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My thoughts were as the population continues to age, and as the target retirement accounts mature, more people will move money into bonds. That would prop up their prices because as you said demand from investors calls the shots.
But presumably everyone else (metaphorically "everyone", that is) is thinking the same thing. Further, everyone (again that metaphorical everyone) realizes that everyone is thinking the same thing. And even further, everyone realizes the aforementioned fact. And so forth, to an infinite regression. The implication is that news is instantaneously priced into the market.
Some people don't believe this. Amongst those, some enjoy market-beating returns. Most don't.
Personally, I'm bemused by bonds. Bonds are weird. Bonds have been stable-ish for several decades. Now what? But if not bonds - and as DaveinMtAiry points out, we can't all be 100% in stocks - then what? Persian rugs? Krugerrands? Pet rocks? Greek banks? Irish real estate? Not even the much-vaunted Vanguard has a satisfying answer to that one.
rising rates are usually indicative of and go with rising inflation. if that is the case other types of bond funds will do better.
TIPS , floating rate high yield , commoodity linked bond funds which are known as real return funds , reit income funds are all various types of bond funds that can do better in a rising rate ,rising inflation environment .
i kept saying over and over the old buy and die way of buying an index equity fund and an index bond fund and holding it forever is not going to be the best way to invest anymore going forward. the last 3 months as bond rates are rising has shown this to be panning out as true.
more than ever portfolios will need active guidance to nudge them to better fit the big picture as 35 years of falling bond rates ends.
AGG is only slightly more volatile than a 3 - 7 year bond index fund, and less volatile than 10 year treasuries. It's a laddered portfolio that is constantly being replaced by new bonds. If interest rates go up then eventually you will enjoy those higher yielding bonds. Of course if stocks fall you will be happy to own bonds. In the end, fiduciary advisers are saying to favor stocks a little more than in years past and to avoid long term bonds.
you will always be behind the curve when rates are rising because of a falling share price. nav will fall more than your interest payment will rise because only a small portion of the funds bonds are turning over as rates rise higher and higher. you also have credit ratings changing nav too.
2008-2009 saw lots of down grades eating into returns
more than ever portfolios will need active guidance to nudge them to better fit the big picture as 35 years of falling bond rates ends.
I feel the same way when it comes to bonds. I want someone who has been around for a while to be at the wheel of my bond investments; not having it on auto-pilot tied to a rigid criteria. I have positions with Loomis Sayles, Metropolitan West (including the Unconstrained Bond Fund) and PIMCO. All shops that have been around the bond block before. What is coming ahead with bonds is not going to be the same as what is behind us.
I feel the same way when it comes to bonds. I want someone who has been around for a while to be at the wheel of my bond investments; not having it on auto-pilot tied to a rigid criteria. I have positions with Loomis Sayles, Metropolitan West (including the Unconstrained Bond Fund) and PIMCO. All shops that have been around the bond block before. What is coming ahead with bonds is not going to be the same as what is behind us.
It's simple. Favor more short-term bonds. Because of the lower expected returns you favor stocks a little more. https://gps.ricedelman.com/
i wouldn't bother with short term bonds at this point. the return is the same as a cd and the chance that it will fall once short term rates go up is so great i think it is a waste of time. except as a holding place for a very near term move in to something else.
i own total bond funds and corporate bond funds too but they are on the edge of going bye bye.
good luck sitting on a falling weight. with the odds of never seeing rates this low again in our lifetime it isn't like loading up on bonds will pay off when things cycle around like stocks do
as you see bonds and stock have been falling together..
if rates keep rising there are a lot better choices then sitting in conventional bonds . but that is your choice.
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