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Buyers of these funds are probably looking at attractive 30-day SEC yields that are potential long-term returns. The past YTM is done and doesn't matter to the new buyers.
Buy the Dip mentality is not limited to equity investors. I think after investors emotionally recovered from last year shock drawdowns in fixed income, they may be doubling down. I do not know about active funds but buying individual high grade bonds gives one some certainty re outcomes not present with equity investment. So, I can see the attraction in fixed income BTD.
@BaluBalu - I’m mentally pulled in three directions: 1) Buy the Dip in Equities, 2) purchase 3,6,12, or 2-yr treasuries, or 3) just leave the cash in VMFXX and collect monthly. Sheesh! What’s a retiree to do? Well, at least there’s a choice.
I'm surprised by the magnitude of DODIX inflows. DODIX is struggling this year (-1.77% YTD) as are many intermediate core/core-plus funds. Maybe these investors are focused on higher expected future returns instead of dwelling on recent performance for a change?
All three OEFs mentioned in the OP are likely in a lot of 401(k) plans. Assuming that is true, contributing factors to net inflows could be -
Many participants do not change their allocation of contributions more than once or twice a year, if that. Many participants tend to be less averse to short to medium term losses in their 401(k) accounts relative to their taxable accounts. Many 401(k) plans are strict about frequent trading.
If the chatter regarding Powell reaching the end of his hiking cycle is accurate, then moving into bonds makes a lot of sense over the next few months. There's going to be big money made in long term treasuries when the tide turns.
@PRESSmUP, the Barron’s article you posted is spot on with respect to duration and credit (quality) argument. Excerpt:
major indexes essentially bets on “duration,” or interest-rate sensitivity (since government-backed debt isn’t considered to have credit risk)
This year these active managed funds mentioned have outpaced the broader bond index the year. YTD the long bonds are down double digits. Not sure there is more rate hikes coming in December this year and/or in 2024.
On the flip side, bond investors need to aware of the opportunity cost on bond price appreciation when CD, treasury and money market yields start to fall, and reinvesting at lower yield. It is dedicated balance to have some intermediate term bonds and not being overly aggressive on long bonds.
@Sven , yes...actively managed funds should continue to outperform I think. I would love to have Parametric design a compact yet diversified bond ladder for me, but with Schwab that includes a pair of fees which might be cumbersome.
Pundits suggest perhaps a bump in rates December/January, then a wait to see what may break. Outside of a black swan event, 1Q might be a good entry point.
I warned about PIMIX since early 2018 (after holding it for about 7-8 years at a huge %) when I sold it and never looked back. RCTIX is a good replacement. But, most bond funds have done badly since early 2022 because the Fed have been raising rates. In that environment, bank loans shine...and they did (less in 2022 and a lot more in 2023).
EIFAX is my LT favorite BL but FAFRX has been shining for months. A chart of all 5 proves it. (https://schrts.co/sszRneNS).
In fact, in 2023 EIFAX+FAFRX beat most generic stock categories such as SPY,IWM(SC),VGK(Europe),EEM while growth/QQQ beat them all easily. See YTD chart(https://schrts.co/yKTxTKtQ)
Your comments regarding bond funds in 2022 and 2023 are spot-on. You have a knack for reporting past performance. I'm much more interested in future bond fund performance. Can you tell me which bond funds or bond categories will outperform over the next 5 Yr/10 Yr? Thanks in advance!
@PRESSmUP, I maintain mostly 70/30 in short/intermediate-term bond allocation. Active managed funds I am using have done very well and expect to continue in the near term. And they have outpaced the broader bond indexes (both US and international). We will maintain Tbills and CD ladders for now. Not sure what Parametric that you are referring to?
Regarding PDI, PDO, PAXS.... these ETFs have estimated Div Income yields of approx. 13% to 17%. Very nice. Now if the stock market tanks, I would assume these bond funds also tank hard as well (highly volatile, leveraged and hold allocation to non-investment grade).
If investing for the long-term, would a cost-average plan starting now not be a wise move with these leveraged vehicles? My thought was to spread out buys over the next 6-12 mos. starting now.
Newer term-structure CEFs PDO and PAXS have discounts that will disappear in a few years. Many avoid them just because they are newer, but they are more attractive than their older BIG cousin PDI.
I like PDO a lot, and will own it again sometime. I'd keep an eye on z-stat (P/D relative to history) in addition to absolute P/D for good buying opportunities. It's B-rated with massive leverage; best buying opps may be a ways off.
@JD_co, many investors are extending their bond maturities as the FED is near the terminal rate hike. There may be one more hike in Nov/Dec rate hike. The rate is likely stay there for awhile unless the economy tanks and slides into recession. The 5% yield money market May not be there several years from now. Money flow into intermediate term bonds has started and likely to increase into next year that fits the Q1 comment above.
@Sven ...re your question about Parametric. They are an asset management firm, once independent, then purchased by Eaton Vance, so now a part of Morgan Stanley. Generally, they specialize in crafting portfolios focused on either direct indexing or different variations of bond ladders as an example. They're accessed via RIA's, or as I was describing, via Schwab and their Managed Account program.
Buying individual bonds is an intriguing option, but one I just don't currently feel equipped to execute.
@PRESSmUP, I believe retail investors can achieve similar goals using several bond funds with different durations. Otherwise, it takes much larger sum to invest.
@PRESSmUP, thank you for the tip on Parametric. My money is with Schwab so I will take a look.
I believe retail investors can achieve similar goals using several bond funds with different durations.
@Sven, I have an opposite view than yours. I don't think retail investors can achieve the same with bond funds. For one, with a laddered individual-bond portfolio, you would know exactly what the return will be. You can't say the same with bond funds. A fund's total return can fluctuate with interest rate variability. More of a guessing game by chance, in my opinion.
Maybe more bond savvy posters, than me, can give their 2 cents.
Your comments regarding bond funds in 2022 and 2023 are spot-on. You have a knack for reporting past performance. I'm much more interested in future bond fund performance. Can you tell me which bond funds or bond categories will outperform over the next 5 Yr/10 Yr? Thanks in advance!
"Nice" comment. I'm a bond trader, not a holder, and I never predict or invest based on that. I do base my investment on what is doing well currently using my own proprietary system that is easy to execute and takes just minutes per week. I used to open threads annually and keep posting what and how I do it. The trolls kept interrupting and why I don't do it anymore.
Sometimes, I post what I do and how. BTW, in 2022-3 I posted several hints when I was out, in, and what I traded. I have talked about bank loans for years for rising rates. Also posted many times why I have preferred RCTIX over PIMIX for years. ...you just didn't pay attention.
I have been holding 2 bond OEFs for several months and they are nicely up while most others lost money. This can continue 1-4-8-more weeks or ends tomorrow.
FD (bold added): "...I do base my investment on what is doing well currently using my own proprietary system that is easy to execute and takes just minutes per week. I used to open threads annually and keep posting what and how I do it. The trolls kept interrupting and why I don't do it anymore..." -------------------------------------
Ah, the old "proprietary system" post yet again, eh?
I know English is not your native tongue but you might want to look up the definition of "proprietary system" before you make your wild-eyed claim for the hundred and first time.
I know it SOUNDS impressive (to you, I trust) to say you use one, but you, um, in a word, don't. (HINT: It's your system. Drop the "proprietary" exaggeration and you'll be fine! Well, on this at least!)
While you have your dictionary out, for kicks, you may also want to check out the definition of self-aggrandizing. It'll be easy to find as your picture is right next to it.
And there might just be an example of its use in a sentence, like "(My investments) are nicely up while most others lost money."
At least I've been "paying attention" (sic)!
Countdown to FD calling me a troll and changing the topic to something irrelevant to my comment... ....3...2...
Why does not MFO allow one to delete one's post, rather than forcing one to replace it with whatever. Obviously, this is not my highest wish but still a nice to have feature.
Comments
It would be interesting to know where those inflows into DODIX are coming from? From other D&C funds, or is it new money coming into D&C?
https://www.morningstar.com/funds/xnas/dodix/parent
Buyers of these funds are probably looking at attractive 30-day SEC yields that are potential long-term returns. The past YTM is done and doesn't matter to the new buyers.
JPM is doing well these days in gathering AUM.
DODIX is struggling this year (-1.77% YTD) as are many intermediate core/core-plus funds.
Maybe these investors are focused on higher expected future returns
instead of dwelling on recent performance for a change?
Same here.
It appears today that those bond funds with higher credit ratings did worst. DODIX down -.68% GNMA -.86%. Both loaded with investment grade paper.
Many participants do not change their allocation of contributions more than once or twice a year, if that.
Many participants tend to be less averse to short to medium term losses in their 401(k) accounts relative to their taxable accounts.
Many 401(k) plans are strict about frequent trading.
"It’s Time to Stop Crying About Bonds and Buy Them Instead"
https://www.barrons.com/articles/should-you-buy-bonds-now-3f5c6efa?mod=djem_b_preview_20231027
Excerpt: This year these active managed funds mentioned have outpaced the broader bond index the year. YTD the long bonds are down double digits. Not sure there is more rate hikes coming in December this year and/or in 2024.
On the flip side, bond investors need to aware of the opportunity cost on bond price appreciation when CD, treasury and money market yields start to fall, and reinvesting at lower yield. It is dedicated balance to have some intermediate term bonds and not being overly aggressive on long bonds.
Pundits suggest perhaps a bump in rates December/January, then a wait to see what may break. Outside of a black swan event, 1Q might be a good entry point.
But, most bond funds have done badly since early 2022 because the Fed have been raising rates. In that environment, bank loans shine...and they did (less in 2022 and a lot more in 2023).
EIFAX is my LT favorite BL but FAFRX has been shining for months. A chart of all 5 proves it. (https://schrts.co/sszRneNS).
In fact, in 2023 EIFAX+FAFRX beat most generic stock categories such as SPY,IWM(SC),VGK(Europe),EEM while growth/QQQ beat them all easily. See YTD chart(https://schrts.co/yKTxTKtQ)
Who said that bonds can't make money?
You have a knack for reporting past performance.
I'm much more interested in future bond fund performance.
Can you tell me which bond funds or bond categories will outperform over the next 5 Yr/10 Yr?
Thanks in advance!
@PRESSmUP, I maintain mostly 70/30 in short/intermediate-term bond allocation. Active managed funds I am using have done very well and expect to continue in the near term. And they have outpaced the broader bond indexes (both US and international). We will maintain Tbills and CD ladders for now. Not sure what Parametric that you are referring to?
If investing for the long-term, would a cost-average plan starting now not be a wise move with these leveraged vehicles? My thought was to spread out buys over the next 6-12 mos. starting now.
@PRESSMUP mentioned 1Q entry point.
Appreciate any additional thoughts.
Buying individual bonds is an intriguing option, but one I just don't currently feel equipped to execute.
Maybe more bond savvy posters, than me, can give their 2 cents.
I used to open threads annually and keep posting what and how I do it.
The trolls kept interrupting and why I don't do it anymore.
Sometimes, I post what I do and how. BTW, in 2022-3 I posted several hints when I was out, in, and what I traded.
I have talked about bank loans for years for rising rates.
Also posted many times why I have preferred RCTIX over PIMIX for years.
...you just didn't pay attention.
I have been holding 2 bond OEFs for several months and they are nicely up while most others lost money. This can continue 1-4-8-more weeks or ends tomorrow.
"...I do base my investment on what is doing well currently using my own proprietary system that is easy to execute and takes just minutes per week. I used to open threads annually and keep posting what and how I do it. The trolls kept interrupting and why I don't do it anymore..."
-------------------------------------
Ah, the old "proprietary system" post yet again, eh?
I know English is not your native tongue but you might want to look up the definition of "proprietary system" before you make your wild-eyed claim for the hundred and first time.
I know it SOUNDS impressive (to you, I trust) to say you use one, but you, um, in a word, don't.
(HINT: It's your system. Drop the "proprietary" exaggeration and you'll be fine! Well, on this at least!)
While you have your dictionary out, for kicks, you may also want to check out the definition of self-aggrandizing. It'll be easy to find as your picture is right next to it.
And there might just be an example of its use in a sentence, like
"(My investments) are nicely up while most others lost money."
At least I've been "paying attention" (sic)!
Countdown to FD calling me a troll and changing the topic to something irrelevant to my comment...
....3...2...
"Randy lay there like a slug. It was his only defense."
Why does not MFO allow one to delete one's post, rather than forcing one to replace it with whatever. Obviously, this is not my highest wish but still a nice to have feature.