Hi to the old M* crowd..and a question about bond funds

[mikes425]

First, thanks to a fellow at the armchair forums for letting me know you guys were here.  I posted occasionally
on the M* boards and always valued and appreciated the feedback many of you offered there. On that note...
I'd be interested in any perspectives on a recent portfolio review.  

I have about 49 ½% in equity - diversified mostly domestic, some global - funds. I'm on the conservative side of moderate. YTD am down about 5%. On advice of my hourly "occasional" FA whom I consult with a few times a year, recent adjustments included increasing a modest allocation to preferred securities as they now yield about 5 ½%.

On the bond side I was at about 10% in tips bond funds which held up pretty well in the past year with inflation coming in much higher than expected. That said, my FA thinks if there are surprises from here it will be LOWER inflation prints since everyone’s inflation radar is high and they can fall with higher bond yields. On that note I sold about 2% of TIPS.

I have held VGIT for a number of years and have not changed that position. Of course it's seen a significant NAV loss YTD.
I also own VCSH and it’s yield is now 3.4%. My FA friend feels that's not bad for a fund that doesn’t have a ton of interest rate risk as it invests in investment-grade bonds with average duration of 2.8 years being lower than most bond funds.
He feels that’s an attractive risk/return tradeoff.

I've expressed concern about many of the bond funds, but he points out that as they decline the yield goes higher and they're more appealing to own, don’t have the same risks as stocks if we hit a recession and related bear market, and may even go up in that environment.

So bottom line, his position is that it is important to maintain my allocation to bonds, and that high quality traditional bonds such as VGIT and BAB (Munis) are “insurance” for a bear market, and these two funds in particular would likely appreciate in a major stock market decline. He does not suggest selling them just because they show losses for now.
They are less than 7% of my total portfolio.

I'm going to be 64 in about a week, self employed & basically semi-retired with the PF comprising about 2.3m in assets, debt free, own my home, low COLA, comfortable, non-extravagant lifestyle, modest spending, average annual dividend income around 50k, other income maybe 35k depending on how much or little I care to work. Maybe this is sort of an "am I okay?" question, but more immediately he did suggest throwing some uninvested cash into VCSH, for reason mentioned above. I'm somewhat second-guessing that one.

I'm obviously not an 'active' trader by most people's standards and pretty much maintain a "B&H" approach. So that said,
thanks for any thoughts and again, nice to reconnect with you folks on this platform: )

[richardsok]

Hi Mike --

I remember you from the old Morningstar forum. Good to connect with another veteran again.

I won't sugarcoat it. I've read your post and think your financial advisor is giving you seriously poor advice. He is telling you what you are already inclined to hear and his opinion is doing you harm.

Look -- underlying all my thinking about the market and investing is my belief that our emotions, habits, and biases should be exiled as much as possible. I believe in using objective evidence and probability whenever I can.

Now when you tell me "I don't like to trade" I would reply you are letting your previous inclinations rule your judgment. No one should "like" to trade and if someone enjoys buying and selling, then investing becomes a pleasurable pastime -- a fun hobby bringing with it a gambler's "buzz" -- and danger. I  argue our emotions should be irrelevant. We should trade out of an asset when the probabilities seem against us. Then and only then.

Fortunately in your case, charts for VGIT and VCSH show them to be beautiful, low-volatility assets. That means they are easy to trade with confidence; when the chart line changes direction, you have a very high probability the trend will remain in that new direction for an extended period of time -- maybe two weeks, maybe two months, maybe two years. In your case, of course, the trend is DOWN. You had clear "sell" signals back in December.

Now there will be people who will  retort, "Well, it's April. The damage is already done." I say nonsense. Assume your bonds and preferreds are over 10% of a 2.5mil portfolio.  That's serious coin. No one knows how long your bonds & preferreds will fall, nor how deep they will go. Sure, the bleeding may stop next week, or not until next year. I really hate to give specific buy or sell opinions, but in your case the conclusion is obvious.  Your funds are in a sustained downward pattern and your only sane course  is to SELL ENTIRELY AT ONCE.

Don't listen to my opinion or anyone else's when to return. You're a reluctant trader. I get it. So, for your indicator use the simplest and most conservative signal I know -- the 50-Day Moving Average. So long as the SLOPE of that line is trending downward, your VGIT and VCSH and preferreds are poison and your FA is mis-advising you.   Clinging to a steadily eroding asset for its trickle of dividends is pure folly.   

Now if we were talking about more volatile stocks or funds, I couldn't be so confident. But your VGIT and VCSH have practically  ideal charts for timely decisions. (I personally follow MUB and BSV and haven't touched either for months.    Nor preferred funds, either.)

I have little patience for talk about what we like to do or what feels right or what's comfortable. Investing isn't back rubs. I want to see what relevant facts I can gather and impassively act when the probabilities seem clear.

[mikes425]

Hi Richard, thanks for the no-nonsense opinion.  I guess I have some serious thinking to do pretty quickly, based on your forecast for bond funds as this totally up-ends literally everything I was just advised to do,
but, I asked, and I appreciate your take on it.  I get that you are anti FA and I have to mention that this is not a conventional 'relationship' in terms of what most think of when it comes to commissioned 'advice.'
The arrangement is strictly on an hourly basis and no more than a few times a year - zero 'commitment' per se.  Suffice to say you and he would be in 100% disagreement in approach.

I gather that you would apply the same conclusion for the rest of my diversified bond funds i.e., half of my 2M Portfolio; including SCHO, SAMBX, VIPSX, SCHP, FLRN, VGIT, PFFD, BAB, WIW, EDD, VWOB, MSD, MINT, you
would similarly exit those positions based on your active trading philosophy.  A lot of consequences to weigh if so.  And, if so, you would, consider Cash to be a more favorable position?   And to reiterate, I prefer to maintain 
a "moderate" allocation (by the standards most apply that term to in portfolio parlance)
     

Now there will be people who will retort, "Well, it's April. The damage is already done." I say nonsense. Assume your bonds and preferreds are over 10% of a 2.5mil portfolio. That's serious coin. No one knows how long your bonds & preferreds will fall, nor how deep they will go. Sure, the bleeding may stop next week, or not until next year. I really hate to give specific buy or sell opinions, but in your case the conclusion is obvious. Your funds are in a sustained downward pattern and your only sane course is to SELL ENTIRELY AT ONCE.

Don't listen to my opinion or anyone else's when to return. You're a reluctant trader. I get it. So, for your indicator use the simplest and most conservative signal I know -- the 50-Day Moving Average. So long as the SLOPE of that line is trending downward, your VGIT and VCSH and preferreds are poison and your FA is mis-advising you. Clinging to a steadily eroding asset for its trickle of dividends is pure folly.

Now if we were talking about more volatile stocks or funds, I couldn't be so confident. But your VGIT and VCSH have practically ideal charts for timely decisions. (I personally follow MUB and BSV and haven't touched either for months. Nor preferred funds, either.)

I have little patience for talk about what we like to do or what feels right or what's comfortable. Investing isn't back rubs. I want to see what relevant facts I can gather and impassively act when the probabilities seem clear.

[Chahta]

Hi Mike. There are plenty of B&H investors. I’ve been following other investors that don’t necessarily think holding bonds is terrible. This came from a contrarian as far as holding bonds over at MFO. www.virtus.com/assets/files/5hw/what_does_a_bond_bear_market_look_like_4596.pdf

It may be “old school” advice coming from your FA but holding to an AA is smart for those of us that are not traders. If he is a fiduciary he is giving you sound advice. Interesting that you pay a FA for advice then ask here. Sounds like you don’t need a FA.

[mikes425]

Well, again, it's not a conventional i.e., percentage of AUM, FA by any stretch.  He's a former fund manager who is willing to do an hourly thing when i seek some guidance -and i'm talking 1-2 hours a few times a year. He has no Product pushing agenda and does not manage my PF.,  It amounts to a tiny fraction of the cost of typical 1% or higher FAs.  

When I ask the same questions I ask him on forums, it's kind of due diligence...I like to get other perspectives and it's always fascinating to see the range of opinions which in this case seems to be anywhere from a  total 180 opposite of his recommendations....to a lukewarm acknowledgement of it as mediocre advice.  When I sought advice on forums in past volatile market periods, i was often chastised for 'trying to time the market or making major allocation changes in attempt to be tactical...so obviously B&H isn't as favorable an approach as it used to be...if it can be called an approach.
I always heard the mantra about maintaining a long-range view..sticking with my stated AA goal stay the course, all the old hackneyed terms for leaving everything alone and being ok so long as it is a well balanced and diversified PF...at that time, a far more conservative PF.. and now, Moderate.  To use another timeworn term, maybe This time IS different? : ) 

[Deleted]

mikes425,
You asked your question on a forum where 95% of participants are engaged in some form of market timing, even if they describe themselves as buy and hold investors. I'm no better, earlier in the year I ignored my IPS and shifted funds to gain exposure to commodities and create a slight portfolio value tilt, and raised about 10% cash in the process.
I'm not a believer in making wholesale changes based on anyone's prediction, but you can make adjustments. Just be humble enough to know you're probably wrong, that markets are incredibly efficient and that you really don't know anything that hasn't been priced into the markets already.

[mikes425]

django, I think we share the same perception on your first point. i have to say i don't believe the guy i talk to is necessarily wrong per se. He's always provided his substantiation for his rationale, knows my risk tolerance, is not a 'salesman' but a value oriented guy who is frequently contrarian, and i must say, has helped me to take a conservative PF from around 800k to about 2.2M in 10 years; Perhaps not a spectacular performance to many here, but i was not comfortable with more than 30-40% equity in that timeframe.

Changes he has suggested over the years have been 'at the margins' and never anything too extreme. He/we also have utilized a lot of CEF with discount strategy and dividends being a big part of that equation.

I respect anyone's opinion here. Hopefully what he's suggesting is taking into account what has already been priced into the markets.
To totally exit all bond funds would have some major tax consequences for me anyway, so to an extent i find that notion a bit reckless
on the surface. I simply can't believe that bond funds at-large will be dead money for a decade.  But then, there's a lot I can't believe about what's happened to this country in the last five years so...who knows?

Thanks again,

[FD1000]

The usual suspect. Do not concentrate on the yield but on the risk-adjusted returns. Are these preferred instead of your stock or bond portion?
Selling 2% is meaningless, just a feel good action.
Most should not be traders, but when they start losing, especially in bonds, they wake up too late.
In a major stock market decline, treasuries(VGIT) are probably the only ones who would protect you. BAB will not, it lost over 20%, see chart below.
The following is a catch 22. When you don't know enough, you don't know if your FA is good. When you know enough, you don't need one. A FA is "Jack of all trades, master of none". This means that in every serious problem such as taxes and trust, you need to see a real expert. For taxes and/or what account(taxable, IRA) to use first, better see a CPA. For trust see an attorney.

A good and honest FA can figure out within 2 hours max your needs and goals and set up a portfolio for you with simple rules for several years to come. I never met one like that.
Simple rules: keep your asset allocation within 5% range and revert when they are off. Don't trade, if you do, your core of 80% should never change, you only allow 20% for trades and stupid mistakes.

BTW, you have done very well up to this point. The best way from here is educating yourself about investing. Just read 2 easy basic books or several articles. KISS investing is easy to learn and implement, and why you don't need a FA.

===========

I don't follow the above, I do trade and have done it since 2000. See my (history).

[richardsok]

OK. Once more to the topic and I'm done. If the FA is putting together a portfolio for a mentally simple or geriatric client -- or some dilettante fashionista who breaks out in hives at the mention of the word "investments" then, yes, I suppose he might lock his client into some ultra-safe but slowly eroding portfolio bucket such as has been described.

But Mike is obviously as observant and intelligent as any of us -- and he can surely see what is happening to bond and preferred funds. He and we can see the loss process is not merely a problem of the past, but that it is on-going. Why should he just passively watch the slow and steady drip, drip of wealth loss and do nothing about it?

And (also, yes) you might argue the big equity leg in Mike's portfolio is doing well and is more than compensating for his bonds & preferreds crumbling. But in fact his equities are NOT marching higher. The broad stock market has been overall dead money (or worse) for the past six months or so. OK so you ride stocks down, you ride them up. In the long run you expect them to be up. Won't quarrel there with a B&H attitude on the volatile stuff.

And YES -- a good rallying trend in bonds & prefs could possibly begin this week. But that is not how any competent poker player would game it.    Mike doesn't have to sit in this allocation and hopefully wait for it to rally some day soon.  He can always end the bleeding, revert to cash, watch for a rally trend to commence and THEN return to his bonds.... next month or next year.

When I discover a leaky radiator I generally feel an urgency to do something about it.

But, hey. That's me.

[win1177]

Apr 21, 2022 12:50:44 GMT richardsok said:

OK. Once more to the topic and I'm done. If the FA is putting together a portfolio for a mentally simple or geriatric client -- or some dilettante fashionista who breaks out in hives at the mention of the word "investments" then, yes, I suppose he might lock his client into some ultra-safe but slowly eroding portfolio bucket such as has been described.

But Mike is obviously as observant and intelligent as any of us -- and he can surely see what is happening to bond and preferred funds. He and we can see the loss process is not merely a problem of the past, but that it is on-going. Why should he just passively watch the slow and steady drip, drip of wealth loss and do nothing about it?

And (also, yes) you might argue the big equity leg in Mike's portfolio is doing well and is more than compensating for his bonds & preferreds crumbling. But in fact his equities are NOT marching higher. The broad stock market has been overall dead money (or worse) for the past six months or so. OK so you ride stocks down, you ride them up. In the long run you expect them to be up. Won't quarrel there with a B&H attitude on the volatile stuff.

And YES -- a good rallying trend in bonds & prefs could possibly begin this week. But that is not the way any competent poker player would game it.

When I discover a leaky radiator I generally feel an urgency to do something about it.

But, hey. That's me.


Agree 100% RichardsOK! The FED has been VERY transparent about their plans to raise rates at nearly every FED meeting, and some of them are even sending out “trial balloons” of possible 0.5% increases at future meetings. There is near 100% agreement that rates will be higher at the end of this year. In this scenario, holding “higher quality bonds” is a nearly guaranteed way to lose principal. Your only “hope” is that the income will outpace the drop in principal value, which at current rates is highly unlikely.

That’s why I’m at 0.5% fixed income (bonds). I’ll get back in when rates slow their ascent and are closer to “stabilizing”.


Win

[win1177]

Apr 20, 2022 3:03:59 GMT mikes425 said:

First, thanks to a fellow at the armchair forums for letting me know you guys were here.  I posted occasionally
on the M* boards and always valued and appreciated the feedback many of you offered there. On that note...
I'd be interested in any perspectives on a recent portfolio review.  

I have about 49 ½% in equity - diversified mostly domestic, some global - funds. I'm on the conservative side of moderate. YTD am down about 5%. On advice of my hourly "occasional" FA whom I consult with a few times a year, recent adjustments included increasing a modest allocation to preferred securities as they now yield about 5 ½%.

On the bond side I was at about 10% in tips bond funds which held up pretty well in the past year with inflation coming in much higher than expected. That said, my FA thinks if there are surprises from here it will be LOWER inflation prints since everyone’s inflation radar is high and they can fall with higher bond yields. On that note I sold about 2% of TIPS.

I have held VGIT for a number of years and have not changed that position. Of course it's seen a significant NAV loss YTD.
I also own VCSH and it’s yield is now 3.4%. My FA friend feels that's not bad for a fund that doesn’t have a ton of interest rate risk as it invests in investment-grade bonds with average duration of 2.8 years being lower than most bond funds.
He feels that’s an attractive risk/return tradeoff.

I've expressed concern about many of the bond funds, but he points out that as they decline the yield goes higher and they're more appealing to own, don’t have the same risks as stocks if we hit a recession and related bear market, and may even go up in that environment.

So bottom line, his position is that it is important to maintain my allocation to bonds, and that high quality traditional bonds such as VGIT and BAB (Munis) are “insurance” for a bear market, and these two funds in particular would likely appreciate in a major stock market decline. He does not suggest selling them just because they show losses for now.
They are less than 7% of my total portfolio.

I'm going to be 64 in about a week, self employed & basically semi-retired with the PF comprising about 2.3m in assets, debt free, own my home, low COLA, comfortable, non-extravagant lifestyle, modest spending, average annual dividend income around 50k, other income maybe 35k depending on how much or little I care to work. Maybe this is sort of an "am I okay?" question, but more immediately he did suggest throwing some uninvested cash into VCSH, for reason mentioned above. I'm somewhat second-guessing that one.

I'm obviously not an 'active' trader by most people's standards and pretty much maintain a "B&H" approach. So that said,
thanks for any thoughts and again, nice to reconnect with you folks on this platform: )

Mikes425,
Great to see you here and I too remember you from Morningstar. 


I’m also more in the BandH camp, but I do “tilt” and “lean” into trends I see. And right now, higher quality bonds are LOSING MONEY. That is why I sold nearly ALL my bond funds, and am holding almost all my “fixed income allocation” in cash. Yes, it’s STILL losing money to inflation, but not as much as my (generally) higher quality bond funds were losing. Ill get back in bonds when rates are higher, and they appear closer to “finishing” their rise. I KNOW I wont be able to time it perfectly, but at least I wont lose 5-10 thousand in principal. 

That’s what I’m doing, for what it’s worth. 


Win

[mikes425]

richardsok, mikes425,

Very compelling. So much so, I hope you don't mind me paraphrasing most of your argument(s) in an email to the aforementioned FA, putting forth these very questions and I'll try and give you his response, assuming he doesn't drop me : ). I get your points. Believe me, it hurts to sit and see these so called protection/insurance positions moving in tandem with lower equities or doing worse than equities at this point in time. Now I've already lost that "5-10k in principal" and then some, so to get out here presumes there's much much further to fall across the board in bond funds based on your projections and outlook. So that said let me ask this. I achieve a steady 50k/year with the existing allocation - in dividend income. If/when I were to bail on these assorted bond positions, that return gets smaller...unless you have a better suggestion than Cash for whatever the liquidation of said bond funds is - that will achieve comparable dividends and..not require precise timing in/out of the markets. What am I missing as far as your alternative options or are you simply saying to go to Cash as a hedge, insurance, protection -during a major stock market decline..? Because, I can all but assure you his response will be that you "need" bonds precisely for this role in the portfolio.

[Chahta]

Maybe you need them but then again some others may need income. Does one consume only "investment cash" while waiting? Maybe with $2m you should have an annuity for part of your portfolio if you need income.

[mikes425]

Ok so, not disagreeing but just for the sake of discussion and enlightenment, what about the fact that as the bond NAVs go down the yields rise and increase the expected return, i.e., it is higher now than at the end of the year. Yes, the Fed will raise rates to the mid 2s but hasn't the bond mkt already anticipated that, if not more. Thus we see higher bond yields and lower bond prices in a significant move even though the Fed has barely moved with only a 1/4% hike thus far. In that
light it isn't a given that yields will keep going up much since they've already moved up in anticipation of the Fed's rate rise to at least 2% in the next year.

[mikes425]

Apr 21, 2022 17:34:31 GMT Chahta said:

Maybe you need them but then again some others may need income. Does one consume only "investment cash" while waiting? Maybe with $2m you should have an annuity for part of your portfolio if you need income.

Hi Chahta, well, unless I'm mistaken, if I stay put with my bond fund allocation,  the dividend income I already realize - in my case about 50-53k will not decline due to the NAV fluctuation --but rather increase as the fund's yields rise.

On another note, in a major market sell-off, the high quality bonds that are losing recently will likely go up  in price or be flat when all else is collapsing. Again, not advocating either way per se, just saying...

[Chahta]

mikes425, yes I realize your income would not change. But correct me if I am wrong, you want to sell those bond funds.

[fishingrod]

mikes425 ,

Sounds like you have some confirmation bias, you want to hear what you want to believe. Everyone has some. I can help with that.
You are right in that a lot of the carnage has already been done.
You are right that the interest rates has risen on bond funds.
You are right in that the treasury bond funds should give you the ballast you are looking for during a stock market meltdown.

On the other side,
What if inflation is hard to tame and the FED continues to raise rates past what the market is expecting and already priced in.

[mikes425]

Apr 21, 2022 19:10:04 GMT fishingrod said:

mikes425 ,

Sounds like you have some confirmation bias, you want to hear what you want to believe. Everyone has some. I can help with that.
You are right in that a lot of the carnage has already been done.
You are right that the interest rates has risen on bond funds.
You are right in that the treasury bond funds should give you the ballast you are looking for during a stock market meltdown.

On the other side,
What if inflation is hard to tame and the FED continues to raise rates past what the market is expecting and already priced in.

Well, I guess it's a 50/50 coin flip then isn't it.  Or...total speculation either way.  (educated guesses?)

[mikes425]

Chahta, I don't necessarily 'want' to sell them - but that is the recommendation I'm getting here anyway.  On a mildly positive note, the TIPS and Floating Rates are doing ok today. The longest duration I have - Intermediate is less than 5% of my PF

[Chahta]

I am curious how much of the $50k per year of income you are using. That is a good chunk of change to reinvest if you are not using it. Going back to your OP being an “am I OK” question, you are in an enviable position; young, well off and a good financial position. I can honestly say if I was in your position, I would keep doing what you have been doing. I think your FA is right. That is my worthless opinion. I have posted previously a good portion of my bond AA is in cash now waiting for lower prices to reinvest.

[mikes425]

Chahta, I really appreciate that. I don't think it's a worthless opinion at all, and yes I feel fortunate to have accumulated the asset base that i have and to that end i credit the FA for helping me maintain perspective and a disciplined approach.  The whole thing from somebody about 'confirmation bias' being my goal here is presumptuous at best.  I presented the rationale behind his/my allocation - which speaks for itself - and others presented theirs. The overwhelming anti-FA bias 'consensus here is loud and clear- just as it was on the M* boards but I'd sorta forgotten about that. Again, this is literally a few hours of advice a YEAR, not some typical 1% cookie-cutter AUM FA. I have never gone that route.  

As for the div. income, I go by Schwab's projection and for 2022 that is currently indicating to be in the realm of 52k. (including of course -from bond funds- and i don't see the NAV losses impacting that negatively unless I'm missing something). I do stay fully invested except for about 30k for cash-flow, and i'd say I average 40k a year in total spending and up to 40k in freelance income but have scaled back on work...hence, paying more attention to the Div income than in the past.  Anyway thanks for your positivity and support : ) Best of luck to you in redeploying your cash whenever the timing feels right to you!

[fishingrod]

mikes425,
"The whole thing from somebody about 'confirmation bias' being my goal here is presumptuous at best".

That was me. Sorry if you took it offensively, I didn't mean it that way.

[mikes425]

fishingrod,  No problem! Sorry for my presumption.  I appreciated your reply and added perspective. 

[FD1000]

As mostly a bond OEFs trader, I'm at 99+% in cash for months now. The Fed told me everything I want to know and markets/charts follow. Most bond funds lost money YTD, higher-rated bonds lost a lot in bond terms. Bank loans are better but most are down anyway.  It's the first time, I'm out for months since 2013 when I decided to use cash in higher risk markets. I only do short term (1-3 days) trades when the charts' setup look very favorable.

[fishingrod]

mikes425,
I am really right where you are. I am holding bond funds in a taxable account, and I have watched them deteriorate from a nice peak. They are off anywhere from 9.39% to 12.32% from their 52 week highs.
That being said I am less than .50% down YTD in my total portfolio, from the peak which was on 1/1/2022.

I am curious as to the last time that you had consulted with your FA before your current consult.
Had you talked to him after the carnage had began but not before bonds were completely ravaged. The reason I ask is I wonder if he had a chance to tell you "hey we could sell some bonds and sit this out for a while". If you didn't talk to him as the descent was happening but only recently, then I think he is also correct in your situation. A lot of the carnage has been done, and who knows what will happen next. Bonds are for ballast.... All of your points are valid.
Everybody's point are valid. And you already knew them.

I am sticking this out with my current bond funds. I too have tax reasons I didn't sell. I don't have any place better to put it if I sell. And the interest compounding at lower prices help me to hold them.

[retiredat48]

I have long been involved with giving Mike some guidance on his portfolio...at least a decade.

Fact is, Mike was about 10% equities allocation when we started. He was very risk-averse. He slowly built up to where he now states 49% various equity based funds...a major milestone for him.

A question Mike...what is your current overall portfolio yield?? If not known, suggest using M* XRAY to get it.

Also, I will reply to your PM next week.

Lastly, two points: Be aware I exited all vanilla/standard-issue bond funds about a year ago.

I am currently in the process of buying 2 year treasury bond funds (yield on 2 yr approaching 3%), as a holding place for my cash, and you can follow this by looking for my original post/thread, in the Bond Fund Forum. So, consider 3% short term, and compare to your overall portfolio yield. Is this not a bad place to park, if you further exit any bond funds??

Best wishes...

R48

[mikes425]

retiredat48 , Thanks for posting Bob! Glad you got my PM and look forward to hearing from you. Yes, we do go back a ways on the discussion of my allocation through the years.  Despite days like these I am happy to have overcome the risk aversion of the past and feel pretty comfortable in the 50/50 AA range now.  As for my total PF yield- not including the sell-off today,  which looks like it'll be about a 1.3% drop for me, per Schwab Performance summary, YTD = 5.18%. One-Year, -3.4%, Three-Years, +5.62%, Five-Years, +5.54%.  This reflects essentially a moderate-conservative AA early on, and more recently, say, 3 years, a shift to a more moderate 45-50% equity AA.  Total asset accumulation since 2010 has more or less doubled.  I will check out your bonds thread. I can tell you that SCHO has been the largest bond holding in my Taxable account at about 14% so it seems that might fall in line with your thinking...followed by VCSH @ 13% and VGIT about 5%...and speaking of 'today' - those don't look all that bad: )

Thanks again!

Mike

[mikes425]

Apr 22, 2022 14:40:23 GMT fishingrod said:

mikes425 ,
I am really right where you are. I am holding bond funds in a taxable account, and I have watched them deteriorate from a nice peak. They are off anywhere from 9.39% to 12.32% from their 52 week highs.
That being said I am less than .50% down YTD in my total portfolio, from the peak which was on 1/1/2022.

I am curious as to the last time that you had consulted with your FA before your current consult.
Had you talked to him after the carnage had began but not before bonds were completely ravaged. The reason I ask is I wonder if he had a chance to tell you "hey we could sell some bonds and sit this out for a while". If you didn't talk to him as the descent was happening but only recently, then I think he is also correct in your situation. A lot of the carnage has been done, and who knows what will happen next. Bonds are for ballast.... All of your points are valid.
Everybody's point are valid. And you already knew them.

I am sticking this out with my current bond funds. I too have tax reasons I didn't sell. I don't have any place better to put it if I sell. And the interest compounding at lower prices help me to hold them.

fishingrod , Thanks for your question and notes. I think it had been about 6 months before my last chat with my FA friend...and we did make some overall changes out of any longer term stuff to primarily ST and a small Intermediate duration position...with an emphasis on Floating Rate and ST Treasury, TIPS, and as mentioned before VCSH, so I think we were pretty logically tactical to be positioned for interest-rate 'sensitivity and volatility protection or 'insurance' per se.  Obviously you have been better positioned for YTD performance than I am at -5-6% YTD so congratulations to you on that!  I have to say that today, the FA was rather on-target on one count...those bond funds that I do have for ballast did what they were supposed to...so, there's that: )