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Post by FD1000 on May 18, 2022 16:10:50 GMT
Nothing new. I don't post what I do any more. My main investments have been bond funds, many times unique ones. I have been in cash for months already. I don't see any glimpse of stabilization and definitely not an uptrend for bond funds. There are a couple that are positive but they are the exception to the rule. Sometimes it's that easy. When the Fed raises rates like that, being out is the best choice. Remember, when your fund performance is down 10%. It means you lost 10%, that includes all the distributions. Your initial $100K is worth just $90K.
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Post by FD1000 on May 20, 2022 15:50:42 GMT
Higher-rated bonds look a bit better in the last several days just because stocks go down and rates went down, but this is a deceiving concept. Rates have a good chance to keep going up. Surprisingly, HY Munis(PHMIX) and even higher-rated Munis FLAAX with 80% in IG rating have been doing awful for 6 months and one month. Attachments:
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Bonds
May 20, 2022 15:59:17 GMT
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Post by chang on May 20, 2022 15:59:17 GMT
IMO there’s no way rates / yields are not going up. So why even bother looking at bonds until yields top out?
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Post by Chahta on May 20, 2022 17:29:28 GMT
IMO there’s no way rates / yields are not going up. So why even bother looking at bonds until yields top out? I would say why ever buy bonds? Certainly not for max TR. Stocks are far better for that. The answer is income. That is the reason most invest in bonds. Not those of us here at investment forums, though. Funny we complain the S&P is down 20% YTD. But TSIIX Is down 5.6% YTD. I know we all have a plan or method where we can beat the odds. But most invest and ride things out.
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Bonds
May 20, 2022 21:36:28 GMT
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Post by FD1000 on May 20, 2022 21:36:28 GMT
Income can't compensate you for the total performance. If you know your bond fund TR will be negative, why would you hold it? We are in a special situation where the 2 major assets (stocks+ bonds) are loosing money.
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Post by Chahta on May 20, 2022 23:24:14 GMT
Most retirees are not sophisticated enough to trade in and out of funds. They pretty much have to hold what they own. If someone is holding 100% cash and needs monthly income what do they do? Consuming your investment cash is the ultimate spend down. Sure yield will not compensate NAV loss but at least if the shares are held they can recover while using the yield to live on.
It doesn’t appear to be the case for many on this forum.
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Post by Deleted on May 20, 2022 23:42:30 GMT
Most retirees are not sophisticated enough to trade in and out of funds. They pretty much have to hold what they own. If someone is holding 100% cash and needs monthly income what do they do? Consuming your investment cash is the ultimate spend down. Sure yield will not compensate NAV loss but at least if the shares are held they can recover while using the yield to live on. It doesn’t appear to be the case for many on this forum. Exactly - although with a sea change (end of the bond bull mkt) it might have been advisable for the average retiree to make sure they had enough cash for three years. Also, if you subscribed that inflation was going to be much higher and that bondholders do poorly with inflation, you would have reallocated accordingly - more equities which have a hedge against inflation. This situation argues well for a bucket strategy and higher allocation to dividend producing equities to sustain income. It also argues against the public insistence that inflation would be transitory or no big deal. In my view a great dis-service was done to retirees by not having more support for the possible scenarios of inflation and now the one which has now occurred. Many retirees are probably terrified and making bad decisions. For people still working and not so close to retiring - it probably won't matter in the long run if they held and just re-invested. Depending on inflation.....
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Post by mozart522 on May 21, 2022 3:24:35 GMT
Chahta, "Most retirees are not sophisticated enough to trade in and out of funds. They pretty much have to hold what they own. If someone is holding 100% cash and needs monthly income what do they do? Consuming your investment cash is the ultimate spend down. Sure yield will not compensate NAV loss but at least if the shares are held they can recover while using the yield to live on" I don't see it like that. Say a retiree is holding what they own in BND. Let's say they bought it a year ago. They have been collecting whatever the interest rate was then around 1.7%. Now the fund is down 9+% and has a distribution yield of 2.2%. The "rule of thumb" says an investor will be made whole based on rate increases for NAV declines + the original interest rate after the duration period. But that assumes one is reinvesting the distributions and you are suggesting spending them. If dividends are reinvested then the investment will be worth very close to what it would have been worth had interest rates never gone up in the first place. And it doesn't matter how much they go up. But if you spend the income, then you get no more shares, and the NAV continues to fall with rate increases and it will take a long time to recover the NAV, but the income will increase over time. Ask yourself, if the NAV has fallen 9% on a .75% rate hike, how much more will it fall on an eventual 3% hike? It clearly isn't built into current prices. Let's look at cash. As rates rise so does the options for income from cash: MM, CDs and so on. So soon one can get the same 1.7% that the person above got on BND, and will continue to benefit from more rate increases. He can spend this income without any drop in his capital. Of course, all of this assumes steady rates either flat or up. If the FED drops rates after rising to 3%, then the NAV would recover much faster, but, of course the income would be going down. Others have said it, but this is just not a good time to hold a bond fund, particularly ones with longer durations. You are almost guaranteed at least a decade of NAV loss.
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May 21, 2022 3:57:51 GMT
Post by FD1000 on May 21, 2022 3:57:51 GMT
I look at this the following: for decades, bonds were great and did their job BUT when the Fed guarantee to raise rates and your bond funds lose 9-10% you should be out of bonds. BTW, holding your bonds in allocation funds doesn't give you a free pass.
I know, not everyone could see it months ago, but sometimes it's clear. The usual, tune out the noise, listen to the Fed. Many are still confusing LT, usual bond investing VS extreme case.
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Post by Deleted on May 21, 2022 11:21:48 GMT
Everyone saw it months ago - in fact 18 months ago. Many denied this could happen to the bond market last year instead of warning of and discussing this potentiality. The minute the money supply grew 20% to 30% was when this level of inflation became inevitable - 25% cumulative over 4 to 5 years from the pandemic start. The lesson should be that bondholders pay the inflation tax. Bonds are a substantial part of a retiree's portfolio. Retirees need time to digest liquidating large parts of portfolios. They need more than a few months warning and a sound explanation to ditch the safe part of their portfolios. Not the Fed is raising rates - but why - the inflation is baked into the system and bonds aren't real assets so not an inflation hedge. Even if the Fed doesn't raise rates - interest rates will go up in an inflationary environment - price of money after all. There was little to no public support for this theory 18 months ago. In fact it was constant arguing against. Not even entertaining the possibility. I really can't imagine how many people on fixed income have been hurt by this potential not being respectfully discussed as a real possibility.
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May 21, 2022 12:30:31 GMT
Post by mozart522 on May 21, 2022 12:30:31 GMT
@slooow, Agree with that, but it is out there now, and continuing to hold doesn't seem to make good investing sense. My point above was even now is a better time to get out, than holding through the next 2.25% increase. Better late than never. Holding bonds now is a bet that many retirees can't afford to make.
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Post by Deleted on May 21, 2022 12:39:12 GMT
But cash is a crappy option for most for that large a part of their portfolio. It sure pays the inflation tax. I would encourage getting three years of cash to weather the storm. Getting to an allocation where some income is shifted from bonds to dividend stalwarts.
From what I have read/listened to - we likely have a lower relative interest rate environment going forward. Interest income from bonds might not fill the bill they used to. Maybe decrease that allocation to bonds, hold more cash than normal, and increase equity dividend payers. All dependent on age, other sources of income, etc - the usual factors.
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May 21, 2022 12:44:39 GMT
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Post by Deleted on May 21, 2022 12:44:39 GMT
Have rates gone up enough that bonds have resumed their role of providing some counterbalance to stocks? It sure seemed so this past week, TLT was up over 2%.
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May 21, 2022 12:45:11 GMT
Post by chang on May 21, 2022 12:45:11 GMT
Getting to an allocation where some income is shifted from bonds to dividend stalwarts. Absolu-u-utely. I am way more interested in stable, profitable, high-ROE, low-beta stocks with 2-3%+ dividends, than bonds. I see no near-term future in bonds.
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May 21, 2022 12:48:11 GMT
Post by Deleted on May 21, 2022 12:48:11 GMT
Have rates gone up enough that bonds have resumed their role of providing some counterbalance to stocks? It sure seemed so this past week, TLT was up over 2%. With an inflation rate of 8%+ and probably closer to 10% in reality, that does not sound great for an asset that provides no protection from inflation.
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May 21, 2022 13:01:13 GMT
Post by Deleted on May 21, 2022 13:01:13 GMT
Selling bonds now to buy stocks is not a good idea, if it ever was, is ,or will be.
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May 21, 2022 13:31:03 GMT
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Post by Deleted on May 21, 2022 13:31:03 GMT
Have rates gone up enough that bonds have resumed their role of providing some counterbalance to stocks? It sure seemed so this past week, TLT was up over 2%. With an inflation rate of 8%+ and probably closer to 10% in reality, that does not sound great for an asset that provides no protection from inflation. Of course stocks have a better chance than bonds of keeping up with inflation over the long term. My comment was more about bonds role in dampening portfolio volatility, which has been nonexistent these last few months.
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May 21, 2022 13:35:18 GMT
Post by mozart522 on May 21, 2022 13:35:18 GMT
But cash is a crappy option for most for that large a part of their portfolio. It sure pays the inflation tax. I would encourage getting three years of cash to weather the storm. Getting to an allocation where some income is shifted from bonds to dividend stalwarts. From what I have read/listened to - we likely have a lower relative interest rate environment going forward. Interest income from bonds might not fill the bill they used to. Maybe decrease that allocation to bonds, hold more cash than normal, and increase equity dividend payers. All dependent on age, other sources of income, etc - the usual factors. For buy and holders, cash is a crappy option for many for their bond portfolio allocation. I am almost 100% cash right now. I don't expect to be in a year from now. I'm betting on lower bond and stock prices from here. Getting 3% dividend income and 10% NAV loss would also crappy for me. None of us knows for sure what will happen in the 6 months or year or 2. We all have different situations. I have taken my position based on my accessment of current conditions. If I'm wrong, I won't lose much. If I'm right, I won't lose more. I will get back into my favorite funds when they quit bleeding and the FED indicates it is stopping. I am confident that I will buy more shares of those funds, and at a lower NAV, then if I was sitting in them now. That is not advice for anyone else. Everyone has choices and decisions.
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Post by FD1000 on May 21, 2022 14:59:10 GMT
My portfolio is usually in a very high % in bonds, it's all in MM for months. Why would I want to lose 10% on my bonds? When will I be back in bond funds? When they stabilize and show uptrend. What have I done for months now when I needed money? The same as I have done for years. Converted my funds to cash, and this time it was MM.
Someone's Total Return has been and always will be the most important. Second, if you care, risk-adjusted performance is the also important. This is why you should never confuse income/distr/yield with total returns. If you started with $100K, 6 months ago and now you have $100K it's better than $90K that includes $5K distributions.
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Post by Deleted on May 21, 2022 17:24:57 GMT
My portfolio is usually in a very high % in bonds, it's all in MM for months. Why would I want to lose 10% on my bonds? When will I be back in bond funds? When they stabilize and show uptrend. What have I done for months now when I needed money? The same as I have done for years. Converted my funds to cash, and this time it was MM. Someone's Total Return has been and always will be the most important. Second, if you care, risk-adjusted performance is the also important. This is why you should never confuse income/distr/yield with total returns. If you started with $100K, 6 months ago and now you have $100K it's better than $90K that includes $5K distributions. Get back to me 5 to 10 years from now on total return. Using the above argument, a portfolio paper value would always have to go up. That isn't realistic. Sitting out, real realized losses are happening. The value of compounding over time is lost. Mozart is fine to sit out a year. That is 10% gone forever. Doesn't matter where you start back up, you need to earn 10% to get even. A real asset going down 10% isn't necessarily gone forever.
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Post by retiredat48 on May 21, 2022 17:51:35 GMT
But cash is a crappy option for most for that large a part of their portfolio. It sure pays the inflation tax. I would encourage getting three years of cash to weather the storm. Getting to an allocation where some income is shifted from bonds to dividend stalwarts. From what I have read/listened to - we likely have a lower relative interest rate environment going forward. Interest income from bonds might not fill the bill they used to. Maybe decrease that allocation to bonds, hold more cash than normal, and increase equity dividend payers. All dependent on age, other sources of income, etc - the usual factors. Nice post... My current view is that 2 year bond space is the place to be, currently. Have a thread on it, in the Bond Forum, titled is it now time for 2 yr treasury bonds...for cash? Buying VSGH...so far, so good. But I not expect to lose nominally in this fund. At worst, yield will offset any capital loss, which should be small due short duration bonds. R48
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May 21, 2022 18:02:00 GMT
Post by retiredat48 on May 21, 2022 18:02:00 GMT
Everyone saw it months ago - in fact 18 months ago. Many denied this could happen to the bond market last year instead of warning of and discussing this potentiality. The minute the money supply grew 20% to 30% was when this level of inflation became inevitable -... ...There was little to no public support for this theory 18 months ago. In fact it was constant arguing against. Not even entertaining the possibility. I really can't imagine how many people on fixed income have been hurt by this potential not being respectfully discussed as a real possibility. I was shouting a warning from the rooftops 18 months ago on M*...and kept getting pummeled from all sides! Frankly, I was surprised the bond market took so long and had not even priced-in the feds raising rates, until Jan of this year, for market adverse reactions. Now will it overshoot?? We should remember that regardless of rates, the Treasury bond market is still a haven of security (flight to) in stock bear markets. Would not be surprised if TLT levels off for a good period of time. Also, it took 33 years to go from treasury bond yields north of 15% (enabling me to retire early), to below 3%. It may take a similar long time for rates to complete their full rise. Rising rates have consequences...like mortgage rate is based on 10 year treasury rates. Rising mortgage rates price people out of the housing market...etc. Look for typical sin wave like market changes. My first mortgage rate, 1970...6 1/4%...fellow workers said I was crazy. Some later took out 15% mortgages! It became a negotiable part of GE transferred worker pay packages. R48
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May 21, 2022 18:10:28 GMT
Post by Deleted on May 21, 2022 18:10:28 GMT
R48- exactly in line with Siegel who sees short term inversions and definitely saw the present situation 18 months ago. I was also pummeled, but that made me research even more. Certainly wasn't my original idea, but it kept me from putting a large chunk of my wealth in bonds. Again, I feel for retirees who didn't get good information to make choices. Hopefully, all will question the Fed going forward.
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May 21, 2022 19:59:54 GMT
Post by FD1000 on May 21, 2022 19:59:54 GMT
My portfolio is usually in a very high % in bonds, it's all in MM for months. Why would I want to lose 10% on my bonds? When will I be back in bond funds? When they stabilize and show uptrend. What have I done for months now when I needed money? The same as I have done for years. Converted my funds to cash, and this time it was MM. Someone's Total Return has been and always will be the most important. Second, if you care, risk-adjusted performance is the also important. This is why you should never confuse income/distr/yield with total returns. If you started with $100K, 6 months ago and now you have $100K it's better than $90K that includes $5K distributions. Get back to me 5 to 10 years from now on total return. Using the above argument, a portfolio paper value would always have to go up. That isn't realistic. Sitting out, real realized losses are happening. The value of compounding over time is lost. Mozart is fine to sit out a year. That is 10% gone forever. Doesn't matter where you start back up, you need to earn 10% to get even. A real asset going down 10% isn't necessarily gone forever. It depends on goals and style. I was in the market 100% until 2013. Since 2013, I learned how to sit out in very risk markets. Worked great for me, it's not for most. But, sometimes, it's very clear what is going to happen regardless, at least for me. When rates are very low and the Fed shout from every roof, they are going to raise rates rapidly, it's pretty obvious. In 01/2022, it was clear to me that market risk is elevated for most categories. I was just looking for the final clues when to get out. So, a portfolio can't go up every year, but you can avoid big losses. It's amazing how I know several traders that skipped all the last three, 20-35% losses for the SP500 since 2018. It can't be just luck when several have been doing it pretty closely without talking to each other too much. I love compounding, it's an easy math formula but I don't like to lose when markets are very risky and going down. My system is primary based on being in better performing categories and be in the market 100%. Only the advanced one, I adopted in 2013, calls for selling to cash. On the other hand, most should invest based on their goals and hardly do any trading. The above do not contradict each other, after all, many posters trade here. That's what I find funny/contradicting on several boards. Posters can trade all the time, sometimes making mistakes, and that's OK but going to cash? or switching from lagging categories to better ones? Ho no, that is a mistake for sure. I have a special place for Siegel's predictions. I wrote a book on that. See the ( link) how he missed so much. Just an easy example: Siegel predicted that VALUE,EM will be better in 2021 and he was wrong, hugely wrong for EM. I predicted on this board on 01/2022 that VALUE will be better and still didn't change my mind. That's the difference between guessing to actually looking at markets and charts
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May 21, 2022 20:50:46 GMT
Post by johnsmith on May 21, 2022 20:50:46 GMT
Stocks are down - high valuations coming down because inflation going up. Bonds coming down - FED moving interest rates up.
So we have the worst of all worlds. The only things that do well during a Stagflationary shock is commodities. No wonder Uncle Warren is busy buying Occidental with both fists and investing his cash hoard into anything that can give him a 10% or so return.
Inflation is not going up because of loose monetary policy by the FED. Asset Prices aka Stock Market Valuations went up because of loose monetary policy, now that there is tightening those valuations are coming down.
Inflation is up because of Supply Side Shocks and Supply Chain Issues. Higher interest rates don't solve this issue. This is both an industry issue and a political issue (baby formula good for EU babies isn't good enough for US Babies - political issue (As long as reasonable people can agree that EU regs regarding baby and food etc are equal and/or better than US regs.))
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May 21, 2022 21:54:44 GMT
Post by Deleted on May 21, 2022 21:54:44 GMT
Get back to me 5 to 10 years from now on total return. Using the above argument, a portfolio paper value would always have to go up. That isn't realistic. Sitting out, real realized losses are happening. The value of compounding over time is lost. Mozart is fine to sit out a year. That is 10% gone forever. Doesn't matter where you start back up, you need to earn 10% to get even. A real asset going down 10% isn't necessarily gone forever. It depends on goals and style. I was in the market 100% until 2013. Since 2013, I learned how to sit out in very risk markets. Worked great for me, it's not for most. But, sometimes, it's very clear what is going to happen regardless, at least for me. When rates are very low and the Fed shout from every roof, they are going to raise rates rapidly, it's pretty obvious. In 01/2022, it was clear to me that market risk is elevated for most categories. I was just looking for the final clues when to get out. So, a portfolio can't go up every year, but you can avoid big losses. It's amazing how I know several traders that skipped all the last three, 20-35% losses for the SP500 since 2018. It can't be just luck when several have been doing it pretty closely without talking to each other too much. I love compounding, it's an easy math formula but I don't like to lose when markets are very risky and going down. My system is primary based on being in better performing categories and be in the market 100%. Only the advanced one, I adopted in 2013, calls for selling to cash. On the other hand, most should invest based on their goals and hardly do any trading. The above do not contradict each other, after all, many posters trade here. That's what I find funny/contradicting on several boards. Posters can trade all the time, sometimes making mistakes, and that's OK but going to cash? or switching from lagging categories to better ones? Ho no, that is a mistake for sure. I have a special place for Siegel's predictions. I wrote a book on that. See the ( link) how he missed so much. Just an easy example: Siegel predicted that VALUE,EM will be better in 2021 and he was wrong, hugely wrong for EM. I predicted on this board on 01/2022 that VALUE will be better and still didn't change my mind. That's the difference between guessing to actually looking at markets and charts There is nothing wrong going to cash, but let's all recognize that there is a cost to that strategy as well. Some people can time when to get back in I guess. Like I said - I don't know many billionaires. If I could perfect that timing trick with my capital, I might well be one. As far as bonds, value, and who knew what when. Does it matter? If you like to switch at the perfect moment, maybe. The average retiree I recall was in an S&P index fund and a total bond fund in general. Liquidating out of taxable accounts is not an option for many and so they must plan accordingly and minimize recognizing gains. What does matter is all the retirees who will be impacted the rest of their retirement by the loss in bond values. I think they would have been mighty happy to know to get the heck out of them in an orderly measured fashion starting 18 months ago rather than last January. In late November, everything started looking grim and people needed time to process that, particularly after being lulled by the rhetoric last year. So saying "now" is the time to bail or switch isn't going to work, for all but a subset of investors. Value is buying a company at a price below its intrinsic value - ALWAYS good to do at ANYTIME. Also, like market timing, not easy to accomplish. Now - when will it be a good time for someone near or in retirement to hold a total bond fund as a part of an allocation - to dampen volatility and to get some measure of reliable income? I think we might be years from that. Why? Because the money already in the system still needs to percolate through it, leading to elevated price levels for the next 18 months or so. And as R48 mentioned, bonds are still a world wide safe have and the US is the best house on the block in a bad neighborhood. Of course this is from that idiot Siegel who sounded the alarm on a situation that many have been harmed by - 18 months ago. I am planning accordingly and have been doing so. I expect dividend stocks to do well as people look for yield.
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May 21, 2022 22:20:01 GMT
Post by yogibearbull on May 21, 2022 22:20:01 GMT
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May 21, 2022 23:41:07 GMT
Post by FD1000 on May 21, 2022 23:41:07 GMT
R48- exactly in line with Siegel who sees short term inversions and definitely saw the present situation 18 months ago. I was also pummeled, but that made me research even more. Certainly wasn't my original idea, but it kept me from putting a large chunk of my wealth in bonds. Again, I feel for retirees who didn't get good information to make choices. Hopefully, all will question the Fed going forward. Siegel was wrong 18 months ago. He, as many others, only discuss treasuries. NOT ALL BONDS ARE TREASURIES. It's about time the "experts" should realize there are several bond categories. I posted many times in 2021 that HY Munis continue to do well and are a good choice for bondholders. I especially mentioned NVHAX+NHMAX which made 8.2%+9.7% in 2021. I posted earlier this year why I sold all my bond OEFs. Where was Siegel about bonds and/or particularly about bond categories in the last 20 years? There is a reason I don't take bond advice from someone who likes only stocks but has no answer for investors who need/want bonds to ballast their risk/volatility. Nobody said timing is easy. I have been using timing since 2000. I used timing for switching from lagging funds to better performing funds but staying invested at 99+%. I figured in 2000 that switching to top risk-adjusted funds can't be wrong too long, instead of staying with lagging funds for years. I only started going to cash close to retirement when I realized I can predict my retirement date + staying in retirement without taking extra risk/volatility, especially until age 70-75. This is all based on my analysis how to retire on time, never needing to go back to work, protect my capital and make it last to age 100+. Fortunately, my portfolio performance in 2018-2021 was much higher than my expectation. I can take even less risk and why it's easier to go to cash.
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May 21, 2022 23:49:40 GMT
Post by anitya on May 21, 2022 23:49:40 GMT
Absolu-u-utely. I am way more interested in stable, profitable, high-ROE, low-beta stocks with 2-3%+ dividends, than bonds. I see no near-term future in bonds. Is not that SCHD / SCHY? What prompted you to pick individual stocks? Not satisfied with the funds / ETFs available?
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May 21, 2022 23:56:43 GMT
Post by Deleted on May 21, 2022 23:56:43 GMT
And I have heard this as well from others whose analysis I respect. So what does the near retiree do with the fixed income portion of the portfolio for the next several years - assuming they are maxing out I-Bonds? And assuming these inversions are short term.
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