Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
more than likely it will play out as peter lynch said . " more money has either been lost or given up in preparation or anticipation of the next down turn than actually has been lost from any down market "
Okay. Let me push back a little and ask, why then, do standard allocation models (think Boglehead) always include bond funds. And not just a small percentage of them, but at our ages, somewhere between 15-40% bond funds?
I just hate to think that I've been following advice of books, podcasters (many, not all.. there certainly are a few that don't do any bonds) and I'll end up wrong. I've read at least a dozen books and I've tried to follow the methodology. As presented the advice seemed sound so I applied it.
But yeah, I'll tell you. Two of those bond funds are losing monies. Not a lot.. we're talking like a couple hundred dollars.. and they are total index funds too. I understand the theory of bonds and how they work when stocks fall, but at the same time it *feels* wrong to put more money into something that is barely keeping up with the purchase price.
It's always a conundrum no matter what you do. The bottom line is we're all emotional creatures and few of us can really consistently hold stocks for 15 or 20 years without freaking out. That's where bonds come into play. They can help you keep your sanity. Stocks are priced pretty high right now, so it doesn't hurt to rebalance. Rebalancing always feels wrong because a balanced portfolio, by definition, means you're putting some of your money into underperforming assets.
Which bond funds do you have? Most bond funds made at least a little money last year (median return for intermediate term bond funds last year was 3.71%), so you may just have crappy funds.
but of course as i remind everyone , those who are risk adverse generally stay risk adverse . there are studies that show balanced funds exhibit the same poor behavior as growth funds .
when i was on the 401k team at work , the fleeing was across the board that we saw in 2008. it did not matter if it was a balanced fund or a growth fund .
generally to risk adverse people , down is down .. like getting wounded by an ak47 round or wounded by a grenade to them .
just not enough spread today to have any large position in junk . i do own some as part of my go anywhere fund but betting the ranch on junk now would not be a good idea .
junk and equities are usually joined at the hip when the markets sell off .
2 years ago when oil prices collapsed that was the time to be in high yield . it was low hanging fruit . i had 20% of all my money in high yield . it had a 19% return beating stocks . but that has been gone for quite a while now .
Last edited by mathjak107; 01-06-2018 at 02:43 PM..
When I sell my house, I want to stash the proceeds into bonds; However, i want to be able to use those proceeds in about two year's time. Would that make sense for me to do this?
Yes, it makes sense.
Consider putting some in VWEAX and some in BSV.
Last edited by SportyandMisty; 01-06-2018 at 02:52 PM..
What other asset classes would you recommend other than bonds?
I would skip the Vanguard Total International Bond Index entirely. The reason being international bond indexes are heavily weighted toward developed countries which pay the lowest interest rates. In Japan and Europe, interest rates were negative for a while. VTABX is 18% in Japan, which is the world's most indebted country (over 200% of GDP), and Japan pays sub 1% interest rates on its government bonds. The next biggest holdings on the list are France, Germany, Italy, UK, Canada, Spain, the Netherlands, & the US. All of those countries pay the same or lower rates of interest than the U.S.--and ours are already quite low.
And it's just me, but I don't think TIPS are worth it, either. They seem kind of low return and gimmicky to me.
The Vanguard Total Bond Market Index is ok--the best of the 3 IMO, but take a look at its 10 and 15 year returns on Morningstar...Mediocre at best, landing in the 52nd percentile for the training 15 year return and 62nd for the trailing 10 year return. A decent, low cost actively managed fund like one of the ones I recommended upthread should be able to beat those returns over time.
If you must choose only from Vanguard, I'd go with Vanguard Core Bond. It's a new fund, but it has a low expense ratio and I think it can beat the bond index pretty easily. I think one fund is enough.
Last edited by mysticaltyger; 01-06-2018 at 02:50 PM..
i would take fidelity's total bond market over vanguards any day . barely a difference in risk and far better performance over almost all time frames .
Well, we are in our late, late 30's and early 40's.
We have 75%+ in equities.
Aren't we supposed to have some in bond funds at this point?
I'm just kind of going along with Boglehead recommendations here.
Yes, you are supposed to have some in bonds.
Most of the return of an entire portfolio occur not based on individual assets you select but rather based on the allocation among asset classes. So yes, you should have some in bonds or bond funds to complement your equities.
more than likely it will play out as peter lynch said . " more money has either been lost or given up in preparation or anticipation of the next down turn than actually has been lost from any down market "
But as you have said, it depends on your pucker factor. Most of us don't find out that we don't have the pucker factor for being anywhere near 100% in stocks until after we've behaved badly--and then it's too late.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
