This is my AC/BC (after coffee/before chores) 2 cents worth on this Saturday morning.
The purpose of this bond view is whether one's investments would have fared better "IF" selling equities in May and purchasing a bond fund, instead of moving the money to a money market cash holding.
The example choices below were a bit random and you likely have your own bond fund list. PIMIX is probably the big outsider here, as a bond fund, as PIMCO uses a fair amount of "magic sauce" machinations with many of their funds. Any front load funds are presumed to have been purchased load-waived for purposes of total returns. ALSO, the sells and buys would likely not be productive for reasons of taxation; and therefore, would be of benefit only within a tax sheltered investment portfolio.
A bond fund(s) overview for total return during the May-Nov period, relative to the sell in May theory for equity holdings. Most funds are investment grade corporate bond, with outright exceptions being FTBFX and PIMIX . I can not verify the holdings of the funds and/or any changes that were performed during these time periods; as an investment grade corporate bond fund may have been allowed by their prospectus to "drift" a percentage of holdings into other bond type holdings: i.e., high yield, mortgage or government issues. After spending 42.5 hours (actually a few hours of digging)
with this project; this is as good as it gets for my pay grade here. Wish for better formatting layout and I'll edit for some cleanup after the initial post.
A few notes from my old brain cells: Keep in mind the massive quantitative easing from the Fed. Reserve during the early period of these date ranges. 2008 was, of course; the big equity melt; 2009 the recovery in equities, 2010 and 2011 still found unresolved problems in Europe in particular and 2011 found the downgrade in July of U.S. government debt from its AAA rating. 2013 bond performance started the year normally, and then; in May, when Fed Chairman Ben Bernanke suggested that the Fed may soon “taper” its quantitative easing policy, profit taking temporary killed off the bond market. The ten year yield hit about 3% in September of this year. Alas, in the fall of 2013; it was announced that taper "would not" take place "yet". 2015 was a twitch of thought that the 30+ year bond rally was going to end, any day now; and "soon" interest rates are going to rise back to "normal" levels.
......... 2008... 2009... 2010... 2011... 2012... 2013... 2014... 2015... 2016...
FTBFX -8.1% +12.4% +5.5% +.1% +3.5% -1.6% +1.8% -1.2% +3%
PIMIX -8.7% +16.8% +11.3% +4% +11% -.5% +3.3% +.2% +4.6%
VFICX -12.5% +13.5% +7.4% +2.5% +5% -2.6% +1.9% 0 -.5%
PIGIX -12.3% +16% +8% +.5% +7.2% -4.4% +3.7% -.6% +4.1%
ACCBX -16.2% +17.6% +3.4% -1% +3.6% -2.5% +2.3% -1.6% +3.8%
MFBFX -13.1% +19.1% +6.7% +1.9% +5% -2.2% +2% -1.3% +2.8%
EDV
* +6.7% -1.6% +6.4% +46.7% +9.2% -18% +12% -.2% +3.2%
IEF
* +.8% -.1% +10.3% +11.7% +3.1% -5% +3.4% +1% +.7%
SPY
* -33.5% +23.6% -.6% -6% +8.5% +11% +6.4% +.5% +.3%
* EDV=Vanguard Extended Duration Bond, IEF=Gov't. 7-10 year issues, SPY=S&P500. Three and four digit tickers no longer highlight here, at MFO.
Well, surely not a scientific study; so you may gather what you choose from the above. Let us know if you discover any errors.
Take care,
Catch
Comments
Thanks for posting the findings from your study.
I have also enclosed a link below to a study that @Ted posted in another post about this topic and strategy. The study provides returns based upon different investment concepts for the off season.
http://www.etf.com/sections/features-and-news/should-you-sell-may-go-away?nopaging=1
Now, for this year I have sold equities down thus far instead of going to all cash I put some into a few hybrid income funds, some into a bond fund, some into a couple of opening positions in a CD Ladder and also some to cash.
I've made some good money with the strategy this season ... and, rather than see it get vaporized by some geopolitical mess I felt it was harvest time so I am now in the process of reducing my equity allocation towards the low range within my asset allocation. When completed my portfolio should bubble somewhere around 45% equity in Instant Xray. So, even if equities continue to rally through the summer I will still be at the equity party.
I'm not saying by any means what I am doing is right for others.
Take care ... and, thanks again for posting your findings.
Old_Skeet
@Old_Skeet, I would be interested in how you think about the objectives you have and the fact that an instant X-ray is giving you information that's somewhere between one and three months old. Have you decided it's the best information you have and decided not to worry about it or do you check fact sheets of funds which quite frequently have at least allocations between asset classes up to the latest month-end? For the most part I've concluded that I don't use the X-ray information for anything that matters if its off by a few months but I'd be happy to know if you view it any differently considering your interest in seasonals where the timing presumably matters more.
Thanks for your question(s).
As for fund fact sheets they usually are produced quarterly by the fund companies. The reason I use Instant Xray is that it is easy to use and for my purpose to gague where my portfolio's asset allocation bubbles it works ok for me. In checking some fund's portfolio holdings page at MorningstarI have found some fund holdings are updated about every 30 days while others might show a 60 to 90 day lag before reporting takes place. And, it is what it is but close enough for me.
Skeet
Ah - can't resist adding that bonds will react as Trump's promises to inflate the economy come to pass - or fail to come to pass (primarily through borrowing and massive infrastructure). So things at present are a bit unsettled.
As to my write, I was curious about various bond related returns during the May-Nov period over the past 9 years, which looked back to the major market melt period. In retrospect, I could have included 2007; as this was the beginning of the erratic equity markets in the late fall of this year.
Realizing there is data that somewhat supports the sell in May theory over a long time frame, I have never used this method to sell or buy either equity or bond positions.
Lastly, as I noted; sell and buy trigger methods used by an investor will likely be modified, at least in part, as to whether the investments are within a tax deferred portfolio. All of our portfolio is tax deferred accounts, so current taxation does not become a consideration with sells or buys.
Hi @Maurice
You noted: "But rotating bond and stock funds every 6 months wouldn't work for me."
>>> I agree. A May equity sell and buy again in November would only function and have value for our house if other factors were present: two being political and/or technical aspects related to particular sectors we may have in our portfolio. One might have a particular investment that has been held for "x" time and has produced a decent profit margin; but is now discovered to move sideways in price for a period of time that gets one's attention. For indicators as these, I/we at this house need to ask "why" questions. Has this sector run its course and is nothing more than the victim of profit taking as monies move elsewhere? Are there real reasons for this pricing change that are related to problems in this sector; or related to real time or potential political actions. I have not checked, but will assume that an example could be the real estate sector and related problem areas. One may own a REIT 1 fund that has held onto investments in the "mall" sector too long; while another REIT 2 fund may have moved away from that sector and had invested more, say; into the apartment sector or spaces leased by the healthcare sector. If the "mall" real estate sector falls on its face and there is continued demand for apartment space and leased healthcare facility related, one might assume better performance from fund 2, eh?
These are some of the factors that may take place to cause us to sell a particular investment area and move to another; but not necessarily linked to either the month of May or November.
The above could as well be directed towards the overall equity or bond market and their particular sectors, too.
We do pay attention on a weekly basis, at this time, to watch the price travel of sectors here and international.
Hi @hank
Bonds of various flavors may find interesting roads to travel depending upon French election results in May and any other funny business in this country.
Regards,
Catch