Any thoughts on bond funds at this point?

[kv968]

But they could be low for decades.

One can make likely predictions about the bond market, there is always a chance one will be wrong.

But that's a bit OT for this thread.

That's definitely true. However I look at it this way, if you've got time on your side with investing, why invest in something that's nearly poised to go down? And while you're waiting for it to go down, you're only getting a percent or 2 if that.

I hold some bond funds for the "stability", but I'm nowhere near what my "correct" allocation should be. To me there's just as much, if not more, long-term risk in those than there are in certain stocks.

[shaggy]

That's definitely true. However I look at it this way, if you've got time on your side with investing, why invest in something that's nearly poised to go down? And while you're waiting for it to go down, you're only getting a percent or 2 if that.

Where else are we going to put money, though? It's insanity to be 100% invested in stocks, and everything else has a negative expected return. At some point I just have to be happy I'm keeping some of my principal safe.

[feh]

Where else are we going to put money, though? It's insanity to be 100% invested in stocks, and everything else has a negative expected return. At some point I just have to be happy I'm keeping some of my principal safe.

That's kind of his point though - if you're in a bond fund/ETF, your principal isn't safe. Bond funds do have downside risk.

People that are really worried about the bond market are using CDs and I-bonds as alternatives. Or even online savings/money market accounts.

[kv968]

Where else are we going to put money, though? It's insanity to be 100% invested in stocks, and everything else has a negative expected return. At some point I just have to be happy I'm keeping some of my principal safe.

Like I said, I do have some of my investments in bond funds just not what my "typical" allocation should be.

And if you're young enough (which I'm not) I don't think its crazy at all to be 100% invested in stocks.

Bond prices have risen for the past 30 years so people start to get the notion that they can't really go down. Well they can and they will and you're not being compensated for the risk of them going down by being paid a measly 1-3%.

Like you said, it could be quite some time before rates rise and it might be nice and gradual when they do, but in the long term bonds aren't looking too attractive to me.

[kork13]

Personally, I largely stepped away from bonds last year (except for a ~10% holding in federal I-Bonds that I still have kept, though I consider those more as a liquid/EF holding than as an investment). I previously held an additional 10-15% in mid- to long-term bonds, but when I was selling some investments to cover my home's downpayment, I went ahead and sold all of those, and I've stayed out of bonds since then. Rather, I've started building a small position focused around high-dividend yielding stocks. Perhaps a bit pre-emptive, but I don't personally see bonds doing me much good over the next number of years. I'm only 26, so I'm okay with accepting the added risk factor... But especially bond FUNDS (vs. individual bonds), no way. As soon as the fed starts hinting at raising rates again, bond investors will run like the wind from the funds. I had no interest in getting caught in the middle of that, so I'm happy to stay out of them for now.

[cardtrick]

I just couldn't get myself to buy stocks and wanted to get out of the money market fund I was invested in, so I got into TGBAX. It has a duration of 2.34 years, so short term bonds.

I would never buy 30 year T-bonds or munis. The fundamentals are just terrible and they're all overvalued. We've had one of the biggest rallies in bonds ever. Besides, if bonds do well, stocks will outperform them.

[shaggy]

People that are really worried about the bond market are using CDs and I-bonds as alternatives. Or even online savings/money market accounts.

Yes, and those definitely have a negative expected return. There is no safe harbor that will give you a good return.

[willuc8]

Assuming you won't be selling for 10+ years, it's my opinion you don't need to do anything.

[willuc8]

Don't you visit bogleheads.org Steve? There are more threads over there on this subject than you can shake a stick at.

[LivingAlmostLarge]

Are the bond funds in taxable or retirement accounts? What portion of your portfolio are you holding in a bond fund? What is the purpose of the money? Depending on the purpose you could hold short term bonds or cds if the purpose is five years of cash for retirement spending. It could be to also just hold short term bond funds to see where rates really go.

[snafu]

I'm ok with the risk factor while Bonds and Bond funds are not keeping up with inflation. USA is tapering off stimulus reducing stimulus to $ 85 billion. The government is printing money and borrowing from itself rather than from the international lenders. I'm paying attention and should there be a change in policy or an attempt to move interest rates I will change my allocation.

In this region we get less than 1% but a car loan averages 7%. There has been two attempts to raise mortgage rates but they fell back in a short time.Our banks are awash with money and their stock is hugely over priced.

[Nocrash]

Go short term if you do anything. I just dumped 100% of my Harbor Bond fund at the beginning of March of this year and now I read the Pimco Total Return funds has lost billions. Harbor mimics Pimco. My personal belief is I did the right thing because very bad times are headed for bonds.