Thoughts on bond funds.

Discussion in 'Business, Investing & Finance' started by Concrete Helmet, Feb 16, 2020.

  1. Concrete Helmet

    Concrete Helmet Hook, Line, and Sinker
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    Interested in hearing opinions on these. The long and intermediate term stuff I'm seeing is doing really well lately but not being a savvy investor myself I'm wondering if I've already missed the boat getting in? I know it is somewhat risky with individual Bonds as the interest rates aren't likely to keep going lower but I feel they could be pretty stable for a while and unlike individual bonds ETF's could be swapped out in the face of increasing rates down the line. Any thoughts?

    I have some CD's coming due that were paying almost 3.5% and some idle cash from savings accounts that are just sitting doing nothing for several years now. Not looking to buy anymore RE as current prices are near top of market in my area and it's not enough between these sources to pay cash anyway at least right now. Love to hear opinions on this stuff btw....
     
    • 78

      78 Dazed and Confused
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      Simple question, Crete. What do you think motivates investors to put money in bonds?
       
    • Concrete Helmet

      Concrete Helmet Hook, Line, and Sinker
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      Help me if I'm missing something but several things come to mind.....
      A more conservative mindset to investing
      Age.....balancing out growth for income as retirement nears
      Income itself for those that are retired
      Diversity in ones holdings(my biggest reason even though I need another 8-10 years of growth)
      And volatility in the SM which I do not see coming until Trump is out of office :dunno:
      Did I miss anything?
       
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      • 78

        78 Dazed and Confused
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        Your investment goal. What is it and, more importantly, how long before you intend to use the money beyond the income it can generate?
         
        • Concrete Helmet

          Concrete Helmet Hook, Line, and Sinker
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          Never really set any iron clad goals....I'm just trying to grow small amounts of cash I've set aside over the years. My biggest concern is outside of my managed investments I'm over 90% in stocks(muni's and ETF's) I don't mess with individual stock or bonds.....

          I've just noticed intermediate and long term Bond funds are showing SM like growth and as I mentioned I'm not concerned as much with current income I just don't want to leave money sitting at .25 in a MM or 1.50 tied up in CD's...:banghead:
           
          • 78

            78 Dazed and Confused
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            VOO

            1.88 dividend yield with growth potential.
             
          • Concrete Helmet

            Concrete Helmet Hook, Line, and Sinker
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            I got too much VOO.....VLCAX actually.....same thing. I need more diversity.
             
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            • 78

              78 Dazed and Confused
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              I get it. The point is bond yields are so low due to the Fed that it warrants a second look to consider solid companies that can spin off as much or more income AND give you an inflation hedge over the long haul.

              If you’re too timid, you probably ought to keep the money in cash.
               
            • 78

              78 Dazed and Confused
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              The tale of two approaches toward generating income or total return, both of them Vanguard indexed ETFs with very low expense ratios.

              The equity ETF (red) has a 30-day yield of 3.29. The bond ETF (blue) has a yield of 2.12.

              Past performance provides zero assurance of future results, but I’m pretty sure which approach I’d want to take if the investment time horizon was 60 months or longer.

              [​IMG]
               
              #9 78, Feb 22, 2020
              Last edited: Feb 22, 2020
              • Concrete Helmet

                Concrete Helmet Hook, Line, and Sinker
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                Still though some of the long term bond funds are up 20-23% in the last 12 month's....I realize they aren't making what tech stocks are but to balance out a little without wondering whether daily news feeds about politics and some flu virus are going to cause a sharp dip in an unbalanced portfolio seems like a smart step..... Of course I did the opposite on Wed. and bought some shares in VGT..... :facepalm:
                 
                • 78

                  78 Dazed and Confused
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                  I’d recommend you stop obsessing about the 24-hour news cycle and put yourself 10,000 feet above the earth with a clearer view.

                  The run on long bonds you alluded to was pretty much over by the time the Gators’ season began, fueled to that point by a pair of Fed interest rate cuts and dramatic reversal in policy from the unwinding of its balance sheet that heavily impacted the bond market in 2017 and 2018.

                  Notice the reaction and anticipation via this extended duration ETF. Not exactly a timid investment.

                  [​IMG]

                  We’re now in a benign central bank environment. Rates are expected to hold steady. The long bond is now more a function of investor confidence going forward. That’s impacted by a myriad of things, some good (accommodative monetary policy around the globe) and some not so good (the trade war, Coronavirus, leading economic indicators).

                  The global economy is dependent on access to capital. That capital is delivered through the lending markets through bonds and bank loans and collateralized debt. One thing is certain. None of these instruments provides one lick of a hedge against inflation over time.

                  Investors make the mistake of thinking bonds are a set it and forget it investment. The above graph is a reminder they are anything but that. They require constant adjustments, more so than the equity component of a portfolio.

                  Again, make it simple. Consider your time horizon. That’s most important.
                   
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    Well I switched some stuff over to long term and intermediate funds 2 days ago....they both started losing yesterday too....Tech fund actually went up a tiny bit from it's previous day low. Don't even want to look at company PSP or IRA. In fact the Advisor sent out an email yesterday saying he was cancelling account evaluations for the time being...:couch:
                     
                  • 78

                    78 Dazed and Confused
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                    Markets are in panic mode. All asset classes are selling off, not just stocks. I personally believe the COVID-19 situation is too fluid to try and get cute about out and in market movements. You run the risk of making two mistakes.
                     
                  • FireFoley

                    FireFoley Senior Member
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                    @78 is correct. Both Thursday and Friday were the first signs of indiscriminate selling, so your bond funds should have been positive. Be that as it may, as an older person always looking for good income producing values, both Thursday and Friday were the first days that they sold what usually performs well on sell offs. Both Electric Utilities and Real Estate Investment Trusts were sold off as much as if not more than the overall market. On Friday, they also sold off gold and silver as fast as they could. To me that has always been a sign that people are raising cash by selling what has been considered their safest, least volatile assets. I am in no way saying it is or predicting a bottom and anyone should consult their own advisor or fiduciary before acting on anything we read in here. But often times when low growth, slow moving stocks and things such as gold are sold off hard, it is a sign that people just want out or they need cash to cover margin calls.
                     
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    Interesting take. I have to say I learned a lot this week and in some sick kind of way I think it will help me quite a bit down the road. I made a few small tweaks during the week and actually staved off what could have been a real train wreck....
                     
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    Wow strips fund up $11 so far today...intermediate fund still inching up and long term treasury up almost $5 in last 2 days...
                     
                  • 78

                    78 Dazed and Confused
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                    It’s called “flight to safety.” Strips are long duration US debt. I referenced it in post #10 of the coronavirus thread.
                     
                  • FireFoley

                    FireFoley Senior Member
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                    Hey @Concrete Helmet , I hope you are not rubbing yourself silly tonight now that the 30 yr. treasury touched right at 1% :lmao2:
                     
                  • Concrete Helmet

                    Concrete Helmet Hook, Line, and Sinker
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                    Strips fund up another $12 so far and Long term treasury fund up $5.....intermediate corp bond fund taking a hit though...
                     
                  • 78

                    78 Dazed and Confused
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                    That’s a silly comment. Extended duration treasurys aren’t limited to 30-year bonds.

                    [​IMG]
                     

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