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Old 09-10-2017, 09:17 AM
 
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Old 09-10-2017, 01:58 PM
 
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Originally Posted by mathjak107 View Post
...TLT which holds long term treasuries is up more than 10% ytd . my fidelity total bond is up almost 5% . my fidelity strategic income is up almost 8% , fidelity new market income is up almost 11% ytd ,that is international bonds , fidelity high yield is up almost 7% ytd .

so just about all bond market segments have produced very nice returns compared to cash . this has been going on for many many years .
Short-term and even intermediate-term bonds have garnered only paltry returns, since 2008. Sure, they've beaten cash, but when cash returns 0.25% and the bonds are returning 2%, that's not a resounding victory.

For many of us who have a portion of our portfolio in bonds, this is for reducing volatility and for improving our psychological well-being, rather than for "income". Thus we lean towards the shorter-term bonds. This has indeed reduced volatility, but at the cost of pretty low returns.

And as for international bonds, well, volatility has been horrendous! They've done well in recent months, because at long-last, the US dollar is declining. But such-currency plan affects all international holdings. One might as well just be invested in international stocks instead.

The point of all of this isn't to berate bond-investors, but to assert that perhaps the ideal combination of portfolio-growth and damped volatility is a combination of lump-sum invested in stocks, and a guaranteed annuity.

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Originally Posted by Cabound1 View Post
...I retired at 42 in large part because I have the stomach for them, and in large part because I am single and childless...it's okay to spend my last dime and take my last breath...
Certainly, your position offers a passel of options. But psychology is crucial. For some people, spending-down their portfolio is painful, even if there are no heirs. Thus one delays retirement, not from thymotic yearning to keep working, or fear of running out of funds, but from the sheer unwillingness to make withdrawals from one's portfolio, after having spent decades making deposits.

This returns us to a consideration useful for the OP.... with a pension taken as an annuity, it is intuitively sensible to spend one's annual income, except perhaps for setting aside a portion for large future expenses, or emergencies. But if taking the pension as a lump-sum, one comes to treat it as something horded, as a chest of gold, and opening the chest to retrieve a couple of coins, is a painful predicament.
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Old 09-10-2017, 02:22 PM
 
Location: North Carolina
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Originally Posted by canoesmith View Post
I would never want to qualify for Medicaid - but for ACA subsidies I thought, very possibly erroneously, that income was the measure, and that assets were not considered. Am I wrong?
Yes, income is the measure of the size of the subsidy you receive and the type of plan you can use..Assets are not considered. My husband is retired. I haven't worked in 3 years. We are 3 years away from Medicare. We have lived on our savings for about 3 years, however, I have had to take some money from an annuity and an IRA, which is considered income. Also, my investment accounts add about 7000.00 a year to my income, even though it's rolled back into the investment account. We have no debt, and our house is paid in full. In total, we live on about 22,000.00 a year. This is a safe minimum for us. In the state of NC, between 16k and 20k defines whether you will be put on Medicaid.
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Old 09-10-2017, 02:41 PM
 
1,088 posts, read 524,326 times
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Quote:
Originally Posted by ohio_peasant View Post
Short-term and even intermediate-term bonds have garnered only paltry returns, since 2008. Sure, they've beaten cash, but when cash returns 0.25% and the bonds are returning 2%, that's not a resounding victory.

For many of us who have a portion of our portfolio in bonds, this is for reducing volatility and for improving our psychological well-being, rather than for "income". Thus we lean towards the shorter-term bonds. This has indeed reduced volatility, but at the cost of pretty low returns.

And as for international bonds, well, volatility has been horrendous! They've done well in recent months, because at long-last, the US dollar is declining. But such-currency plan affects all international holdings. One might as well just be invested in international stocks instead.

The point of all of this isn't to berate bond-investors, but to assert that perhaps the ideal combination of portfolio-growth and damped volatility is a combination of lump-sum invested in stocks, and a guaranteed annuity.



Certainly, your position offers a passel of options. But psychology is crucial. For some people, spending-down their portfolio is painful, even if there are no heirs. Thus one delays retirement, not from thymotic yearning to keep working, or fear of running out of funds, but from the sheer unwillingness to make withdrawals from one's portfolio, after having spent decades making deposits.

This returns us to a consideration useful for the OP.... with a pension taken as an annuity, it is intuitively sensible to spend one's annual income, except perhaps for setting aside a portion for large future expenses, or emergencies. But if taking the pension as a lump-sum, one comes to treat it as something horded, as a chest of gold, and opening the chest to retrieve a couple of coins, is a painful predicament.
I've given up on bonds. They provide me no psychological benefit because I never feel I have a good enough handle on their downside risk to make them worthier than, say, a laddered CD scheme.
I do exactly what you suggested....equities and a guaranteed risk free return. That portion resides in retirement acts.

Yes, psychology plays a big part in all of this. I probably would have resisted the possibility of spending any of this down too if it hadn't occurred to me that estranged extended family would become rich if I suddenly dropped dead. That realization prompted me to set up an estate that will go to charity. Easier to accept dipping into it under those circumstances.
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Old 09-10-2017, 03:11 PM
 
71,946 posts, read 71,971,035 times
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Quote:
Originally Posted by ohio_peasant View Post
Short-term and even intermediate-term bonds have garnered only paltry returns, since 2008. Sure, they've beaten cash, but when cash returns 0.25% and the bonds are returning 2%, that's not a resounding victory.

For many of us who have a portion of our portfolio in bonds, this is for reducing volatility and for improving our psychological well-being, rather than for "income". Thus we lean towards the shorter-term bonds. This has indeed reduced volatility, but at the cost of pretty low returns.

And as for international bonds, well, volatility has been horrendous! They've done well in recent months, because at long-last, the US dollar is declining. But such-currency plan affects all international holdings. One might as well just be invested in international stocks instead.

The point of all of this isn't to berate bond-investors, but to assert that perhaps the ideal combination of portfolio-growth and damped volatility is a combination of lump-sum invested in stocks, and a guaranteed annuity.



Certainly, your position offers a passel of options. But psychology is crucial. For some people, spending-down their portfolio is painful, even if there are no heirs. Thus one delays retirement, not from thymotic yearning to keep working, or fear of running out of funds, but from the sheer unwillingness to make withdrawals from one's portfolio, after having spent decades making deposits.

This returns us to a consideration useful for the OP.... with a pension taken as an annuity, it is intuitively sensible to spend one's annual income, except perhaps for setting aside a portion for large future expenses, or emergencies. But if taking the pension as a lump-sum, one comes to treat it as something horded, as a chest of gold, and opening the chest to retrieve a couple of coins, is a painful predicament.
bonds have not returned 2% . they are no different than stocks, they have a total return .

lets look at a few total returns on a mix of bond funds that should make up a diversified bond portfolio . the volatility has to be judged as a portfolio , not the individual components . most of us don't care how the sausage is made . one of the least volatile portfolio's the hb permanent portfolio has 3 very very volatile asset classes that end up being like watching paint dry .

so a diversified mix of bond funds is going to be far less volatile than looking at the individual components .

fidelity total bond ytd 4.50% , 3 year 3.54% , 5 year 3.09 , 10 year 5.09

fidelity strategic income ytd 7.35% , 3 year 4.20 , 5 yr 4.27 , 10 year 6.23

fidelity floating rate bond fund ytd 2.40 , 3 year 3.06 , 5 year 3.36 , 10 yr 4.06

TLT long treasury bond ytd 11% , 3 year 6.30, 5 year 3.52 , 10 year 7.09

fidelity high yield ytd 6.45% , 3 year 4.48 , 5 year 5.47, 10 year 8.58%

fidelity new market income international bond ytd 10.35, 3 year 6.44, 5 year 5.25 , 10 year 10.48 .

fidelity short term bond ytd 1.49 , 3 year 1.26 5yr 1.10 10 year 1.68 .

so over 10 years how much would a diversified bond portfolio beaten cash by ? a whole lot of dollars .

that is what happens , the weight of cash ends up lagging quite a bit behind .

no one should buy one type of bond fund anymore than they should buy a single fund and call it a portfolio .

a total bond fund is really far from total anything . it is missing so many segments of the bond market so it really needs to go with other types of bonds.

my income model consists of 5 to 6 funds . that model makes up the shorter term money going out from 2- 5 years

Last edited by mathjak107; 09-10-2017 at 03:34 PM..
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Old 09-10-2017, 03:55 PM
 
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Originally Posted by mathjak107 View Post
bonds have not returned 2% . they are no different than stocks, they have a total return . ...
Without trying to be obdurate, here's my main bond fund: https://personal.vanguard.com/us/fun...FundIntExt=INT

It has returned just under 3% CAGR over the past 5 years. That's around 16% cumulative. Depending on one's tax bracket (and city/state taxes!), this could be around 4.5% equivalent-taxable, in a taxable account... or say 25% cumulative over the past 5 years. Certainly, that beats cash handily. But it's not quite touching the lofty returns that you cited.

It may be that I'm a hapless idiot in picking bond-funds; and while I can't refute that, it's also true, that bonds sit on a risk/return (and for the cognoscenti, risk/volatility spectrum). I settled for lower returns. It's also true, that we could have a more volatile portfolio component, in negative correlation with say stocks, so that overall portfolio volatility is attenuated. I offer my sincere respect to persons who have found such opportunities, but thus far, they have eluded me (the "golden butterfly" notwithstanding).

And yes, I agree that Fidelity has better bond-offerings than Vanguard. Vanguard has too much of a skeleton-crew to perform the necessary research. But we're all tribal creatures, are we not? Who has the perspicacity to embrace the opposing tribe?
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Old 09-10-2017, 04:19 PM
 
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that is a fund that in my opinion should be part of a bond fund portfolio , not THE PORTFOLIO . a bond fund portfolio is as important to diversify and "change " holdings from time time as a stock fund portfolio .

last year high yield was low hanging fruit . it was just priced ridiculously and was a no brainier . fidelity high yield made up 20% of my bond portfolio last year and returned 19% . today it is gone as the low hanging fruit was picked . today fidelity strategic income replaced it . but i still hold many other bond funds today .

i could have thrown all my money in to fidelity conservative bond fund , called it my bond portfolio , got 1% the last year and said bonds suck!

Last edited by mathjak107; 09-10-2017 at 04:59 PM..
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Old 09-10-2017, 04:57 PM
 
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i forgot if it was swenson or swedroe who put this together . it is a comprehensive bond portfolio .


25% FIDELITY TOTAL BOND

25% iShares iboxx $ Investment Grade Corporate (LQD) (Tracks an index of the most liquid, long-term corporate bonds)

10% Fidelity Floating Rate High Income (FFRHX) (Invests in floating rate bank loans that automatically adjusts to rising short-term interest rates. It offers additional inflation hedge)

10% iShares MBS Fixed Income (MBB) (Tracks a broad index mortgage-backed securities)

7.5% SPDR DB International Govt Inflation-Protected Bond (WIP) (Invests in an index of non-U.S., inflation-linked bonds)

7.5% PowerShares Emerging Markets Sovereign Debt (PCY) (Tracks an index of emerging markets government debt)

7.5% iShares Barclays TIPS Bond (TIP) (Tracks an index of inflation-protected, U.S. Treasury securities)

7.5% iShares Iboxx $ High Yield Corporate Bond (HYG) (Tracks an index of high yield bonds)
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Old 09-10-2017, 07:45 PM
 
1,088 posts, read 524,326 times
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Originally Posted by mathjak107 View Post
i forgot if it was swenson or swedroe who put this together . it is a comprehensive bond portfolio .


25% FIDELITY TOTAL BOND

25% iShares iboxx $ Investment Grade Corporate (LQD) (Tracks an index of the most liquid, long-term corporate bonds)

10% Fidelity Floating Rate High Income (FFRHX) (Invests in floating rate bank loans that automatically adjusts to rising short-term interest rates. It offers additional inflation hedge)

10% iShares MBS Fixed Income (MBB) (Tracks a broad index mortgage-backed securities)

7.5% SPDR DB International Govt Inflation-Protected Bond (WIP) (Invests in an index of non-U.S., inflation-linked bonds)

7.5% PowerShares Emerging Markets Sovereign Debt (PCY) (Tracks an index of emerging markets government debt)

7.5% iShares Barclays TIPS Bond (TIP) (Tracks an index of inflation-protected, U.S. Treasury securities)

7.5% iShares Iboxx $ High Yield Corporate Bond (HYG) (Tracks an index of high yield bonds)
Managing these, and on top of them equity holdings, is a lot more than most can handle. You need time, energy, education, intellect and luck to be able to manage this approach.

It is not surprising that this is what the experts recommend, because they want you to conclude you need professional help. I know, I've worked in that industry. Most can do it on their own if they don't get swallowed up by the rhetoric.
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Old 09-11-2017, 01:58 AM
 
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which is why i have been using a newsletter for 30 years . portfolio management on the 3 portfolio's i run takes 30 seconds a week .

you really do not need to buy anything like that bond portfolio to get good coverage , it is just an example of how many different segments there are .

i have a pretty broadly based income portfolio and it uses 4 bond funds and 23% dividend income fund . the portfolio is 75% less volatile than the s&p 500 .

it is very easy for my wife to maintain and that is what is important . she reads an e-mail update on friday's as to any changes .

i can put portfolio's together in my sleep but i use fidelity insight . i never have to think about my next move or 2nd guess the last one .

even buying funds or etf's you can have a huge amount of holdings overlap unless you take the time to understand just what the etf holds . you cannot go by name of the fund so even trying to buy simple etf's you need to know what you are doing .

a very popular vanguard trio is :

voo large cap , vo mid cap and vb small cap


VOO vs. VO = 229 overlapping constituents (45% of VOO's holdings, 67% of VO's holdings)
VO vs. VB = 20 overlapping constituents (6% of VO's holdings, 1% of VB's holdings)
VOO vs. VB = 28 overlapping constituents (6% of VOO's holdings, 2% of VB's holdings)?


looking at i-shares , ivv is large cap , ijh midcaps and ijr small caps

there is no overlap
IVV vs. IJH = 0 overlapping constituents
IJH vs. IJR = 0 overlapping constituents
IVV vs. IJR = 0 overlapping constituents

the reason vanguards popular combo is a poor choice is the funds follow different index's . those funds really do not belong as a combo , there are better vanguard choices that will not overlap yet folks pick these by name thinking it's simple to put a portfolio together

Last edited by mathjak107; 09-11-2017 at 02:18 AM..
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