally once they come to an agreement. Further into 2013, hard to predict - depends if Europe runs into more panic.
im 97% bond funds as of now and have been since july, up 9% for the year . personally i dont see things improving in the short term so i think low rates are here for a while longer.
one important event coming up is on dec 31st the unlimited amount of money you could put in a bank and still get it fdic insured as long as it wasnt interest bearing expires.
the emergency act in 2008 that brought in 1.8 trillion in foreign money for safe keeping will no longer give them fdic coverage over 250k
that 1.8 trillion may be looking for a home.
its unlikely to find its way into the stock market but my feeling is quite a bit will end up in bonds here.
they will be looking for safety and capital gains at this level so bonds still may have some oooomph left.
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?
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, I absolutely do not. While I usually refrain from expressing opinions on other people's investment strategy, your question is too fundamental to ignore. I just had this conversation with my 30 yr. old daughter yesterday during our annual personal finance discussion.
My continued advice, which she followed, was to simply ignore the markets and just keep trucking along. Her portfolio allocations in her IRA type account were appropriately established 8 years ago when she started her professional career.
They will remain relatively constant for decades, with perhaps some minor tinkering in the bond portion when interest rates return to the 5-6% level. Otherwise, its on autopilot for the foreseeable future.
She happily experienced a classic and educational example of this wisdom in the '05-'11 period. It offered an excellent primer on market(s) volatility.
Folks near to or actually retired are in an entirely different situation if their funds are to be drawn upon for income in the near to intermediate future. That is a matter for each to choose their own path. JMO
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