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Post by chang on Dec 23, 2020 13:49:02 GMT
A pretty good article from Morningstar: www.morningstar.com/articles/1013726/with-yields-so-low-where-do-you-goUp until recently I had a lot of VBILX and BIV (same fund). I eliminated all the BIV and sold a sliver of VBILX. (I moved the money into S/T bonds.) I also had a large holding of FXNAX (a "total bond"-type fund like VBTLX / BND) in a Fidelity IRA, but I've been using that to fund new buys in the IRA and my intention is to deplete it to $0. As mentioned in the BSW thread, I am concerned about the low yields with these funds. VBILX has an SEC yield of 1.05% (and a duration of 6.5 years) per the Vanguard page. That tells me: 1. The income is peanuts and I'm not being paid to take risk. 2. The upside is limited - how much higher can prices go? 3. The downside risk is potentially significant - I could lose several years income in a very short period of time. I am still keeping some VBILX (quite a lot, actually) as well as other I/T bonds in DODIX, PIGIX, VGWAX and VWIAX (but these funds have more corporates and higher yields). But I did pare back substantially by selling BIV. Anyway, the article was a worthwhile read. Anyone else concerned about the yields of I/T and total / aggregate bond funds with significant holdings of treasuries? If so, have you reduced or eliminated your exposure? TIA.
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Post by Chahta on Dec 23, 2020 16:25:17 GMT
My thought is to hold some higher yielding funds. I am using a 20% allocation to PIMIX and PTIAX. I don’t think of these well managed funds as “black boxes”. Both of these funds have good long term records. That is a key for me buying that type of fund. I hope to hold both of these long term not being worried about volatility. Equities have made me desensitized.
I also hold IT core and short term funds to balance off with higher yielding. Even though these funds don’t yield much the thought is that I can use them to buy more equities at some future time. Even if NAVs don’t go up I am happy to collect 2% on these funds. Ballast. If NAVs go down they will come back on funds with good long term records. If not become a trader.
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Post by Norbert on Dec 23, 2020 17:11:00 GMT
I agree with Gary that certain multi-sector bond funds remain a decent investment. These things are FD's focus (though I have never understand that it makes sense to trade them short-term). Funds like PIMIX and PTIAX are black boxes to a degree: we have no clue about what the managers are up to with their swaps and derivatives. But, I have some of both, much more in PTIAX than PIMIX.
There's a multi-sector, go anywhere TRP fund TMSRX that might be worth a look. It reminds me of Fidelity's FAGIX. At the moment I think it's about 14% growth stocks, with the rest in bonds and God-Knows-What.
As posted before, I'm busy renovating an old stone house on Crete right now. I didn't do this because of low bond yields, but I bought cheaply and am able to hire outstanding stone masons for good prices. They are pleased to have the work. And I am pleased to get so much value for my cash. So, if you've had your eye on an exotic project, I'd have no qualms about using some low yield cash to pursue it right now.
In general, however, real estate prices haven't fallen in many desirable places. My daughter is trying to buy near Sydney now, and even with her $2M AUD budget, she keeps getting outbid. Life is hard.
FWIW,
N.
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Post by Chahta on Dec 23, 2020 17:54:16 GMT
I agree with Gary that certain multi-sector bond funds remain a decent investment. These things are FD's focus (though I have never understand that it makes sense to trade them short-term). Funds like PIMIX and PTIAX are black boxes to a degree: we have no clue about what the managers are up to with their swaps and derivatives. But, I have some of both, much more in PTIAX than PIMIX. There's a multi-sector, go anywhere TRP fund TMSRX that might be worth a look. It reminds me of Fidelity's FAGIX. At the moment I think it's about 14% growth stocks, with the rest in bonds and God-Knows-What. As posted before, I'm busy renovating an old stone house on Crete right now. I didn't do this because of low bond yields, but I bought cheaply and am able to hire outstanding stone masons for good prices. They are pleased to have the work. And I am pleased to get so much value for my cash. So, if you've had your eye on an exotic project, I'd have no qualms about using some low yield cash to pursue it right now. In general, however, real estate prices haven't fallen in many desirable places. My daughter is trying to buy near Sydney now, and even with her $2M AUD budget, she keeps getting outbid. Life is hard. FWIW, N. Currently PTIAX uses no derivatives and PIMIX is very low to none. I do not consider them as “black boxes” the same as VCFAX and SEMMX. I don’t believe they use derivatives currently either. But what I like about PIMIX and PTIAX is their NAVs have demonstrated to be able to recover from lower levels. In my estimation SEMMX was a 1 hit wonder in another time. In 5 years I will look back and see how it fared from the black swan forward. If you talk to others that have held PIMIX for a long time it has worked. A hard core trader or someone that thrives at 4% per year investing in bond funds, you are very sensitive to volatility. But those of us using equities to make money bond fund volatility is a fact of life.
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Post by steadyeddy on Dec 23, 2020 18:21:53 GMT
I am comfortable holding bonds for ballast - and not yield. In fact, my portfolio is bond heavy.
I narrowed down to two ETFs: IUSB and ISTB both are iShares versions. IUSB is intermediate term, and ISTB is short-term. Both have a smidgeon of junk bonds in them. I combine them in equal portions to reduce duration risk.
I do hold a big chunk of Wellesley which holds corps as you know.
I got rid of all active bond funds in the recent couple of months.
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galeno
Commander
KISS & STC
Posts: 221
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Post by galeno on Dec 24, 2020 1:22:32 GMT
Our current port: 55% World stocks + 14% US treas + 14% Corp bonds + 14% TIPS + 2% Cash. We hold investment grade bonds for ballast.
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Post by FD1000 on Dec 25, 2020 16:44:41 GMT
Bonds, bonds and more bonds. This vast category can be "easy" or as complicate as you want it to be. Several good funds were mentioned already. Generic Higher Rated bonds: BIV(index of 50/50 treasuries/corp),GIBLX Multi: PIMIX+PTIAX are good ones but TSIIX did even better in the last 3 years ( link). Yield is important but not necessary, I would look first for risk/reward then yield. Better yield are usually found within Multi sector. ============= Norbert: These things are FD's focus (though I have never understand that it makes sense to trade them short-term). FD: Two main reasons 1) The market gives you better opportunities short term if you know how to use it. 2) I don't know any other way to accomplish my performance with very low daily and long term volatility. My portfolio SD in the last 3 years was 2.2 and I easily beat PIMIX or VWIAX ( link) But generally I agree with you and I posted the following many times, most should select asset allocation based on their goals, hardly trade and use no more than 5-7 funds.
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Post by Norbert on Dec 25, 2020 17:32:10 GMT
Bonds, bonds and more bonds. This vast category can be "easy" or as complicate as you want it to be. Several good funds were mentioned already. Generic Higher Rated bonds: BIV(index of 50/50 treasuries/corp),GIBLX Multi: PIMIX+PTIAX are good ones but TSIIX did even better in the last 3 years ( link). Yield is important but not necessary, I would look first for risk/reward then yield. Better yield are usually found within Multi sector. ============= Norbert: These things are FD's focus (though I have never understand that it makes sense to trade them short-term). FD: Two main reasons 1) The market gives you better opportunities short term if you know how to use it. 2) I don't know any other way to accomplish my performance with very low daily and long term volatility. My portfolio SD in the last 3 years was 2.2 and I easily beat PIMIX or VWIAX ( link) But generally I agree with you and I posted the following many times, most should select asset allocation based on their goals, hardly trade and use no more than 5-7 funds. Hi FD, It's good to see you posting here. On trading, sure, it's a great way to make money if you have the skills and the interest. What I meant above is that I'm a bit surprised that you trade bond OEFs, not CEFs, stocks or ETFs. Damn, several alt Energy ETFs are up over 100% this year. Talk about "opportunity" ... It seems to me that portfolio volatility could be managed in other ways. What "most" should do is not the issue. This is an Investing site and we're interested in actionable ideas to make money. Anyway, there are lots of ways to make money in the market. Each to their own. Cheers.
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Post by acksurf on Dec 26, 2020 14:47:06 GMT
I actually still hold the Permanent Portfolio in a taxable account from back in the day as a bit of ballast. I keep thinking I'll sell it but never do. PCI/PTY for a bit of income. PTIAX, munis, BSV and a goodly amount of cash (self employed and occasionally use for private placements). I don't hold any bond funds in tax advantaged accounts but do have quite a bit in Wellesley.
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Post by FD1000 on Dec 26, 2020 15:23:39 GMT
Hi FD, It's good to see you posting here. On trading, sure, it's a great way to make money if you have the skills and the interest. What I meant above is that I'm a bit surprised that you trade bond OEFs, not CEFs, stocks or ETFs. Damn, several alt Energy ETFs are up over 100% this year. Talk about "opportunity" ... It seems to me that portfolio volatility could be managed in other ways. What "most" should do is not the issue. This is an Investing site and we're interested in actionable ideas to make money. Anyway, there are lots of ways to make money in the market. Each to their own. Cheers. As I said, I can't find any better way to achieve my goals of portfolio performance with SD<3 (not even under 5). I'm sure you know the song What goes up must come down. If an investment can go up 10% in one week it can do the reverse even faster. Why in the world do I need to look for anything else when we need 4% annually, and I made much more in the last 3 years? My actions are mentioned on my bond thread, not always in real time, for that, you need to pay up In reality, it's pretty easy to follow since bond OEFs move really slow. But I also trade riskier stuff when the opportunities are fantastic. Example: I traded PCI twice in March for 30 minutes + couple of hours and made several % on each.
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Post by chang on Jan 6, 2021 0:38:49 GMT
IT / Total Bond funds had a poor 1st two days of 2021, losing 0.20-0.25% each day. I have been depleting FXNAX in my IRA to fund a buildup of equity there, but I'm still holding a large amt of VBILX, and slightly smaller amounts of DODIX and PIGIX. I have always thought of these as "hold forever" positions (for ballast and some income), but sometimes I wonder.... I guess the old thumb rule that a bond fund will earn its current yield over its duration (with dividends reinvested) means I will make 2-3% p.a. over 5-6 years, which fulfills the ballast function. Still, I don't like to see the NAV drops. If interest rates are definitely going up, perhaps I should move these to shorter durations.
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Post by Chahta on Jan 6, 2021 2:19:35 GMT
I have never exactly understood holding those funds long term such as C Benz suggests against equities. But I think it is exactly as you describe about earning the interest over the duration. Looking at the long term records of these funds they do work. I am holding a nice CG in BAGIX from last year. So do I sell to put the gain in something else and hold the principal? But back to the question, “with yields so low where do you go”? Those of us used to holding equities this bond fund thing is a different animal.
RPHIX had a rough start too. You need a lot of patience to earn 2.48%.
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Post by chang on Jan 6, 2021 2:53:21 GMT
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Post by Chahta on Jan 6, 2021 12:34:49 GMT
It was the the .1% drop yesterday and last week. That’s why I said patience.
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Post by Chahta on Jan 6, 2021 15:21:38 GMT
With the 10 year rate rising and possibly going up to 1.5% by some forecasts, are floating rate funds the place to be?
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Post by FD1000 on Jan 6, 2021 16:11:59 GMT
With the 10 year rate rising and possibly going up to 1.5% by some forecasts, are floating rate funds the place to be? From my research over several periods it was a better place to be. I had a post on old M*. But, it's not happening this time and why I always follow markets and the charts. I take a quick look at one month performance ( chart) and EIFAX isn't doing better. I'm sure someone can come with great explanation(why HY Munis are doing so great) but I let the charts lead me.
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Post by Chahta on Jan 6, 2021 16:24:16 GMT
After the election in Georgia I can see that municipalities will be taken care of by the federal government so muni funds will probably do well this year.
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Post by FD1000 on Jan 6, 2021 16:27:38 GMT
Another reason, Dems may will raise taxes and why Munis are worth more. HY are doing better because of higher correlation to stocks and improving economy. Securitized special funds (SEMMX,IOFIX..) have done better because they have room to go back just to break even.
Higher-rated bond funds will do worse when rates go up.
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Post by chang on Jan 6, 2021 16:35:06 GMT
I already placed an order today to move 40% of my VBILX into VWALX. The writing's on the wall.
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Post by yogibearbull on Jan 6, 2021 16:40:51 GMT
HY muni ETFs and CEFs are mixed.
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Post by FD1000 on Jan 6, 2021 16:55:19 GMT
HY muni ETFs and CEFs are mixed. I have seen many times when HY ETFs are not in sync with the OEFs. HYD seems to be closer than the others but still can be off. I don't know why other than demand/supply trading But, another 0.1% today and most days will be welcomed Attachments:
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Post by Chahta on Jan 6, 2021 18:03:38 GMT
I already placed an order today to move 40% of my VBILX into VWALX. The writing's on the wall. Are you planning to hold an allocation to IT longer term (the remaining 60%)? If I cap my IT fund, BAGIX, then I have the problem of where to park it. Geez, more ST or RPHIX. Don't really want to do that and I am not exited about going larger on my higher yielders, PIMIX and PTIAX. I suppose that IT will drop in price and make it a purchase again later this year. Doing the math if rates go up another .5% then I lose about 3% on my IT. Not the end of the world since I would still have a decent profit. Indeed, where to go?
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Post by chang on Jan 7, 2021 0:20:05 GMT
I already placed an order today to move 40% of my VBILX into VWALX. The writing's on the wall. Are you planning to hold an allocation to IT longer term (the remaining 60%)? If I cap my IT fund, BAGIX, then I have the problem of where to park it. Geez, more ST or RPHIX. Don't really want to do that and I am not exited about going larger on my higher yielders, PIMIX and PTIAX. I suppose that IT will drop in price and make it a purchase again later this year. Doing the math if rates go up another .5% then I lose about 3% on my IT. Not the end of the world since I would still have a decent profit. Indeed, where to go? Good question, I don't know. I've been bitching about IT/Total Bond funds performance for several months but not acting decisively enough on my own concerns - shame on me. (Fortunately I have sold off about 80% of the FXNAX I had in my IRA.) So now I'm taking bolder steps, even as these funds continue to plummet. I don't have "higher yielders" like yours, simply because I'm yield-wary and prefer to focus on equities and TR. I'm OK with ST funds like BSV and RPHIX.
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Post by Chahta on Jan 7, 2021 0:57:49 GMT
I am thinking that IT fund’s weakness is the G bonds and MBS. Possibly buying ST/IT corp funds might be a good substitute.
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Post by chang on Jan 7, 2021 1:31:07 GMT
I am thinking that IT fund’s weakness is the G bonds and MBS. Possibly buying ST/IT corp funds might be a good substitute. Excellent point. That was my idea behind liquidating BIV (and some of VBILX) a few months ago, and buying VUSFX and RPHIX. Get rid of IT Treasuries and other USG stuff and move into very short-term, BB-B rated corporate debt. I remain happy with that decision and wish I had taken it further.
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Post by Chahta on Jan 7, 2021 2:53:00 GMT
I was looking at SCHI or SCHJ both ETFs from Schwab, but not so short.
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Post by chang on Jan 8, 2021 1:14:11 GMT
I did the right thing (at least based on one day's performance)—VBILX fell again while VWALX was flat. I won't wait long before I transfer some more.
I know that folks here are talking about buying TLT and EDV as black-swan insurance, but I don't like the pain of VBILX constantly slipping .... I don't see how I could stomach LT Treasuries.
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Post by Chahta on Jan 8, 2021 1:41:02 GMT
I did the right thing (at least based on one day's performance)—VBILX fell again while VWALX was flat. I won't wait long before I transfer some more. I know that folks here are talking about buying TLT and EDV as black-swan insurance, but I don't like the pain of VBILX constantly slipping .... I don't see how I could stomach LT Treasuries. I sold 1/2 my BAGIX plus the profits today. I think I will buy GSY, which I have owned before. After last March I thought I would go more traditional and own IT and ST funds as ballast. I just can't watch it slip away either because it reminds me of the pain during the last black swan, owning the black boxes. I suppose if I looked at the bottom line and not each holding I would happy. Equities are crazy now. I've turned into a bond fund trader.
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Post by chang on Jan 8, 2021 1:51:20 GMT
Chahta I didn’t know about GSY, but VUSFX seems to have slightly better performance and a lower ER (maybe these are related). Also I like VUSFX's BBB rating which seems a reasonable way to maximize yield in a UST portfolio (vs GSY's A rating). Of course GSY would be easier to own outside of VG.
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Post by Norbert on Jan 8, 2021 11:46:28 GMT
Chahta"Equities are crazy now. I've turned into a bond fund trader." Dividend funds like SCHD and MCDFX have PEs around 15. Not that bad, I think.
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