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I have owned bond funds from time to time, but have made little money, if not lost (did lose a lot in a long duration fund that was bought at exactly the wrong time). I simply don't understand them and don't plan to spend too much time studying them. Are there others here who don't buy bonds or bond funds at all and have done well?
I did not understand them at the beginning but after a LOT of research and asking a ton of questions now I do understand them... what I have found out is that they are some of the most poorly understood instruments. There is a very legitimate reason to hold them in your portfolio. Research "flight to safety", bond duration, Distribution Yield and Yield to Maturity, all very important terms to understand how it works!
Point to note - a lot of financial pros don't understand them either, for example Dave Ramsey says don't ever hold them as they lose money, well, he is wrong. You do want to hold some in your portfolio as a diversification strategy.
In addition to the general bond knowledge, there are also many different types of bond funds aside from the durations, e.g. high yield (junk), multi-sector, bank loan, global/foreign/emerging market, and I'd include preferred stocks which behaves like bonds, etc. Rather than spending the time researching on these boring stuffs, how 'bout just own equity and cash (or at most ultra short duration bond funds), and be more active in monitor the stock market...
I don't buy them anymore because I feel they're too risky and for that kind of risk, I'd rather invest in stock funds.
you're kidding right? Investment grade bonds have very low risk, some term risk but are nowhere near as risky as stocks. My bond portfolio is down around 0.69% for the year, stocks went down 10+% in a span of 4 days in February.
There is no comparison in terms of risk. Just because stocks are going up now that isn't going to be the case going forward, when the stock market crashes (which is a WHEN not IF) and there is a flight to safety bonds will go up. That's the safety net.
Also look at 2008, VG Total Bond finished the year 6% higher, Total Stock finished the year -36% LOL!
I don't buy them anymore because I feel they're too risky and for that kind of risk, I'd rather invest in stock funds.
Too risky? How...LOL..your statement is right if you said it the EXACT opposite way. LOL investor greed at work here. As I see the above poster has stated ...my apologies for the redundancy
There is a very real risk with owning bonds. If ...when... interest rates increase, existing bonds lose value. Sure you could keep them to maturity and receive the promised returns but that might be less that the rate of inflation and is very likely to be less that returns from other investments. That is an investment that currently is risky!!
The other issue with bonds is the low return. That has been the case for the past several years. Years ago bond returns were much higher. Even then they proved to be a poor long term investment compared with stocks. I had two 401k funds from my first job. I split the investment 50:50 stocks to bonds. Decades later the stock fund was worth 3 times the amount of the bond fund. The situation is much, much worse now.
I do invest in some bond funds. The hope is that the bonds will help offset any declines in the stock market. It is an old idea that only works sometimes.
...... My bond portfolio is down around 0.69% for the year, stocks went down 10+% in a span of 4 days in February.......
Is this a joke or some sort of weird rationalization? Bond yields have not even kept with the very low rate of inflation for the past several years. The stock market has some short term volatility but has been doing very well over the past 10 years since the great recession. Many of us have way more than doubled our portfolios in that time period.
I have owned bond funds from time to time, but have made little money, if not lost (did lose a lot in a long duration fund that was bought at exactly the wrong time). I simply don't understand them and don't plan to spend too much time studying them. Are there others here who don't buy bonds or bond funds at all and have done well?
No. I own bond funds. It makes sense to not buy something you don't understand. I just don't get why it's so hard to learn this stuff. The basics are not rocket science. People make it out to be harder than it really is.
In addition to the general bond knowledge, there are also many different types of bond funds aside from the durations, e.g. high yield (junk), multi-sector, bank loan, global/foreign/emerging market, and I'd include preferred stocks which behaves like bonds, etc. Rather than spending the time researching on these boring stuffs, how 'bout just own equity and cash (or at most ultra short duration bond funds), and be more active in monitor the stock market...
I don't think your solution is that great. Bonds typically perform better than cash over the long run. Just own a solid core bond fund that invests in intermediate term bonds. Something like Dodge & Cox Income, Harbor Bond, Fidelity Total Bond, Baird Core Plus Bond, or--my least favorite--Vanguard Total Bond Market Index (the worst long term performer of the above listed funds)
They're like anything else. They won't be up all the time. They will have bad years. But with a basic core bond fund, you typically don't see big swings in either direction.
You can skip global, foreign, emerging market, multi-sector, long term/duration, and bank loan funds. Those are more niche products. I personally own a multi sector bond fund and have a pretty big sake in a global bond fund because I like those specific funds. But I am the first to admit they aren't an investment necessity.
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