I'm a passive, weekly set it and forget it investor, but I'm currently getting the itch the move my holdings from something completely passive VTSAX to something only slightly less passive like VDADX. My thought process is that a large cap, dividend heavy fund might be more inclined to better weather what I feel is a likely downturn in the next couple of years than the market as a whole.

Someone please talk me out of the slippery slope I'm staring down of 1. fricking with my investment strategy because of my uneducated opinion of what the market might do 2. for a fund that has been in existence for a length of time roughly equivalent to a medium stretch of celebrity rehab.

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Posted by TheHiddenFlask

The Welsh red light district

Member since Jul 2008

18384 posts

Posted on 8/10/14 at 7:16 am to Joshjrn

Large cap dividend plays will underperform significantly in an environment where interest rates rise materially.

Not a good idea.

ETA: also a terrible slippery slope. Don't start that shite.

This post was edited on 8/10/14 at 7:17 am

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Posted by Sigma

Fairhope, AL

Member since Dec 2005

3643 posts

Posted on 8/10/14 at 8:06 am to Joshjrn

If things do turn south significantly, just focus on the discounts you are getting with every purchase. It keeps me going.

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Posted by Venelar

The AP

Member since Oct 2010

1135 posts

Posted on 8/10/14 at 8:14 am to Sigma

quote:

If things do turn south significantly, just focus on the discounts you are getting with every purchase. It keeps me going.

This. With a 25yr outlook I just remind myself that I'm buying on the cheap.

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Posted by Joshjrn

Baton Rouge

Member since Dec 2008

27081 posts

Posted on 8/10/14 at 8:40 am to Venelar

Much better. Thank you, gentlemen

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Posted by LSU0358

Member since Jan 2005

7918 posts

Posted on 8/10/14 at 8:45 am to TheHiddenFlask

If bonds are paying 3-4%, why risk losing capital to make 4-5%? I think the last 3-4 years with high performing dividend stocks aren't here to stay.

This post was edited on 8/10/14 at 8:47 am

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Posted by Joshjrn

Baton Rouge

Member since Dec 2008

27081 posts

Posted on 8/10/14 at 1:36 pm to Joshjrn

On a related note, I was also considering reducing my bond exposure under the idea that raising interest rates would likely cause a bond bear market. I have a 30+ year investment timeline, so I'm not concerned about fluctuations in the equity market. Is this still getting too cute?

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Posted by BJ titsnbeer

Gods Country

Member since Mar 2011

217 posts

Posted on 8/10/14 at 5:03 pm to Joshjrn

quote:
I was also considering reducing my bond exposure under the idea that raising interest rates would likely cause a bond bear market. I have a 30+ year investment timeline, so I'm not concerned about fluctuations in the equity market.

Having a long time horizon like you, I see bonds as a buoy when the equity market gets crazy. I keep about 15% of my portfolio in intermediate term gov't bonds. My rationale is that if/when all hell breaks loose and there is a flight to quality (think 2008) I should see decent appreciation with the bonds which then will be used to buy more equities when rebalance time comes around.

just my $.02

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Posted by Volvagia

Fort Worth

Member since Mar 2006

51910 posts

Posted on 8/10/14 at 9:27 pm to Joshjrn

quote:
I was also considering reducing my bond exposure under the idea that raising interest rates would likely cause a bond bear market.

Vanguard's bond expert said something to the effect that as long as you plan to hold for a duration longer than the average maturity of your bonds, then interest rate related bear/bull markets are irrelevant to you: in the end it works out nearly the same due to the higher yield the bonds will garner.

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