re: Recommendations on index funds for taxable account?

quote:

---

Why wouldn't you have those funds in stocks until you want to make the switch? While I understand that stocks are seen as more volatile, your horizon for turning on the switch seems to be long, so why not take the stock gains in the interim, then convert those into bonds when you want to start regular payments in the case of subpar work income?

---

I'm more heavily in stocks (VEIPX specifically) than bonds for that reason.


The argument for putting money into bonds now rather than putting it in stocks and transferring over when I reach the point of wanting income is mostly over interest rates, a factor which is emphasized by the fact that I am purchasing long term bonds.

If you hold a bond to maturity while reinvesting, interest rates don't really matter in terms of your investment. Movements in capital gains is checked by opposite motions in yields.

However, if you purchase bonds without reinvesting your yield, and you do so in a rising interest rate environment, you stand to to take a huge hit on your principal.

If you would do an approach similar to what you said your trade off would be having to get a far shorter term (and lower yield).

I just find it simpler to hold a portion of long term bonds (whose high risk allows for returns that are pretty respectable even though they don't quite match the average for stocks.


I fully expect to see one more knowledgable than I call me foolish though.