Stocks go up, bonds fall. Stock fall, bonds also fall.

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fantasytensai
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Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by fantasytensai » Thu Oct 26, 2017 1:38 pm

Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.

Seasonal
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Seasonal » Thu Oct 26, 2017 1:45 pm

When bonds fall, interest rates rise. Over the long term, this is good - it leads to higher returns (unless you're selling a significant portion of your bond portfolio).

When they fall, they tend not to fall as much as stocks.

John Z
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by John Z » Thu Oct 26, 2017 1:46 pm

I don't look at the daily price since I'm retired. I only like seeing the monthly dividends pile up in our accounts.

aristotelian
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by aristotelian » Thu Oct 26, 2017 1:48 pm

It's an ironclad law based on the last two days of data. Theoretically, the value of bonds will be zero by the end of the year. It is hard to imagine how bonds ever had any positive value.

visualguy
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by visualguy » Thu Oct 26, 2017 1:51 pm

Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.

itstoomuch
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by itstoomuch » Thu Oct 26, 2017 1:56 pm

No bonds here.
Deferred annuities and rentals are my substitute to bonds.
Additional elasticity from Discretionary trading account.
YMMV :sharebeer
Last edited by itstoomuch on Thu Oct 26, 2017 1:57 pm, edited 1 time in total.
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HomerJ
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by HomerJ » Thu Oct 26, 2017 1:56 pm

fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market?
Heh.

Home insurance is practically useless too until your house burns down.

Of course, the difference is, you may get lucky and never have your house burn down.

You WILL experience another 25%+ drop in the market.

mega317
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by mega317 » Thu Oct 26, 2017 2:01 pm

Are you suggesting you want to change your asset allocation to 100% stocks? In the same post that you express concern with daily fluctuations? Good luck.

Stocks and bonds are not correlated, so actually the results in the last two days are exactly what you would expect to happen on average.

livesoft
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by livesoft » Thu Oct 26, 2017 2:04 pm

I love it when bonds fall a certain amount in a single day or even in 5 minutes such as right at a FOMC announcement. So Yes, I have made peace with bond volatility because it is a way to make easy money.

--- and ---

I love it when bonds rise a certain amount in a single day or even in 5 minutes such as right at a FOMC announcement. So Yes, I have made peace with bond volatility because it is a way to make easy money.

So while the OP cannot convince themselves to hold bonds, I suppose they hold cash instead (and not 100% equities). However, I find that cash over the intermediate and long terms returns less than bonds. I am unconcerned if cash does better than bonds over the short-term since I have made so much extra over the past to more than overwhelm any returns of cash.
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fantasytensai
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by fantasytensai » Thu Oct 26, 2017 2:10 pm

livesoft wrote:
Thu Oct 26, 2017 2:04 pm
I love it when bonds fall a certain amount in a single day or even in 5 minutes such as right at a FOMC announcement. So Yes, I have made peace with bond volatility because it is a way to make easy money.

--- and ---

I love it when bonds rise a certain amount in a single day or even in 5 minutes such as right at a FOMC announcement. So Yes, I have made peace with bond volatility because it is a way to make easy money.

So while the OP cannot convince themselves to hold bonds, I suppose they hold cash instead (and not 100% equities). However, I find that cash over the intermediate and long terms returns less than bonds. I am unconcerned if cash does better than bonds over the short-term since I have made so much extra over the past to more than overwhelm any returns of cash.
Can you elaborate the way to make easy money?

Slothmeister
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Slothmeister » Thu Oct 26, 2017 5:04 pm

I skipped bonds and went with CDs.

livesoft
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by livesoft » Thu Oct 26, 2017 6:56 pm

fantasytensai wrote:
Thu Oct 26, 2017 2:10 pm
Can you elaborate the way to make easy money?
I've written this before.

a. Buy a bond fund and collect the dividends. That's really easy.

but one can also:

b. If bond fund goes up by 0.5% or more in a few hours, sell some shares and buy them back when they go back down a little bit.
... and/or ...
c. if bond funds goes down by 0.5% or more in a few hours, buy some shares and sell them when they go back up a little bit.
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fantasytensai
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by fantasytensai » Thu Oct 26, 2017 7:37 pm

livesoft wrote:
Thu Oct 26, 2017 6:56 pm
fantasytensai wrote:
Thu Oct 26, 2017 2:10 pm
Can you elaborate the way to make easy money?
I've written this before.

a. Buy a bond fund and collect the dividends. That's really easy.

but one can also:

b. If bond fund goes up by 0.5% or more in a few hours, sell some shares and buy them back when they go back down a little bit.
... and/or ...
c. if bond funds goes down by 0.5% or more in a few hours, buy some shares and sell them when they go back up a little bit.
Thanks. But that doesn't work with mutual funds like VBTLX that trades on the daily closing price right? Only ETFs.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by CppCoder » Thu Oct 26, 2017 8:09 pm

visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
Scenario where bond funds are better than a CD ladder: You want to hold fixed income in your 401k, and your 401k doesn't have CDs but has an intermediate bond fund.

unstartable
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by unstartable » Thu Oct 26, 2017 8:31 pm

[/quote]
Scenario where bond funds are better than a CD ladder: You want to hold fixed income in your 401k, and your 401k doesn't have CDs but has an intermediate bond fund.
[/quote]
Bond funds are also liquid without paying penalties.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by venkman » Thu Oct 26, 2017 10:50 pm

visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
VBTLX has better liquidity, and the dividends can be reinvested monthly.

Also, you can go all-in with VBLTX in a much shorter time frame than it takes to get to a 5-year CD ladder where all the of CD's are earning 5-year rates. :happy

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by tibbitts » Thu Oct 26, 2017 11:00 pm

visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
A CD also has volatility even if you choose to ignore it. But yes, in the end there is not likely to be much difference.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by WanderingDoc » Thu Oct 26, 2017 11:18 pm

itstoomuch wrote:
Thu Oct 26, 2017 1:56 pm
No bonds here.
Deferred annuities and rentals are my substitute to bonds.
Additional elasticity from Discretionary trading account.
YMMV :sharebeer
Interesting. This has me thinking. My rentals already cover my basing monthly expenses AND I have a pretty ironclad source of work. Any reason at all to hold any bonds?
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Earl Lemongrab
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Earl Lemongrab » Thu Oct 26, 2017 11:57 pm

visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
How am I going to buy the 350k of CDs I would need in my 401(k)?
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by itstoomuch » Fri Oct 27, 2017 12:05 am

WanderingDoc wrote:
Thu Oct 26, 2017 11:18 pm
itstoomuch wrote:
Thu Oct 26, 2017 1:56 pm
No bonds here.
Deferred annuities and rentals are my substitute to bonds.
Additional elasticity from Discretionary trading account.
YMMV :sharebeer
Interesting. This has me thinking. My rentals already cover my basing monthly expenses AND I have a pretty ironclad source of work. Any reason at all to hold any bonds?
tracking purposes?
able to say that you own bond index?
YMMV :mrgreen:
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by WanderingDoc » Fri Oct 27, 2017 3:49 am

itstoomuch wrote:
Fri Oct 27, 2017 12:05 am
WanderingDoc wrote:
Thu Oct 26, 2017 11:18 pm
itstoomuch wrote:
Thu Oct 26, 2017 1:56 pm
No bonds here.
Deferred annuities and rentals are my substitute to bonds.
Additional elasticity from Discretionary trading account.
YMMV :sharebeer
Interesting. This has me thinking. My rentals already cover my basing monthly expenses AND I have a pretty ironclad source of work. Any reason at all to hold any bonds?
tracking purposes?
able to say that you own bond index?
YMMV :mrgreen:
Tracking huh? Looks like I am going to do an interfund transfer in my TSP and get rid of the few bonds I do have in the lifecycle funds. Equities are only a small portion of my portfolio but this is about to be ramped up.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by zaboomafoozarg » Fri Oct 27, 2017 7:03 am

Earl Lemongrab wrote:
Thu Oct 26, 2017 11:57 pm
visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
How am I going to buy the 350k of CDs I would need in my 401(k)?
Agreed, it's impossible to rebalance a tax-advantaged account with anything but a bond fund or ETF in that account.

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TomatoTomahto
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by TomatoTomahto » Fri Oct 27, 2017 7:31 am

aristotelian wrote:
Thu Oct 26, 2017 1:48 pm
It's an ironclad law based on the last two days of data. Theoretically, the value of bonds will be zero by the end of the year. It is hard to imagine how bonds ever had any positive value.
Thank you. I hadn’t seen this yesterday, so you made my breakfast that much better this morning. Now I will have to figure out what to do with the $3M Bond fund liability matching portion of my portfolio before it goes to zero (it’s not really LMP, but close enough). Man, that’s a lot of CDs to try to stuff into tax deferred accounts.

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SquawkIdent
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by SquawkIdent » Fri Oct 27, 2017 7:37 am

If you have access to the TSP, very simple. It's called the G Fund.

Even though the returns won't shoot out the lights, the NAV goes up everyday without fail. :sharebeer

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CyclingDuo
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by CyclingDuo » Fri Oct 27, 2017 7:50 am

fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
Do you have a longer term time horizon?

Good read here about rising interest rates and intermediate bonds...

https://finance.yahoo.com/m/5d77f522-14 ... stors.html

visualguy
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by visualguy » Fri Oct 27, 2017 8:30 am

Earl Lemongrab wrote:
Thu Oct 26, 2017 11:57 pm
visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
How am I going to buy the 350k of CDs I would need in my 401(k)?
That would depend on the 401(k) plan. Mine allows CDs and also has a stable value fund. I'm able to have none of my "fixed income" in bond index funds. Even if your 401(k) doesn't offer these options, at least you can avoid bond funds elsewhere.

visualguy
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by visualguy » Fri Oct 27, 2017 8:38 am

CyclingDuo wrote:
Fri Oct 27, 2017 7:50 am
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
Do you have a longer term time horizon?

Good read here about rising interest rates and intermediate bonds...

https://finance.yahoo.com/m/5d77f522-14 ... stors.html
Even if you have a long-term horizon, what's the point when you can put your money in a CD ladder instead? The article doesn't address that.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Johm221122 » Fri Oct 27, 2017 8:46 am

visualguy wrote:
Fri Oct 27, 2017 8:30 am
Earl Lemongrab wrote:
Thu Oct 26, 2017 11:57 pm
visualguy wrote:
Thu Oct 26, 2017 1:51 pm
Holding a bond fund such as VBTLX doesn't make sense to me either. A ladder of 5-year CDs pays the same interest without the volatility. Not sure under what scenario holding the bond fund would be better, and it can be worse, so I don't bother with that.
How am I going to buy the 350k of CDs I would need in my 401(k)?
That would depend on the 401(k) plan. Mine allows CDs and also has a stable value fund. I'm able to have none of my "fixed income" in bond index funds. Even if your 401(k) doesn't offer these options, at least you can avoid bond funds elsewhere.
I only wish I had low cost bond index or low cost bond fund in my 401,my stable value has paid 1.25% over 10 years.But my best bond fund option starts at 1.45%

Have to use IRA for international
Last edited by Johm221122 on Fri Oct 27, 2017 8:49 am, edited 1 time in total.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by matjen » Fri Oct 27, 2017 8:48 am

fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
AQR's QSPIX Style Premia Fund was up .37% Wednesday and .37% Thursday. Wednesday it was my only holding that was up. 8-)
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CyclingDuo
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by CyclingDuo » Sat Oct 28, 2017 10:01 am

visualguy wrote:
Fri Oct 27, 2017 8:38 am
CyclingDuo wrote:
Fri Oct 27, 2017 7:50 am
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
Do you have a longer term time horizon?

Good read here about rising interest rates and intermediate bonds...

https://finance.yahoo.com/m/5d77f522-14 ... stors.html
Even if you have a long-term horizon, what's the point when you can put your money in a CD ladder instead? The article doesn't address that.
We're certainly not anti-CD as we do keep some of our money in CD's. I don't believe the OP mentioned Bonds vs. CD's, so the response question we asked was with regard to the OP's comment "I can't convince myself to keep holding bonds."

Really longer term looks like this.... :mrgreen:

Image

One could always short bonds. :greedy

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by itstoomuch » Sat Oct 28, 2017 10:55 am

Nice graphic:
The linear (y axis) difference between Stock and anything other bonds, CDs, USD, gold, etc is what I call the Insurance Cost for supposed safety.
The Insurance Cost has been and is increasing; For how long, is the bet that Asset Allocators make.
JMO and YMMV :annoyed
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by nedsaid » Sat Oct 28, 2017 2:35 pm

fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
You have to look longer term. You are trying to make sense of the market by looking at daily price movements, which is a big mistake. In the short run, markets can do almost anything. I have seen some crazy stuff happen over the years. Longer run, markets 100% reflect economic reality.

Who told you bonds were useless? Bonds are there to keep portfolio volatility at a tolerable level during bear markets. We had the stock market drop over 50% during both the 2000-2002 and the 2008-2009 bear markets. I had 20% bonds during the first bear market and 28% bonds during the second one, my peaking to trough losses were 32% in 2000-2002 and 35% during 2008-2009. That is a considerable drop in volatility from the holding of bonds.

Can you take the volatility of a 100% stock portfolio? Remember, we are all heroes during long bull markets. Bear markets can turn even the most aggressive among us into cowards. You don't want to sell your stocks at the bottom of a bear market. Bear markets are like Chinese water torture, they just never seem to end. Bear markets also seem to be bottomless.
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fantasytensai
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by fantasytensai » Sat Oct 28, 2017 8:54 pm

nedsaid wrote:
Sat Oct 28, 2017 2:35 pm
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
You have to look longer term. You are trying to make sense of the market by looking at daily price movements, which is a big mistake. In the short run, markets can do almost anything. I have seen some crazy stuff happen over the years. Longer run, markets 100% reflect economic reality.

Who told you bonds were useless? Bonds are there to keep portfolio volatility at a tolerable level during bear markets. We had the stock market drop over 50% during both the 2000-2002 and the 2008-2009 bear markets. I had 20% bonds during the first bear market and 28% bonds during the second one, my peaking to trough losses were 32% in 2000-2002 and 35% during 2008-2009. That is a considerable drop in volatility from the holding of bonds.

Can you take the volatility of a 100% stock portfolio? Remember, we are all heroes during long bull markets. Bear markets can turn even the most aggressive among us into cowards. You don't want to sell your stocks at the bottom of a bear market. Bear markets are like Chinese water torture, they just never seem to end. Bear markets also seem to be bottomless.
Thank you. This is definitely the most helpful response here.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by z3r0c00l » Sat Oct 28, 2017 8:57 pm

fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by F150HD » Sat Oct 28, 2017 11:06 pm

itstoomuch wrote:
Sat Oct 28, 2017 10:55 am
Nice graphic:
The linear (y axis) difference between Stock and anything other bonds, CDs, USD, gold, etc ...
Sorry, linear?

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by triceratop » Sat Oct 28, 2017 11:31 pm

F150HD wrote:
Sat Oct 28, 2017 11:06 pm
itstoomuch wrote:
Sat Oct 28, 2017 10:55 am
Nice graphic:
The linear (y axis) difference between Stock and anything other bonds, CDs, USD, gold, etc ...
Sorry, linear?
I'm not sure what your question is, but just to expand on the point: the plot is log-linear so linear differences are differences in (exponential) growth rates.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by itstoomuch » Sun Oct 29, 2017 1:46 am

Sorry, my bad. the Y axis is log :oops: .
Just makes the Safety Premium even larger :annoyed .
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by fantasytensai » Sun Oct 29, 2017 11:36 am

z3r0c00l wrote:
Sat Oct 28, 2017 8:57 pm
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.
The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.

Admiral
Posts: 863
Joined: Mon Oct 27, 2014 12:35 pm

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Admiral » Sun Oct 29, 2017 11:58 am

fantasytensai wrote:
Sun Oct 29, 2017 11:36 am
z3r0c00l wrote:
Sat Oct 28, 2017 8:57 pm
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.
The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.
So what? Unless you're selling your shares and locking in your losses, the price is immaterial. Bond funds are held for 1) stability and 2) dividend yield not NAV. CDs have penalties. VBTLX doesn't.

fipt2030
Posts: 47
Joined: Tue Oct 03, 2017 8:09 am

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by fipt2030 » Mon Oct 30, 2017 7:07 am

Admiral wrote:
Sun Oct 29, 2017 11:58 am
fantasytensai wrote:
Sun Oct 29, 2017 11:36 am
z3r0c00l wrote:
Sat Oct 28, 2017 8:57 pm
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.
The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.
So what? Unless you're selling your shares and locking in your losses, the price is immaterial. Bond funds are held for 1) stability and 2) dividend yield not NAV. CDs have penalties. VBTLX doesn't.
Yes, I may be misinformed, but let's say the interest rate jumps up by 1% in four 0.25% increments in a year, the NAV will go down by 5% (the quarterly increases should help the NAV volatility) and would take 5 years of that increased yield to catch up the lower NAV

So in 5 years, you really didn't make any money, CD's may be better in this environment (only way to move is up for interest rates)

bi0hazard
Posts: 31
Joined: Mon Mar 14, 2016 10:36 pm

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by bi0hazard » Mon Oct 30, 2017 10:48 am

I'm not an expert on bonds, but few things I have noticed in my investments.

1) my intermediate tax exempt bond fund monthly dividends are higer than all current 5 year CD interest payments I'm aware of. ( I have multiple CDs as well which are not tax efficient)

2) I pay no taxes on tax exempt divideds.

3) bond fund share prices do not appear to be exactly correlated to fed interest rate changes.

4) comment about not really making any money @ 5 years can be the same for stocks! Just last year the stock funds were are at low, where I was basically even on contributions and value of my stock funds... This can go either way, and stay for long periods. There are so many threads about going 100% stock, but those threads disapear during market downturns...

B=-

randomguy
Posts: 4890
Joined: Wed Sep 17, 2014 9:00 am

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by randomguy » Mon Oct 30, 2017 11:25 am

Admiral wrote:
Sun Oct 29, 2017 11:58 am
fantasytensai wrote:
Sun Oct 29, 2017 11:36 am
z3r0c00l wrote:
Sat Oct 28, 2017 8:57 pm
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.
The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.
So what? Unless you're selling your shares and locking in your losses, the price is immaterial. Bond funds are held for 1) stability and 2) dividend yield not NAV. CDs have penalties. VBTLX doesn't.
You have 1000 bucks. What is better
a) keep it in the mattress and have 1000 bucks
b) Invest in VBTLX. Make 100 in interest and lose 200 in NAV value from rising rates
C) invest in CDs, make 100 in interest and give 50 bucks back as a penalty

You might not realize your losses. They are still losses. And obviously things can also go the other way and bonds work out better than CDs or cash.

itstoomuch
Posts: 4724
Joined: Mon Dec 15, 2014 12:17 pm
Location: midValley OR

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by itstoomuch » Mon Oct 30, 2017 11:38 am

itstoomuch wrote:
Thu Oct 26, 2017 1:56 pm
No bonds here.
Deferred annuities and rentals are my substitute to bonds.
Additional elasticity from Discretionary trading account.
YMMV :sharebeer
I do have a couple of high-yield, CEF bond funds in taxable. Since I can't trade too much in taxables (the account isn't that big and don't want to bother with shortterm accounting), I try for high returns other than share appreciation.
Rev90517; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax 25%. Early SS. FundRatio (FR) >1.1 67/70yo

rgs92
Posts: 1436
Joined: Mon Mar 02, 2009 8:00 pm

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by rgs92 » Mon Oct 30, 2017 11:43 am

Flights To Quality help bonds a lot. That's when they provide ballast, and that's the purpose of bonds.
[I started a thread a few months ago asking what happens if stocks and bonds fall at the same time and got many good replies (and felt better).]

bloom2708
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Location: Fargo, ND

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by bloom2708 » Mon Oct 30, 2017 11:46 am

WanderingDoc wrote:
Thu Oct 26, 2017 11:18 pm
itstoomuch wrote:
Thu Oct 26, 2017 1:56 pm
No bonds here.
Deferred annuities and rentals are my substitute to bonds.
Additional elasticity from Discretionary trading account.
YMMV :sharebeer
Interesting. This has me thinking. My rentals already cover my basing monthly expenses AND I have a pretty ironclad source of work. Any reason at all to hold any bonds?
Tough to compare buying a bond index fund and having a second job/owning a small business (rentals). Many threads on that subject.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

Admiral
Posts: 863
Joined: Mon Oct 27, 2014 12:35 pm

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Admiral » Mon Oct 30, 2017 11:48 am

randomguy wrote:
Mon Oct 30, 2017 11:25 am
Admiral wrote:
Sun Oct 29, 2017 11:58 am
fantasytensai wrote:
Sun Oct 29, 2017 11:36 am
z3r0c00l wrote:
Sat Oct 28, 2017 8:57 pm
fantasytensai wrote:
Thu Oct 26, 2017 1:38 pm
Stocks are up today and bonds (VBTLX) fall. Stocks were falling yesterday and bonds also fall. Has everyone holding bond funds simply made peace with the fact that bonds are practically useless until there is a 25%+ drop in the market? I can't convince myself to keep holding bonds.
I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.
The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.
So what? Unless you're selling your shares and locking in your losses, the price is immaterial. Bond funds are held for 1) stability and 2) dividend yield not NAV. CDs have penalties. VBTLX doesn't.
You have 1000 bucks. What is better
a) keep it in the mattress and have 1000 bucks
b) Invest in VBTLX. Make 100 in interest and lose 200 in NAV value from rising rates
C) invest in CDs, make 100 in interest and give 50 bucks back as a penalty

You might not realize your losses. They are still losses. And obviously things can also go the other way and bonds work out better than CDs or cash.
The Fed has been raising rates for almost a year and the price has gone up.

EDIT to add: and I have not experienced losses, in the same way as I have only experienced paper gains when the price goes up, because I have not sold. What I have gotten is more shares, because of the interest payments.

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triceratop
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by triceratop » Mon Oct 30, 2017 12:00 pm

Admiral wrote:
Mon Oct 30, 2017 11:48 am
randomguy wrote:
Mon Oct 30, 2017 11:25 am
Admiral wrote:
Sun Oct 29, 2017 11:58 am
fantasytensai wrote:
Sun Oct 29, 2017 11:36 am
z3r0c00l wrote:
Sat Oct 28, 2017 8:57 pm


I love bonds and didn't buy them for any perceived zig-when-stocks-zag reason. Focus instead on the amount of change on each of these days. I suspect it was all fractions of a percent such as .2%. That means bonds are doing what they are supposed to do, offering moderate to low volatility and moderate to low return. Surely you must have noticed all of those dividend payments, that is the purpose of the bond fund. 2.5% for low risk isn't so horrible really, just a notch better than 5 year CDs. But if course that bond fund is liquid, I can invest in it and take money out any time I want with no penalty. It is a nice thing to have 20% of invested money in.
The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.
So what? Unless you're selling your shares and locking in your losses, the price is immaterial. Bond funds are held for 1) stability and 2) dividend yield not NAV. CDs have penalties. VBTLX doesn't.
You have 1000 bucks. What is better
a) keep it in the mattress and have 1000 bucks
b) Invest in VBTLX. Make 100 in interest and lose 200 in NAV value from rising rates
C) invest in CDs, make 100 in interest and give 50 bucks back as a penalty

You might not realize your losses. They are still losses. And obviously things can also go the other way and bonds work out better than CDs or cash.
The Fed has been raising rates for almost a year and the price has gone up.

EDIT to add: and I have not experienced losses, in the same way as I have only experienced paper gains when the price goes up, because I have not sold. What I have gotten is more shares, because of the interest payments.
BND prices:
10/28/2016: 83.1
10/30/2017: 81.8

Anyway, the point of the post is that bonds do have risk, even if you don't sell. In comparison CDs can be superior. The fact that the risk hasn't been realized much in the past year is not really the point.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Admiral
Posts: 863
Joined: Mon Oct 27, 2014 12:35 pm

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Admiral » Mon Oct 30, 2017 12:18 pm

triceratop wrote:
Mon Oct 30, 2017 12:00 pm
Admiral wrote:
Mon Oct 30, 2017 11:48 am
randomguy wrote:
Mon Oct 30, 2017 11:25 am
Admiral wrote:
Sun Oct 29, 2017 11:58 am
fantasytensai wrote:
Sun Oct 29, 2017 11:36 am


The dividends have been completely wiped out and then some by the constant drop in NAV of the bond funds like VBTLX.
So what? Unless you're selling your shares and locking in your losses, the price is immaterial. Bond funds are held for 1) stability and 2) dividend yield not NAV. CDs have penalties. VBTLX doesn't.
You have 1000 bucks. What is better
a) keep it in the mattress and have 1000 bucks
b) Invest in VBTLX. Make 100 in interest and lose 200 in NAV value from rising rates
C) invest in CDs, make 100 in interest and give 50 bucks back as a penalty

You might not realize your losses. They are still losses. And obviously things can also go the other way and bonds work out better than CDs or cash.
The Fed has been raising rates for almost a year and the price has gone up.

EDIT to add: and I have not experienced losses, in the same way as I have only experienced paper gains when the price goes up, because I have not sold. What I have gotten is more shares, because of the interest payments.
BND prices:
10/28/2016: 83.1
10/30/2017: 81.8

Anyway, the point of the post is that bonds do have risk, even if you don't sell. In comparison CDs can be superior. The fact that the risk hasn't been realized much in the past year is not really the point.
VBTLX:
3/13/2017: $10.55
10/27/2017 $10.74

Prices go up, and they go down, and they go up again, and they go down.

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triceratop
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Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by triceratop » Mon Oct 30, 2017 12:21 pm

Strange that you would talk about rates rising for a year with no price declines and then quote a price change of about 6 months. :confused

It still doesn't mean that CDs cannot be superior in terms of risk/reward, nor that bond prices won't decline in the future. And that's the real point of the prior post.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

Admiral
Posts: 863
Joined: Mon Oct 27, 2014 12:35 pm

Re: Stocks go up, bonds fall. Stock fall, bonds also fall.

Post by Admiral » Mon Oct 30, 2017 12:39 pm

triceratop wrote:
Mon Oct 30, 2017 12:21 pm
Strange that you would talk about rates rising for a year with no price declines and then quote a price change of about 6 months. :confused

It still doesn't mean that CDs cannot be superior in terms of risk/reward, nor that bond prices won't decline in the future. And that's the real point of the prior post.
Where did I say that? I said the Fed has been raising rates for a year, and the price has gone up. It has, over the last six months. It's also gone down before that, and then up. And it may go down again. I don't hold VBTLX for my 30-40 year investment horizon and worry about such things.

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