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Low Bond Yields
Posted on 12/4/12 at 7:56 pm
Posted on 12/4/12 at 7:56 pm
What is the MT's thoughts on Total Bond Funds (index) right now and the supposed interest rate risk?
Are you making any changes to your asset allocation (bond/equity) or staying away from treasuries and using with munis and corporate bonds?
I have a ~30 year retirement horizon so I've shifted my asset allocation to 90/10 equity/bond. Still haven't convinced myself the need to get out of my total bond fund given my long horizon.
Are you making any changes to your asset allocation (bond/equity) or staying away from treasuries and using with munis and corporate bonds?
I have a ~30 year retirement horizon so I've shifted my asset allocation to 90/10 equity/bond. Still haven't convinced myself the need to get out of my total bond fund given my long horizon.
This post was edited on 12/4/12 at 7:57 pm
2
Posted on 12/4/12 at 8:08 pm to saving$
My bonds are in long and intermediate term bond funds
I don't do total....yield is too low IMO.
I can deal with the high interest rate sensitivity in exchange for the half decent return.
I'm considering moving it into a decent dividend paying blue chip though.
I don't do total....yield is too low IMO.
I can deal with the high interest rate sensitivity in exchange for the half decent return.
I'm considering moving it into a decent dividend paying blue chip though.
Posted on 12/4/12 at 8:31 pm to saving$
I have a fair amount of investment grade bond funds with 10 year or so duration, and it's done surprisingly well. Another twist is that I have plenty of Asian bond exposure.
I'm generally staying away from US treasuries, I just don't think they offer enough.
That said, I have much greater overall bond exposure than you do (and my horizon is similar to yours).
I'm generally staying away from US treasuries, I just don't think they offer enough.
That said, I have much greater overall bond exposure than you do (and my horizon is similar to yours).
Posted on 12/4/12 at 8:57 pm to foshizzle
quote:
That said, I have much greater overall bond exposure than you do (and my horizon is similar to yours).
I've read that studies show that an allocation of anything over 80/20 equities to bonds does not compensate for risk taken. That said even John Bogle has recommended investors diversify their bond holdings with intermediate and corporate bonds given the low yield rate.
Tough times because I don't believe in market timing and prefer to take my risk on the equity side. My plan is in 3 years to go back to my asset allocation regardless of the noise.
Why are you tilted in Asian bonds? Why not use an international bond? I'm assuming you want to minimize exposure Euro's problems.
Posted on 12/4/12 at 9:00 pm to Siderophore
quote:
I'm considering moving it into a decent dividend paying blue chip though.
I would not recommend this. Check this video out
This post was edited on 12/4/12 at 9:03 pm
Posted on 12/4/12 at 9:29 pm to saving$
quote:
Why are you tilted in Asian bonds? Why not use an international bond? I'm assuming you want to minimize exposure Euro's problems.
The tilt toward Asian bonds isn't terribly high. I rebalance every year or so across US, Asia, Europe and "other" markets and there's always something left over that doesn't fit "neatly" and I tend to throw it into Asian exposure is all. So the tilt isn't huge. Most of my exposure to Asia comes from deliberate allocation, I just think a diversified portfolio needs a good dose.
I have looked at "international" bond index funds but this is where it pays to read the prospectus - many of them are basically Euro bond funds or a combination of that and US Treasuries for uninvested cash. I once ran across one purported "international" fund that was 20% in European investments and 80% US Treasuries! UST's aren't necessarily bad but you do need to know the extent of your exposure to them.
If you seriously pursue a globally diversified portfolio, prospectuses must be read. "International" is almost never "everything but the US". It's usually just Europe. Sometimes they throw in Japan (home of the Great Stagnation) too but in general if a fund invests in Asian nations it explicitly says so in the fund name.
But I don't spend a lot of time sweating small differences, basically it's divided roughly according to the size of each economy and making sure the prospectus indicates that they really are investing as expected.
Posted on 12/4/12 at 9:47 pm to foshizzle
quote:
I have looked at "international" bond index funds but this is where it pays to read the prospectus - many of them are basically Euro bond funds or a combination of that and US Treasuries for uninvested cash. I once ran across one purported "international" fund that was 20% in European investments and 80% US Treasuries! UST's aren't necessarily bad but you do need to know the extent of your exposure to them.
Gotcha, in my equities I have an international allocation that includes the rest of the world minus the US. I agree knowing the actual allocation of a fund is important.
On the bond side I do not diversify anymore than a total bond fund, so I have a very small foreign exposure.
It seems like you don't hold many US treasuries. Do you have any exposure to I-bonds or TIPS? I've been thinking about just buying some ibonds for my emergency fund. I know my money will be locked up for a year but the cash will keep up with inflation and allow me to focus on saving rate, other goals, etc rather than trying to chase the small yields available. Of course I'll just buy in a ladder type scheme to make sure I don't run into liquidity problems.
Posted on 12/4/12 at 9:57 pm to saving$
That is the counter argument, but it doesn't shoot my idea out of the water.
I regard bonds as a stock alternative in case I need to dip in emergency money at a time when my stock based securities are undervalued. And just that. Not really as a diversification vehicle in of itself.
So it's mostly a question of if I have enough liquid reserves out of investments to weather some market ripples at a time I need cash.
My retirement window is long enough that I don't yet have bonds in my tax advantaged accounts.
I may go the other way and stay exposed to heavy interest rate influenced investments and move it to a mREIT. ANGC has caught my eye....
I regard bonds as a stock alternative in case I need to dip in emergency money at a time when my stock based securities are undervalued. And just that. Not really as a diversification vehicle in of itself.
So it's mostly a question of if I have enough liquid reserves out of investments to weather some market ripples at a time I need cash.
My retirement window is long enough that I don't yet have bonds in my tax advantaged accounts.
I may go the other way and stay exposed to heavy interest rate influenced investments and move it to a mREIT. ANGC has caught my eye....
This post was edited on 12/4/12 at 10:00 pm
Posted on 12/4/12 at 10:00 pm to saving$
Oh, through index fund holdings I have exposure to Treasuries and am fine with that, I just want to be sure I have a rough idea of the extent of that exposure is all.
Basically everything is in index funds or ETF's, so my focus is in making sure I read the prospectus to have some rough idea of where the exposure is. And rereading every time I rebalance (funds change sometimes). But I haven't looked into anything more specific like TIPS or laddered schemes. I'm just trying to globally diversify as much as I can, chasing the return vs. risk ratio instead of pure return.
Basically everything is in index funds or ETF's, so my focus is in making sure I read the prospectus to have some rough idea of where the exposure is. And rereading every time I rebalance (funds change sometimes). But I haven't looked into anything more specific like TIPS or laddered schemes. I'm just trying to globally diversify as much as I can, chasing the return vs. risk ratio instead of pure return.
Posted on 12/4/12 at 10:10 pm to Siderophore
I think I understand where you are coming from. I don't consider my emergency fund part of my portfolio allocation. In addition, all bond funds are kept in tax advantage vehicles.
Do you buy only individual stocks? How many stocks make up your portfolio? Do you equally weigh sectors?
I'm not smart enough to be an active trader but it's always peaked my interest. Unfortunately, I know I can't beat the market benchmarks.
Do you buy only individual stocks? How many stocks make up your portfolio? Do you equally weigh sectors?
I'm not smart enough to be an active trader but it's always peaked my interest. Unfortunately, I know I can't beat the market benchmarks.
This post was edited on 12/4/12 at 10:14 pm
Posted on 12/4/12 at 10:12 pm to foshizzle
Not sure if you are familiar with this but I use a tool by morning star called Instant x ray.
LINK to X Ray
Really simplifies when I need to rebalance.
LINK to X Ray
Really simplifies when I need to rebalance.
Posted on 12/4/12 at 10:17 pm to saving$
My core is in an index mutual fund, and sector based etfs I like.
My biggest of the sectors are consumer staples, followed by energy.
I only have 3 straight up stocks, and they are moderate to long investments I have a hunch on (and also are relatively safe ones so that if I'm wrong, im just out opportunity cost).
I'm a lot more hands off in my retirement portfolio.
Right now it's just a generic stock funds. 70% domestic and 30% emerging market.
My biggest of the sectors are consumer staples, followed by energy.
I only have 3 straight up stocks, and they are moderate to long investments I have a hunch on (and also are relatively safe ones so that if I'm wrong, im just out opportunity cost).
I'm a lot more hands off in my retirement portfolio.
Right now it's just a generic stock funds. 70% domestic and 30% emerging market.
This post was edited on 12/4/12 at 10:21 pm
Posted on 12/4/12 at 10:41 pm to Siderophore
This also brings to light to my situation. I also have a 30+ year retirement horizon and my strategy is 70/30 equity to bonds. I'm still playing around with the ratio, because I'm not sure what the optimal blend is ( I don't think really anyone does). 90/10 seems really high to me.
Can someone give me some assurance about my 70/30 outlook?
Can someone give me some assurance about my 70/30 outlook?
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