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I have read a ton of press that the bond market is ripe for a crash due to increasing interest rates this year. Does that mean balanced funds such as VWELX are at risk and will not make the 65/35 equities/bonds mix more conservative than a 100% equity ETF position?
A conservative portfolio is not one that minimizes losses. It minimizes losses from the stock market. Now, because stock market losses are the biggest losses of them all, in effect, a conservative portfolio minimizes losses overall. But in the early stages of a bond bear market, a conservative portfolio may lose more than an aggressive, stock-heavy portfolio. Is this a bad thing? In the long run, it isn't. Rebalancing from stocks towards bonds prepares you for the next stock downturn. You should hope for a nice bond market crash, because it will set the stage for the next bond bull market that will ensue when the stock market crashes.
Clear as mud?
TL;DR version. Don't worry about it. Stocks and bonds will not fall together, regardless of what the so-called experts say. When bond yields rise high enough to trigger a recession and a stock market crash, money will flow back into bonds. This process will occur over months to years. As long as you/the portfolio manager rebalance, it will all be good.
Every surge in yields is a great buying opportunity. I'm diverting all my income into Treasuries now to maintain my stock:bond allocation.
You know what would be really bad news? If the bond bear market never came, and the world lapsed back into deflation and yields sinking towards zero. THAT is bad in the long term.
don't you lose every time you rebalance since it triggers a tax event? You have to pay the taxes at possibly a high marginal rate (I pay 9.3% CA state and say 20% LTCG, that's 30% in taxes!!!) rather than deferring taxes.
depends . the 15% bracket can see zero taxes on any appreciation . unless you are very high income , long term capital gains taxes are 15% . if a high earner they are 20% plus an almost 4% surcharge .
if in an ira or 401k than no taxes on the transactions . in any case i never let the tax tail wag the tax dog .
i don't care about paying taxes on bonds . compared to gains in stocks the payouts are a fraction even with capital gains . i keep my stocks in my ira's and bonds which spin off a fraction in comparison in the brokerage account .
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