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Bonds in current market

ron
edited May 2013 in Fund Discussions
I am still underweight fixed income for a 30-70 asset allocation at age 79. I am overweight equites and cash.
I would prefer to add to current positions than add another. I hold PIMIX, MWTRX, TGBAX, OSTIX, TGEIX. Considering the durations, R-squared to different indexes, I think OSTIX may be lowest risk, TGBAX the highest risk-reward, MWTRX somewhere in the middle, but I'm too confused. Would appreciate some suggestions. Thank you.

Comments

  • beebee
    edited May 2013
    Hi ron,

    I would first determine what you would like your asset allocation mix to be going foward. If not 30-70, what? Once you have determined this new mix(40-60, 50-50,etc,), then I would evaluate the performance of the equities you hold. Over the last year, how much percentage wise have your equities grown? Move 1 year profits from each equty holding into your bond holdings. This may get you to your asset allocation target. If it doesn't, look to further reduce each equity holding evenly to further reduce equities.

    In this environment I like multisector bond funds as well as unconstrained bond funds. These types of bond funds provide a broad base of holdings that can be managed for risk/reward by a bond manager. Looks like you have some very good bond choices. Good Luck.
  • MourningStars

    First, congratuations on reaching 79 years of age. Suggest you contact one or more trusted financial advisors/accountants for their tax,estate,daily expenses, etc. advice. ( I say again trusted and especially their advice as to tax and estate implications) as you maneuver toward a different asset allocation. We all, alas, begin to "slip" a bit as we age so I have started involving a trusted family member (or friend) before taking any significant action involving financial advice. Fee only advisors might be best if you are a " do it yourself" type.
  • AndyJ
    edited May 2013
    Hi Ron, just generalizing here, my thought would be to try mapping stock/credit vs. interest rate risk in the portfolio as a whole, including those bond funds, plus the stock funds you own, & feel out what kind of split you're most comfortable with. TGEIX and TGBAX should be more correlated with stocks, and OSTIX, PIMIX, and MWTRX less so, but your bonds as a whole have a bit of a tilt to the credit side ... which is a good thing now, but who knows down the road.

    If your stock funds are more like SEQUX, say, you could afford more credit risk in the bond part of the portfolio than, say, if they're more along the lines of the High-Beta Wild & Crazy SuperGrowth Fund.

    I think it'd be hard for people to make concrete suggestions not knowing the flavor of stock funds you have, the split among those bond funds, and how much you're depending on the stock-bond portfolio for income, among other things.
  • Mona
    Reply to @AndyJ:

    Hi AndyJ,
    but your bonds as a whole have a bit of a tilt to the credit side ... which is a good thing now, but who knows down the road.
    What is meant by "credit side" in this context?

    Mona


  • InvestorInvestor
    edited May 2013
    Reply to @Mona:

    "What is meant by "credit side" in this context?"

    Bonds!
  • AndyJ
    edited May 2013
    Reply to @Mona: The type of risk, as in credit vs. interest rate risk, as mentioned in the first paragraph.
  • Mona
    Hi AndyJ,
    as in credit vs. interest rate risk
    Think I got it.

    If Ron's fixed income would have included a fund such as VFIDX instead of OSTIX or TGEIX, I assume you might have said "but your bonds as a whole have a bit of a tilt to interest rate risk"

    Mona
  • AndyJ
    Reply to @Mona: Yeah, more or less. Main thing I was trying to get across, maybe not very effectively, was to consider the whole portfolio and both of the main types of risk in evaluating what to do with the bond sleeve.
  • ron
    Reply to @AndyJ: I appreciate everyone's comments. Andy, without getting too much into everything, all our accounts, IRA's, Roth, and taxable, total, have 19% cash, 30% bonds, 39% domestic stocks, 11.5% foreign stocks, Our largest holding other than cash is PAUIX 8.2%, TIBIX 4.8%, MWTRX 4.3%, PEP 4.2%, BA 3.8%, SGENX 3.5%, MWEFX 3.2%, MAPIX 3.2%.
    Everything else holds 1-3% in other bond funds (mentioned above), preferreds, dividend stocks, Tips, gold. Nothing else speculative or high risk. Hope this helps. I'm in the process of reducing equity and increasing fixed income. I want to eventually be around
    30-35% equity, 65% cash-bonds. Thank you.
  • johnNjohnN
    these views maybe right
    http://articles.marketwatch.com/2013-05-01/commentary/38944225_1_peripheral-euro-zone-bonds-debt-crisis-italian-bonds
  • ron
    Well, I just added to my PIMIX, PAUIX after some DD. But still need more fixed income or leave in cash.
  • fundalarmfundalarm
    Reply to @ron: leave the balance in cash for now. wait for 10 yr rates to hit around 2% before adding to fixed income. this happened several times during the recovery. just a suggestion of course.
  • johnNjohnN
    gundlach says to buy bonds but buffett says to stay away
    http://money.cnn.com/2013/05/06/investing/fund-buy-bonds/

    http://www.businessweek.com/ap/2013-05-06/buffett-says-bonds-are-terrible-investments-today
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