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.
I have lt treasuries only as part of the PP in an ETF - TLT (thanks MJ). The fact that one can sell in a nanosecond is a great comfort. If rates ever approach anything decent - like above CDs, I might buy the bond itself, although I think that is increasingly unlikely the older I get unless the rates become irresistible. I do remember Ron Insana saying long ago he always bought the bonds, not funds. Not sure what he's doing now in the age of ETFs.
Last edited by thepinksquid; 09-23-2012 at 05:58 PM..
Reason: typo fix per poster :)
Not alot of people buy and sell Treasuries. They usually buy and hold til maturity.
i dont know to many that hold treasuries 30 years. in fact i know no one pewrsonally nor did i ever know one.
. they are traded. i use TLT myself. they have soared so much year after year i sell some off ,rebalance back to the percentage im holding and let it run up again. been doing that for 25 years.
thats the beauty of a portfolio thats in the game all the time. i dont care whats next, there is an asset class that is always in place ready to respond. whether i think its a winner or not.
up over 9% a year cagr now for almost 30 years.
Last edited by mathjak107; 09-23-2012 at 05:54 PM..
I have lt treasuries only as part of the PP in an ETF - TLT (thanks MJ). The fact that one can sell in a nanosecond is a great comfort. If rates ever approach anything decent - like above CDs, I might buy the bond itself, although I think that is increasingly unlikely the older I get unless the rates become irresistible. I do remember Ron Insana saying long ago he always bought the bonds, not funds. Not sure what he's doing now in the age of ETFs.
with treasuries it really doesnt matter if you go bond fund or individual.
the reason is if you stay in a treasury bond fund long enough you will never lose a penny selling if rates rise.
because a bond fund is always buying and selling bonds its interest rate is always changing unlike an individual bond which stays fixed for ever.
a fund has whats called a duration value. thats the amount of time you need to stay put if rates rise 1%.
so lets take a bond fund you just bought in to.
if its a treasury bond fund and at 10 bucks a share and paying 5% with a duration value of 5 heres is what happens.
rates rise 1% and your share price falls 5%. if the funds duration value is 5 then the value of your fund falls to 9.50 but your collecting 6% interest now not 5%. thats because the fund is always
selling old bonds and buying higher rate new bonds. so at the end of 5 years you are whole again back to your origonal deal. you have a share price at 9.50 so your down there but you collected an extra 1% interest for 5 years making up for the drop.
john bogle once said no one has ever lost a penny in a treasury bond fund because rates went up as long as they stayed long enough to meet the duration figure for the fund.
Last edited by mathjak107; 09-24-2012 at 02:37 AM..
But bad news and a worse future for the millions of Americans without retirement accounts.
like i keep saying. for some there will be no answer. the only answer is they had to do whatever they had to do to make life work for them and they didnt..
some will always find a way to succeed , others under the same circumstances will complain and wont.
the only thing that matters is which one are you .
john bogle once said no one has ever lost a penny in a treasury bond fund because rates went up as long as they stayed long enough to meet the duration figure for the fund.
Thanks, MJ. Good analysis, as always. You've discussed previously duration value. Thanks for the reminder. Eventually, it will sink in. lol
if rates dont level off you may be behind the curve somewhat but by the same token if they fall you will be ahead of the curve but for the most part if your funds drop will be offest by higher interest.
this is only true of treasury and very very high quality corporate bond funds. everything else can have the equation shifted by credit risk being introduced.
Not at all. You could have owned it the last few years and seen amazing gains. A one point drop gave you a 30%capital gain.
I never hold them,i let them run up in price ,rebalance them back to the percentage i want to hold and buy something that hasnt gone up as much with the gains.
Not at all. You could have owned it the last few years and seen amazing gains. A one point drop gave you a 30%capital gain.
I never hold them,i let them run up in price ,rebalance them back to the percentage i want to hold and buy something that hasnt gone up as much with the gains.
They have had incredible run ups this decade.
Not sure everyone realizes the capital gains part of bonds and how they can go up and down or have a big run up. Not everyone realizes how bonds are traded for capital gains hopefully.
the reason is if you stay in a treasury bond fund long enough you will never lose a penny selling if rates rise.
Quote:
Originally Posted by newenglandgirl
You get the best return by riding out the maturity, right?
There is no maturity date on a fund. Only if you hold the bond itself. MJ is talking about duration value within the fund, explained here:
Quote:
Originally Posted by mathjak107
selling old bonds and buying higher rate new bonds. so at the end of 5 years you are whole again back to your origonal deal. you have a share price at 9.50 so your down there but you collected an extra 1% interest for 5 years making up for the drop.
If you know a fund has a duration value of five years, keeping that fund at least five years, should keep you whole. Not what you're looking for, necessarily, if you've invested for income.
Which is why Insana said he always held the bonds themselves. He could clip coupons and not worry about interest rate fluctuation affecting market value. Depending on his strategy and investment goals, he might be a seller if he had a high coupon bond and rates plummeted.
Return in these bond funds, as Tubourg says, is a function of interest paid on the bonds held by the fund and capital gains - which varies with the rise and fall of interest rates.
Can't be buying a bond fund these days unless you keep a close eye on interest rates. Probably going OK for a couple of years, if Bernanke keeps his promise. But once rates rise, values will drop.
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.
