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@Old_Skeet, I think that is the progression of a lot of investors. Listening to someone and eventually broadening their horizons. I will admit Brinker got me on the $cost avg kick, and I pushed that hard through my working life. For me, when my portfolio hit a certain level I made the decision to take more responsibility. I listened to other experts, read books, and if course the internet has been a treasure trove of information if one is careful.
But after all of that, the confusion of bonds still plagues me. I have the basics down but since there are so many varieties of bonds, things get fuzzy.
Another point to bring up is Bob Brinker Jr's fixed income newsletter. This has been out for quite some time now. I have never read it but wonder if anyone else has?
"confusion of bonds still plagues me. I have the basics down but since there are so many varieties of bonds, things get fuzzy. "
John- Bonds themselves aren't all that difficult to understand, at least in theory. Where it gets murky is with all of the different flavors, and bond funds make it much worse, because many of them not only deal in mixes of flavors, but by their very natures don't have clear issue dates, payment schedules, call dates, and so on. An individual bond is reasonably easy to evaluate, but once mixed up in a stew, good luck!
Very much like mortgages. An individual mortgage is on a piece of property that you can see, walk through, evaluate, and borrow or loan money on, for a fixed amount of time, at a fixed (or at least capped) rate. But once you chop up the mortgages into little pieces and throw a whole mess of them into a common pool, who really knows what properties are involved, what they are really worth, etc. As was well demonstrated in 2007/08.
And hopefully I haven't committed the cardinal error of investing in something I don't understand. I had decided way back that funds were better for my purpose as I can let the manager deal with maturities and durations. But I also knew that diversification was important in the bond world as it is with equities. So my research pointed me to a core bond fund which has done okay and now this unconstrained bond fund. This one I'm taking a chance on. My defense is that only a small part of the portfolio is involved so if it went to zero and I don't think it will, I will be okay.
The last few years have seen this explosion in bonds with all the new funds.
The way that the mortgages were handled was truly criminal. I know someone who stopped making their payments in 2009 and has just this year got notice of foreclosure. Their mortgage was in the blender for sure. They stopped payments due to the underwater situation which I disagree with but that is a topic that is well worn already.
Comments
But after all of that, the confusion of bonds still plagues me. I have the basics down but since there are so many varieties of bonds, things get fuzzy.
John- Bonds themselves aren't all that difficult to understand, at least in theory. Where it gets murky is with all of the different flavors, and bond funds make it much worse, because many of them not only deal in mixes of flavors, but by their very natures don't have clear issue dates, payment schedules, call dates, and so on. An individual bond is reasonably easy to evaluate, but once mixed up in a stew, good luck!
Very much like mortgages. An individual mortgage is on a piece of property that you can see, walk through, evaluate, and borrow or loan money on, for a fixed amount of time, at a fixed (or at least capped) rate. But once you chop up the mortgages into little pieces and throw a whole mess of them into a common pool, who really knows what properties are involved, what they are really worth, etc. As was well demonstrated in 2007/08.
The last few years have seen this explosion in bonds with all the new funds.
The way that the mortgages were handled was truly criminal. I know someone who stopped making their payments in 2009 and has just this year got notice of foreclosure. Their mortgage was in the blender for sure. They stopped payments due to the underwater situation which I disagree with but that is a topic that is well worn already.