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Post by FD1000 on Jan 9, 2021 17:11:08 GMT
The concept is "when rates rise, bonds are doomed".So let's test it based on the past. The Fed raised the federal funds rate from 12/2015 at 0.25-0.50 to 12/2018 at 2.25-2.5%, see ( link) Let's see the effect on different fund categories from 12/31/2015 to 12/31/2018. Below is a total performance for 3 years.PIMIX (Multi sector) +18.75...PTIAX 14.3% VWALX(HY Muni) +10.45...OPTAX(HY Muni) 16.7%...HYD(HY Muni index) 13.3% MUNI (Investment grade Munis) +5.5% BIV (all investment grade, 50% treasuries + 50% Corp) +6.7 VBTLX=BND (US tot bond index) +6.2% VCIT (investment grade Corp) 9.15%...LQD (longer duration than VCIT, investment grade Corp) 9.3% EIFAX (bank loan managed) 19.1%...BKLN(BL index) 10.9% HYG (High yield) +18.5% DODIX(core plus managed bond fund) +9.9% VWIAX (conservative allocation about 40/60) +16.3% So, every time you read or hear that rising rates is the end of the world please disregard it. Bonds have a place for many investors in portfolios, especially if you want to lower volatility. If you don't care, whatever the reason then by all means, invest it all in stocks.
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Post by Chahta on Jan 9, 2021 20:38:14 GMT
Interesting post. The only thing I see now is the rise is market driven not forced by the Feds. I will assume when the next stock correction hits bond prices will come back up.
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Post by steadyeddy on Jan 11, 2021 0:16:46 GMT
The lesson to learn from this thread for me is to invest in Wellesley and foggedaboudit!
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Post by Chahta on Jan 11, 2021 11:20:21 GMT
No fun in that. But I have learned that bond OEFs are far more complicated than anything equity.
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Post by anitya on Jan 11, 2021 20:27:48 GMT
No fun in that. But I have learned that bond OEFs are far more complicated than anything equity. Then, we should not frown upon fixed income managers who may want to charge as much or more ER as the equity OEF managers!
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Post by Chahta on Jan 11, 2021 20:32:54 GMT
anitya, I agree! It is not to say equities don't take research and phone calls to companies. Visiting and going to stockholder meetings is important too.
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