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Bond Funds are having a bad time now due to interest rates increasing. I bought some VBTLX in early Jan and it's down 1.2%. That may seem like small potatoes compared to stock volatility but one should understand that bonds return very little in the first place so this reflects almost 50% of it's yield gone in a month.
NOW, I understand that yields will go up to compensate but it does not seem like they are rising all that fast. This must be particularly hard for those nearing retirement who have a huge bond portfolio that they thought would be stable. This flies in the face of moving towards bonds in retirement as we have seen last few months in a rising interest rate environment it seems bonds and equities could crash together.
I have read arguments that bonds as a instrument to balance your portfolio because it represents stability and mitigates volatility may no longer hold true because of the immense distortions created by the Fed by keeping interest rates so low for so long.
What are you guys doing with your bond funds? I realize that most bond funds have done decently well even in periods of high equity volatility but can we expect the same going forward?
right now i am staying the course with what i have in bonds until the newsletter shifts some of them to other types of bond funds .
the bond side is about as non interest sensitive right now as it can be . the income model i am in from fidelity insight is still up 1.40% since january and is spinning off over 41k a year right now in interest annualized . the total bond portion is down 1 .09% for january but that is a very tiny piece just because it is highly interest rate sensitive . most bond funds in the mix are less interest rate sensitive .
so if you bought an individual bond and prices fluctuated if you sold early and were worth less at the moment would you care ? likely not .
if you buy a bond fund and expect anything different in the short term prior to the funds duration , you are doing the same thing by comparing before the duration is met.
the bond fund needs time to cycle the bonds in to higher paying ones over that time frame before you see your total return work it's way back up to the deal you had the day you bought . .
Last edited by mathjak107; 02-02-2018 at 04:01 AM..
Bonds are part of my portfolio. Am I going to sell them? Not individually. But some of my money is coming from liquidated bonds as well as equities. My portfolio is a source of income and I told my fund manager that I want $3,000 from my account monthly. What is sold and how much is left to the manager.
What are some good bond funds or ETFs? Right now, I'm at 4% with bonds in my fidelity acct and about 10% bonds in my wealthfront accts split between EM, muni and corporate bonds. I really like EM bond ETFs so if anyone has good long term picks I'm all ears.
i don't have a favorite "one fund " i use an assortment that work together .
i do like funds like fidelity strategic income , fidelity new market income , if rates rise i like floating high yield . if inflation rises i like fidelity strategic real return .
these are all not funds i own currently. it all depends on the big pictuire and the portfolio gets adjusted accordingly
i don't have a favorite "one fund " i use an assortment that work together .
i do like funds like fidelity strategic income , fidelity new market income , if rates rise i like floating high yield . if inflation rises i like fidelity strategic real return .
these are all not funds i own currently. it all depends on the big pictuire and the portfolio gets adjusted accordingly
Mathjak, thanks. Right now, I'm not a fan of mutual funds. I like ETFs as there are alot of options. But with all options there's opportunities to make mistakes. So I have to do my research for the long game, For my wealthfront acct (which I can't change), I'm in PCY, EMB and LQD.
For my fidelity acct, I'm in EMHY, EMLC and IGOV for my bonds. I like emerging market bonds because they have higher yields and I get monthly dividends from them for my IRA. I'll be looking for some opportunities for other bond funds in my fidelity acct in the next few weeks (I would like to be at 7-8% in bonds).
What are your thoughts on deutsche bank? Whatever it is, it's affecting the euro market right now and will affect the us market when it opens.
the bond fund needs time to cycle the bonds in to higher paying ones over that time frame before you see your total return work it's way back up to the deal you had the day you bought . .
so here is the question. When the bond cycles to new bonds over the years does the NAV gradually recover?
nav will recover if and when rates lower . otherwise the higher interest buys more and more shares as time goes on driving down your cost basis to match the lower nav.
either way by the time the duration is up you will be close to the yield you signed on for when you bought .
either way by the time the duration is up you will be close to the yield you signed on for when you bought .
yep, got it. So in a way the bond fund is nothing more than a CD of that duration with the slight added flexibility that in an emergency you can sell the exact amount of shares that you want before duration. With a CD you can structure it as multiple smaller CDs but since there is a limit you will pay a higher penalty if you break it before duration.
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