Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
The Fed chair blinked on Nov 1st. Today he did it more convincingly hinting about 3 cuts. Most likely, bonds will continue doing better in 2024. A chart (https://schrts.co/uiIcBzeV)of ORNAX(HY Muni),DODIX(high-rated bonds) shows that ORNAX has to make about 9% and DODIX about 7% just to get to even
FMSDX (heavy bonds, smart-managed, they say) down 4% over 2y and up <3% the last 3mos; BND, STIP, BSV, VGIT: the longer down 8%-10% 2y and the shorter -2% / +2%, or for 3mos all up 1.5%-<4%. Rock on. Maybe I'll buy more?!
FMSDX is not a bond fund. It's a multi-asset fund (allocation would be fine too). According to the Fidelity site(https://fundresearch.fidelity.com/mutual-funds/composition/31638R717) is has 29.29% equities. No need to look further. 2023 has been a dream for bond traders. Higher volatility makes it easier.
Multisector FMSDX may have only 30% nominal-equity now (it varies), but it has increased HY/FR-BL/convertibles/EMs to 25%. So, it still acts as moderate-allocation. Of course, it will lag in any stock rally.
I should have said most in the thread. There was a long thread posted a few months back asking if people were going to invest in bonds again. I recall most of the posts said "why would I when I can get a 6mo CD yielding 5%? Many also cited the abysmal recent PAST performance of bond funds as another reason not to invest there again. My own comment was that it was a really good time to invest in credit. Most of the best credit managers like marathon, pimco, oaktree, canyon, KKR, PGIM were shouting from the rooftops how attractive the setup was.
Asset allocation funds are having a great day this month. The bond sleeves are rocking as the FED holds the rate hike unchanged for the rest of the year. 10 year treasury dropped again today! For example, VWINX having more long bonds is doing well. When the FED starts to cut rate, it is expected to do even better. At that time period, the 5% yield of money market, T bill, and CDs will come down as well.
We stop buying T bills and CDs several months ago and shifted to bond funds as T bill/CD matures. Really don’t want to get caught with reinvestment issue down the road.
3.903% before today’s open. My (mostly reliable) tracker shows Rieder’s BINC up 2.73% to $53.41 today alone in pre market. Most likely an error or abnormality. ISTM those pre market quotes get yanked around a lot by very small trades. Nonetheless, this one, like almost all bond funds, has had a great ride.
Although there’s been a lot of discussion about CDs and Treasuries on the forum this year, I didn’t take that to mean everyone had abandoned bond funds. I certainly didn’t, and my bond funds have rebounded nicely over the past month. I set up CD/Treasury ladders with a portion of the income allocation — to take advantage of the high yields and add some certainty to my portfolio. My wife and I will have required minimum distributions starting in a few years, and I wanted some guaranteed sources of income that I could rely on whatever the market conditions.
There were a LOT of posts this year about CDs for a LOT of reasons. Here’s my 2 cents on all that.
As background: I’ve been a brokerage, CD (all references here are to brokerage, Call Protected CDs) ladder owner for ~15 years, owned individual CDs many times in the 25 years prior to that, have been active for years in BUYing Secondary Issues, and set up a Revocable Trust, CD portfolio many years ago for HNW relative.
I found the posts to be everything from enlightening to alarming. I was surprised at how little many posters know about CDs and how widespread an overall bias is against them.
The recent, and to some, LONG awaited, months of unusual opportunities in CDs is winding down. For much of 2023, investors had the opportunity to build CD ladders out 5+ years with 5+% or better average annual rates. It was a godsend period for investors who highly regard guaranteed, call protected fixed income.
Some, like me, love to not have to think or worry about the FI sleeve of their portfolio. Some, like me, think that 4%-5+% is a level that is equal to or better than whatever they might get from bond funds over the next 5 years. And even if it’s not, it’s a hurdle at which they say, “Screw worrying about bonds. Gimme the CD X% and lemme worry about/spend more quality time with the higher risk, higher reward part of my portfolio.
Me? I dumped every dedicated bond fund I owned (mostly at EOY 2022) and pared back the number and value of allocation funds with bonds, ending with only about 5% in bonds, down significantly from my levels of the past 5-10 years. The proceeds replaced the lost stock exposure from sale of allocation funds, bought a 5-yr CD ladder paying 5+%, and added the residual (~$50K) to a Total Stock Market Index fund, the latter of which is UP ~24% YTD.
Meanwhile, I was free to spend WAY MORE time on my now 11-fund stock/bond portfolio. The 11 funds are UP between 11% to 76% YTD, yielding a weighted average of UP ~29%.
The main reason CD posts are WAY DOWN has little to do with anyone who bought them NOT being interested in them or happy/satisfied in their BUYs. It has WAY MORE to do with the fact that the opportunities that graciously peaked twice this year are now dwindling-to-gone. I would also guess there are some posters who didn’t quite get the whole CD opportunity thing, passed on it, and ain’t real interested in posting about it now.
The rates that will be available in the coming 6 months, when several rungs fall off my ladder, will still be over MY hurdle. So I’ll be able to have a 5-yr CD ladder in place starting July 2024 at the age of 68. Could NOT be happier with the way all that shakes out. I will be interested, without any hesitation or rear-view remorse, to see how the TRs of the dedicated bond funds I dumped compare to what I replaced them with. Either way, it’s a W for me as I’ve virtually and happily removed bonds from my portfolio, and can spend WAY MORE quality time on the part of my portfolio that makes me real money.
Also, on the posted notion that there have been issues with CD interest payments...
Ugh.
There have been three known issues noted by MFO posters on CD interest payments.
All occurred within about the past year. All were caused by unique issues that slightly delayed the interest payment (e.g., power outage, bank merger with systems communications issues). All were resolved and all interest payments were posted to investor a/c's within a reasonable delay period.
So that's three minor issues related to hundreds of MFO posters who have received thousands of interest payments over the past X number of years (in my case, 15 years!).
To me, that is all worthy of a minor footnote, but definitely not worthy of a broad stroke, negative comment about issues with interest payments.
That’s me and my 2 cents, and that's all it is. Take it or leave it.
Comments
Wahoo-bonga.
A chart (https://schrts.co/uiIcBzeV)of ORNAX(HY Muni),DODIX(high-rated bonds) shows that ORNAX has to make about 9% and DODIX about 7% just to get to even
FMSDX (heavy bonds, smart-managed, they say) down 4% over 2y and up <3% the last 3mos; BND, STIP, BSV, VGIT: the longer down 8%-10% 2y and the shorter -2% / +2%, or for 3mos all up 1.5%-<4%. Rock on. Maybe I'll buy more?!
2023 has been a dream for bond traders. Higher volatility makes it easier.
>> 2023 has been a dream for bond traders.
Well, not the ones at this fund, looks like. My point.
Equity holdings (as with so many funds) are heavy in MS, Google, Uber, and other rockers.
So gosh, I wonder what could account for the fund's weak performance?
I don’t recall your having a reading comp problem
And I am certain you know how fund ‘sleeves’ work
We stop buying T bills and CDs several months ago and shifted to bond funds as T bill/CD matures. Really don’t want to get caught with reinvestment issue down the road.
As background: I’ve been a brokerage, CD (all references here are to brokerage, Call Protected CDs) ladder owner for ~15 years, owned individual CDs many times in the 25 years prior to that, have been active for years in BUYing Secondary Issues, and set up a Revocable Trust, CD portfolio many years ago for HNW relative.
I found the posts to be everything from enlightening to alarming. I was surprised at how little many posters know about CDs and how widespread an overall bias is against them.
The recent, and to some, LONG awaited, months of unusual opportunities in CDs is winding down. For much of 2023, investors had the opportunity to build CD ladders out 5+ years with 5+% or better average annual rates. It was a godsend period for investors who highly regard guaranteed, call protected fixed income.
Some, like me, love to not have to think or worry about the FI sleeve of their portfolio. Some, like me, think that 4%-5+% is a level that is equal to or better than whatever they might get from bond funds over the next 5 years. And even if it’s not, it’s a hurdle at which they say, “Screw worrying about bonds. Gimme the CD X% and lemme worry about/spend more quality time with the higher risk, higher reward part of my portfolio.
Me? I dumped every dedicated bond fund I owned (mostly at EOY 2022) and pared back the number and value of allocation funds with bonds, ending with only about 5% in bonds, down significantly from my levels of the past 5-10 years. The proceeds replaced the lost stock exposure from sale of allocation funds, bought a 5-yr CD ladder paying 5+%, and added the residual (~$50K) to a Total Stock Market Index fund, the latter of which is UP ~24% YTD.
Meanwhile, I was free to spend WAY MORE time on my now 11-fund stock/bond portfolio. The 11 funds are UP between 11% to 76% YTD, yielding a weighted average of UP ~29%.
The main reason CD posts are WAY DOWN has little to do with anyone who bought them NOT being interested in them or happy/satisfied in their BUYs. It has WAY MORE to do with the fact that the opportunities that graciously peaked twice this year are now dwindling-to-gone. I would also guess there are some posters who didn’t quite get the whole CD opportunity thing, passed on it, and ain’t real interested in posting about it now.
The rates that will be available in the coming 6 months, when several rungs fall off my ladder, will still be over MY hurdle. So I’ll be able to have a 5-yr CD ladder in place starting July 2024 at the age of 68. Could NOT be happier with the way all that shakes out. I will be interested, without any hesitation or rear-view remorse, to see how the TRs of the dedicated bond funds I dumped compare to what I replaced them with. Either way, it’s a W for me as I’ve virtually and happily removed bonds from my portfolio, and can spend WAY MORE quality time on the part of my portfolio that makes me real money.
Also, on the posted notion that there have been issues with CD interest payments...
Ugh.
There have been three known issues noted by MFO posters on CD interest payments.
All occurred within about the past year.
All were caused by unique issues that slightly delayed the interest payment (e.g., power outage, bank merger with systems communications issues).
All were resolved and all interest payments were posted to investor a/c's within a reasonable delay period.
So that's three minor issues related to hundreds of MFO posters who have received thousands of interest payments over the past X number of years (in my case, 15 years!).
To me, that is all worthy of a minor footnote, but definitely not worthy of a broad stroke, negative comment about issues with interest payments.
That’s me and my 2 cents, and that's all it is. Take it or leave it.
YMMV.