Collective crystal balls, canny investment choices & bonds
Discussion
Due to my shrewd investment choices I have 20% of my portfolio in a Vanguard LifeStrategy 20 which is heavily skewed to Bonds. Due to the amazing ineptitude of our country's political leaders along with the megalomaniac asshole in Russia, I am currently riding a 20% loss over the last 12 months.
Warren Buffett would be in awe of my canny choices.
Anyway, no point in crying into my cornflakes - but what are the collective crystal balls saying about the future of Bonds?
Warren Buffett would be in awe of my canny choices.
Anyway, no point in crying into my cornflakes - but what are the collective crystal balls saying about the future of Bonds?
I've been considering for the past few months whether now is the right time to buy into a bond fund and have asked a few questions on this forum.
I'm certainly in the demographic that should be considering them because I'm close to retirement and I'm also the first person to say don't try and time the market but in recent years with yields so low there seemed little point in holding bonds over cash. Now that yields have increased I am starting to take an interest but I still can't bring myself to buy a bond fund given the current events.
As a result I'm still invested 100% equity meaning I'm 'only' down 9% YTD compared to, say, 30% down if I'd have a held a Gilt index fund. As things stand, the idea that bonds act as a damper on volatility has been turned on its head but with Gilt yields now at over 4% almost risk free, it's becoming harder to justify continuing to hold nothing but equities.
I'm certainly in the demographic that should be considering them because I'm close to retirement and I'm also the first person to say don't try and time the market but in recent years with yields so low there seemed little point in holding bonds over cash. Now that yields have increased I am starting to take an interest but I still can't bring myself to buy a bond fund given the current events.
As a result I'm still invested 100% equity meaning I'm 'only' down 9% YTD compared to, say, 30% down if I'd have a held a Gilt index fund. As things stand, the idea that bonds act as a damper on volatility has been turned on its head but with Gilt yields now at over 4% almost risk free, it's becoming harder to justify continuing to hold nothing but equities.
LeoSayer said:
I've been considering for the past few months whether now is the right time to buy into a bond fund and have asked a few questions on this forum.
I'm certainly in the demographic that should be considering them because I'm close to retirement and I'm also the first person to say don't try and time the market but in recent years with yields so low there seemed little point in holding bonds over cash. Now that yields have increased I am starting to take an interest but I still can't bring myself to buy a bond fund given the current events.
As a result I'm still invested 100% equity meaning I'm 'only' down 9% YTD compared to, say, 30% down if I'd have a held a Gilt index fund. As things stand, the idea that bonds act as a damper on volatility has been turned on its head but with Gilt yields now at over 4% almost risk free, it's becoming harder to justify continuing to hold nothing but equities.
I think there's some confusion around bonds and the various risks you are accepting, one of which has impacted us this year - term/duration.I'm certainly in the demographic that should be considering them because I'm close to retirement and I'm also the first person to say don't try and time the market but in recent years with yields so low there seemed little point in holding bonds over cash. Now that yields have increased I am starting to take an interest but I still can't bring myself to buy a bond fund given the current events.
As a result I'm still invested 100% equity meaning I'm 'only' down 9% YTD compared to, say, 30% down if I'd have a held a Gilt index fund. As things stand, the idea that bonds act as a damper on volatility has been turned on its head but with Gilt yields now at over 4% almost risk free, it's becoming harder to justify continuing to hold nothing but equities.
A short-duration, high-quality bond fund is down circa 7% YTD.
As always, it's important to fully understand the underlying investment before making the plunge.
This is the fourth worst year for global bond market returns in the last 322 years. After 1721, 1865 and 1920... Given the state of the global bond markets I don't think we've seen the last of it yet. Over levered pension funds seeking liquidity will be selling gilts the worse the over all market gets. The worse it gets, the more illiquid it will become.
Like I said above, "yield free risk".
Like I said above, "yield free risk".
RichTT said:
Like I said above, "yield free risk".
How are you measuring yield, and is this for all funds. or a particular fund?RichTT said:
Over levered pension funds seeking liquidity will be selling gilts the worse the over all market gets. The worse it gets, the more illiquid it will become.
I'm not sure of the relevance of this to a global bond fund (with FX hedging)? Edited by Derek Chevalier on Saturday 15th October 13:46
38911 said:
Due to the amazing ineptitude of our country's political leaders along with the megalomaniac asshole in Russia, I am currently riding a 20% loss over the last 12 months.
You are not alone. I have some that are down a full 30% - notably UK index-linked.So much for years of "financial experts" saying bonds are safer than equities and tend to move in the opposite direction to equities. The only consolation is that, across the board, equities are down just as much as bonds. Thank goodness I had the sense to "cash out" a decent safety reserve when markets were riding high last year. Even though that cash pile is shrinking with inflation it remains my best performing asset class.
Panamax said:
saying bonds are safer than equities
What has happened to make you think they aren't? Have a look at previous equity drawdowns and compare to the current bond situation (both on a global basis).Panamax said:
and tend to move in the opposite direction to equities
Which they have done in recent history when equities have taken a beating.Given that global equities are down around 6% over the last year (measured in GBP), it's hard to argue equities are taking a beating
Panamax said:
The only consolation is that, across the board, equities are down just as much as bonds
That's not the case. Some small-cap value funds are positive over the last 12 months.Derek Chevalier said:
RichTT said:
Like I said above, "yield free risk".
How are you measuring yield, and is this for all funds. or a particular fund?RichTT said:
Over levered pension funds seeking liquidity will be selling gilts the worse the over all market gets. The worse it gets, the more illiquid it will become.
I'm not sure of the relevance of this to a global bond fund (with FX hedging)? Panamax said:
38911 said:
Due to the amazing ineptitude of our country's political leaders along with the megalomaniac asshole in Russia, I am currently riding a 20% loss over the last 12 months.
You are not alone. I have some that are down a full 30% - notably UK index-linked.So much for years of "financial experts" saying bonds are safer than equities and tend to move in the opposite direction to equities. The only consolation is that, across the board, equities are down just as much as bonds. Thank goodness I had the sense to "cash out" a decent safety reserve when markets were riding high last year. Even though that cash pile is shrinking with inflation it remains my best performing asset class.
So follow on question, if I decided that I don't have the balls to ride the Vanguard 20 out, what are peoples thoughts about switch to a Vanguard 80? I'm not asking for someone to tell me the next lottery numbers - I'm just looking for ideas and perspectives rather than predictions
Long term, equities are probably the right call for everyone. 2%+ inflation is built into the system and that eventually reflects in earnings and valuations. Look at pretty much every index outside of Japan and they move up and to the right. You also have dividends en route.
In the short term things get a bit more volatile, so it all depends on your appetite to risk and timelines.
In the short term things get a bit more volatile, so it all depends on your appetite to risk and timelines.
RichTT said:
Happy to be proved wrong, but is there a bond fund out there with a nominal return beating inflation? That is, not ones invested in the silly high risk junk market.
Ah, I was thinking more of the negative yields of not-so-long agohttps://www.ft.com/content/0ec09021-55e8-4829-b3e2...
From the article - almost a third of Bloomberg Agg had a negative yield not so long ago. Now global gov benchmark yields 3% and IG 5% - a large change in a relatively short space of time.
RichTT said:
No, it was more just a comment on the general state of the bond market.
It's certainly a lot more attractive than it was pre-falls in terms of future expected returns.38911 said:
So follow on question, if I decided that I don't have the balls to ride the Vanguard 20 out, what are peoples thoughts about switch to a Vanguard 80? I'm not asking for someone to tell me the next lottery numbers - I'm just looking for ideas and perspectives rather than predictions
What has changed in your financial plan/objectives to require the change? If nothing, I'm not sure why LS80 is now the best choice when it wasn't previously.Derek Chevalier said:
Ah, I was thinking more of the negative yields of not-so-long ago
https://www.ft.com/content/0ec09021-55e8-4829-b3e2...
From the article - almost a third of Bloomberg Agg had a negative yield not so long ago. Now global gov benchmark yields 3% and IG 5% - a large change in a relatively short space of time.
The 60/40 portfolio is dead for the time being. Where does one hide their net worth when equities are down, bonds are down or negative, property on the cusp, inflation high. CDS on banks and sovereigns rocketing, everyone seemingly over levered. Inflationary bear markets don't come about too often thankfully. https://www.ft.com/content/0ec09021-55e8-4829-b3e2...
From the article - almost a third of Bloomberg Agg had a negative yield not so long ago. Now global gov benchmark yields 3% and IG 5% - a large change in a relatively short space of time.
38911 said:
Due to my shrewd investment choices I have 20% of my portfolio in a Vanguard LifeStrategy 20 which is heavily skewed to Bonds. Due to the amazing ineptitude of our country's political leaders along with the megalomaniac asshole in Russia, I am currently riding a 20% loss over the last 12 months.
Warren Buffett would be in awe of my canny choices.
Anyway, no point in crying into my cornflakes - but what are the collective crystal balls saying about the future of Bonds?
My limited understanding is that as interest rates go up, the value of the fund goes down by circa 1% x average duration of the bond fund - hence the decline in LS 20 fundWarren Buffett would be in awe of my canny choices.
Anyway, no point in crying into my cornflakes - but what are the collective crystal balls saying about the future of Bonds?
It looks to me that interest rates are still going to go up (maybe another 2%) so I would expect further drops in the value of bond funds although the return will go up
Personally, I prefer 80% US Equities and 20% cash in the present climate and that is what I am doing
Good luck
38911 said:
So follow on question, if I decided that I don't have the balls to ride the Vanguard 20 out, what are peoples thoughts about switch to a Vanguard 80? I'm not asking for someone to tell me the next lottery numbers - I'm just looking for ideas and perspectives rather than predictions
Aren't the Vangaurd LS products UK biased? Do you want to be overweight UK assets at present? I can see arguments for and against, but keep it in mind.38911 said:
So follow on question, if I decided that I don't have the balls to ride the Vanguard 20 out, what are peoples thoughts about switch to a Vanguard 80? I'm not asking for someone to tell me the next lottery numbers - I'm just looking for ideas and perspectives rather than predictions
This would be a complete change of investment strategy. The midst of a market crash isn’t the best time to completely change strategy in my opinion - you’re most likely to end up performance chasing and/or selling low and buying high. Derek Chevalier said:
LeoSayer said:
I've been considering for the past few months whether now is the right time to buy into a bond fund and have asked a few questions on this forum.
I'm certainly in the demographic that should be considering them because I'm close to retirement and I'm also the first person to say don't try and time the market but in recent years with yields so low there seemed little point in holding bonds over cash. Now that yields have increased I am starting to take an interest but I still can't bring myself to buy a bond fund given the current events.
As a result I'm still invested 100% equity meaning I'm 'only' down 9% YTD compared to, say, 30% down if I'd have a held a Gilt index fund. As things stand, the idea that bonds act as a damper on volatility has been turned on its head but with Gilt yields now at over 4% almost risk free, it's becoming harder to justify continuing to hold nothing but equities.
I think there's some confusion around bonds and the various risks you are accepting, one of which has impacted us this year - term/duration.I'm certainly in the demographic that should be considering them because I'm close to retirement and I'm also the first person to say don't try and time the market but in recent years with yields so low there seemed little point in holding bonds over cash. Now that yields have increased I am starting to take an interest but I still can't bring myself to buy a bond fund given the current events.
As a result I'm still invested 100% equity meaning I'm 'only' down 9% YTD compared to, say, 30% down if I'd have a held a Gilt index fund. As things stand, the idea that bonds act as a damper on volatility has been turned on its head but with Gilt yields now at over 4% almost risk free, it's becoming harder to justify continuing to hold nothing but equities.
A short-duration, high-quality bond fund is down circa 7% YTD.
As always, it's important to fully understand the underlying investment before making the plunge.
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