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Anybody started to trim any of their bond funds back?
I am thinking that same thing, and heck, interest rates have not yet hit any real upswing. The question is will they soon or is this recent bout of selling premature selloff? Its a dilemma, as I am still not buying that the economy is as rosie as everyone seems to think.
On Friday I moved 20% of my bond position in a 401k to a stable value fund.I have not moved other bond holdings in part because the alternatives ere not appealing as I feel I have enough in stocks. Sadly cds make little sense either. But if you think bonds are risky moving to stocks may work well or you may be going from the frying pan into the fire The last "expert" I heard suggests buying the 10 year when rates go to 2.60 .I understand the rate went to about 2.20 today but I think the rate then dropped.
Did sell a chunk of munis, but otherwise holding for now. Be aware that some of the big selling in FI CEFs and ETFs, at least yesterday and today, has an element of panic to it; several have lost big in price, while actually gaining in NAV. (Same with Japan stock; EWJ and DXJ have price-IIV disconnects of ~ 4% each right now.)
Here is what I think is a better alternative to any kind of bond fund, it is what I call a bond equivilant fund (stable income, price not correlated to stocks or bonds, no sensitivity to interest rates): MASFX, Littman Gregory Alternate Strategy.
Reply to @Joe: I own MASNX (retail version) and I love its low volatility and arb sleeve. But if/when a strong equity correction finally arrives, this vehicle will feel some pain. Its a solid, conservative fund, though with a high ER. Its not a bad place to ride out a storm.
CashBondsEquity January: 43% 22% 35% As of 5/24: 50% 15% 34%
Last week I took profits and reduced both bond funds (sharply) and equity positions by approximately 10% in total. I will most likely continue the reduction in increments over the next few weeks, depending on what is happening. As I've mentioned before, I am very concerned with respect to a possibly extended period of instability with respect to the reappointment (or not) of Mr. Bernanke.
These reductions were made in tax-sheltered retirement accounts to avoid tax issues. The fund portfolio has had an approximate 10% gain since January, which is more than enough to keep us well ahead of inflation for the rest of this year, and I'm not comfortable with the risk/reward profile for the next few months.
The distribution shown above shows only a 1% equity difference (January/present) because all of the portfolio gain has been in the equity sector, while the bond sector has deteriorated slightly. In addition to last week's cutback, I've been transferring bond fund resources to equity funds incrementally since the beginning of the year.
hello Skeeter I did Not much scale much back. you get dirt yield for CDs/MMs. May need to go to junk bonds ETFs. I may buy more gold - cant really decide yet. The guys at work whom we've discuss with still sitting w/ some cash on the sidelines.
Reply to @Charles: GE & BRK/B probably pretty good moves. Had a significant BRK/B position for years, but didn't do much. Got out just in time for it to really take off. Kinda contemplating maybe trying that one more time. GE should do just fine, no matter what. BTW, here's something current re GE: GE & Shale Oil
Late last year, I began gradually reducing my FI exposure which is now at about 20%, and I am unlikely to go lower. Our FI allocation comes from PGDIX, PIMIX and TTRZX.
Reply to @Gandalf: No, it's not, and I really think that a whole lot of the equity side gains have been due to the big boys playing their games. That in itself makes me leery, because for all I know their computers are issuing massive sell orders right at this very instant. Why might that happen, without any actual change in market conditions? Well, maybe because some quant's algorithm hits a trip wire, and all of the rest of the computers follow in a rush for the door. (Hold on for a minute- let me go check and see what's going on...)
The point is that so-called "fundamentals" (brings back FA memories of Fundmentals, one of my favorite guys) have very little to do with the market right now- most of the smoke and fire is due to big money games and Fed actions, either of which could change without much warning, and at any time.
One of our more verbose board members suggests that "a plethora of academic and industry generic studies" prove that it's best to just stay put, as extensive mathematical models of the past indicate that this is the best course. Personally, I doubt that any such model is capable of factoring in all of the various unique and potentially destabilizing forces swirling around right now:
• Mideast (pick your favorite disaster/war/potential war area)
• Europe (Euro, yes/no?), Britain (in/out?), "austerity" (yes/no/maybe/sort-of?), recession (again/still), EU banking issues (save the banks, yes/no/some/it depends/who, us ??)
That's just a few too many unpredictable variables for me. Past performance is no guarantee of future results, as they like to say. The other fella may turn out to be right, but I think that the odds are a lot worse than apparently he does. Plethora or not- time to take some money off the table.
I did not take any action today to reduce my allocation to bonds; however, I most likely will in the near term and let some of my fixed income funds go keeping only my shorter duration funds.
Thanks again for your comments. They were indeed of value.
I dumped my PAUIX stake the other day, and was thinking of adding it to my RPHYX holding. Given the current churn, does anyone see an issue with adding new $s to RPHYX?
Reply to @Gandalf: No- good move. Thanks for the idea. I might do the same, rather than PONDX. I have both, and I'm betting that RPHYX is even safer in a downturn than PONDX.
While I'm always interested in what's happening, I don't make changes to my asset allocation quickly or easily. Over the past couple of years, in fact, I've increased my bond allocation and now hold, in order of amount, PIMIX, MWTRX, FSICX, FEHIX,TGEIX,TGBAX, JRO, PDT, 1 TIP bond. I'm also 79, retired. I also have some funds that hold some bonds like VWINX. I also have PAUIX and the reason I bought it, still exists. To provide some protection in the event of a large drop in the markets.
Not exactly how the Fed aggressive bond buying will end. I increase cash position through stable value and Pimco Unconstrained while selling Pimco Total Return, Fido High Income, BOND and Vanguard Total Bond Index. Will do more trimming with equity if it continues to move higher.
I'm planning to build up from a small position in ARLSX (long-short); overall its returns since I've owned it have fallen between stocks and bonds, and on the days when both take it in the shorts, it's been the only green anywhere in my holdings ... at the moment, at least, it looks like a real diversifier.
judging by the response, good question. practicing my simple approach to investing, the run-up in equities has been awesome, but, the ride could end so moved about 10% out and into ultra-short, short, and intermediate term bond funds to stay close to my preferred asset allocation. I think when the ride in equities takes a breather, or worse, bonds will be alright. anders
...I just would not be in this fund at all. As for the question about trimming back one's bond holdings: I'm riding out this downturn, about 50/50 stock funds and bond funds. I toyed with the idea of re-shuffling, taking a bit from bonds and putting it into equities, into a fund where I already have a small position. My bonds are getting hammered lately, but they provide steady income. In two cases, there's a monthly dividend, and in another, quarterly. I'm lucky to be able to re-invest all profits, still. ...Very soon, an item I've been holding for the past 10 years will mature. I want to put it into a retirement account, rather than a regular, taxable account. (I could go Roth rather than Trad. IRA, but have decided upon the latter.) The folks here have been offering input that I'm very grateful to get. Given the latest downturn, I'll be taking that money which is going to come to me soon and put it in an equity fund or "balanced" fund which holds both equities and bonds.
ASIOX is a loser. A quick look shows its risk is too high and its returns are low. It is lagging behind its benchmarks. And compared to its peers, it sits near the BOTTOM of the heap.
If you want, share with us here about what you own, both bonds and equities. Government policies which have been artificially deflating interest rates are responsible for what's going to become a big mess. It is inevitable. The Market is jittery. Anyhow, just don't do anything SUDDENLY--- except to get out of ASIOX.
Bonds? You'll get many different recommendations. I like FNMIX, PREMX, DLFNX and DODIX. I own SOME of those. "Break a leg." Welcome to the party.
Thanks Max for the tip. I have been looking at this ASIOX lately and wondering about what to do with it. It is 8% of my portfolio right now. American Century has most of my business. I have the following; AOMIX, (which is my core holding) ARYVX which has done well, ASIOX as discussed already, and ACCNX. Outside of American Century I own MAPTX and MAINX of which has been discussed here I see. I try to be globally diversified in a roughly 60/40 mix. I invest more in the Asia region than anywhere else. I spend lots of time in Asia so I see what is happening.
I had been in BGNMX which has done very well for me over the years but I sold this earlier this year. The ASIOX is in a tax deferred account so I was thinking of transferring that back into BGNMX. However information on the performance of GNMA funds during rising interest rate conditions is a bit confusing. Maybe it will depend on how quickly rates go up? I suspect they will not unless something happens.
I have been doing this since the mid-eighties. I am retired but still believe in the 60/40 mix as attested to by Dr. Wm. Sharpe. Perhaps a bit aggressive for my stage in life but then again I watch it every day.
Comments
The last "expert" I heard suggests buying the 10 year when rates go to 2.60 .I understand the rate went to about 2.20 today but I think the rate then dropped.
In May, I've cut BOND back 36%.
On 5/13 and bought AA, BTU, X, NLY.
On 5/23 and bought more AA, BTU, X.
On 5/24 and bought more BAC, GE, BRK/B.
Top three holdings remain: AQRIX, BOND, FAAFX.
Only the latter has had a winning month. Here's M* performance comparison:
Joe
These reductions were made in tax-sheltered retirement accounts to avoid tax issues. The fund portfolio has had an approximate 10% gain since January, which is more than enough to keep us well ahead of inflation for the rest of this year, and I'm not comfortable with the risk/reward profile for the next few months.
The distribution shown above shows only a 1% equity difference (January/present) because all of the portfolio gain has been in the equity sector, while the bond sector has deteriorated slightly. In addition to last week's cutback, I've been transferring bond fund resources to equity funds incrementally since the beginning of the year.
I did Not much scale much back. you get dirt yield for CDs/MMs. May need to go to junk bonds ETFs. I may buy more gold - cant really decide yet. The guys at work whom we've discuss with still sitting w/ some cash on the sidelines.
still 80/20 in 401k
Late last year, I began gradually reducing my FI exposure which is now at about 20%, and I am unlikely to go lower. Our FI allocation comes from PGDIX, PIMIX and TTRZX.
Kevin
The point is that so-called "fundamentals" (brings back FA memories of Fundmentals, one of my favorite guys) have very little to do with the market right now- most of the smoke and fire is due to big money games and Fed actions, either of which could change without much warning, and at any time.
One of our more verbose board members suggests that "a plethora of academic and industry generic studies" prove that it's best to just stay put, as extensive mathematical models of the past indicate that this is the best course. Personally, I doubt that any such model is capable of factoring in all of the various unique and potentially destabilizing forces swirling around right now:
• Mideast (pick your favorite disaster/war/potential war area)
• Europe (Euro, yes/no?), Britain (in/out?), "austerity" (yes/no/maybe/sort-of?), recession (again/still), EU banking issues (save the banks, yes/no/some/it depends/who, us ??)
• Fed (more QE?, yes/no/maybe?)
• automated rapid purchasing/selling
• lack of employment recovery.
That's just a few too many unpredictable variables for me. Past performance is no guarantee of future results, as they like to say. The other fella may turn out to be right, but I think that the odds are a lot worse than apparently he does. Plethora or not- time to take some money off the table.
Cartoon Credit: GoComics
Thanks for those that stopped by and visited and especially to those that made comments.
During the day I came across this bond proxy which I have linked below that some might find of value.
http://fundamentalis.com/?p=1834
I did not take any action today to reduce my allocation to bonds; however, I most likely will in the near term and let some of my fixed income funds go keeping only my shorter duration funds.
Thanks again for your comments. They were indeed of value.
Skeeter
Regards- OJ
I also have PAUIX and the reason I bought it, still exists. To provide some protection in the event of a large drop in the markets.
anders
...I just would not be in this fund at all. As for the question about trimming back one's bond holdings: I'm riding out this downturn, about 50/50 stock funds and bond funds. I toyed with the idea of re-shuffling, taking a bit from bonds and putting it into equities, into a fund where I already have a small position. My bonds are getting hammered lately, but they provide steady income. In two cases, there's a monthly dividend, and in another, quarterly. I'm lucky to be able to re-invest all profits, still. ...Very soon, an item I've been holding for the past 10 years will mature. I want to put it into a retirement account, rather than a regular, taxable account. (I could go Roth rather than Trad. IRA, but have decided upon the latter.) The folks here have been offering input that I'm very grateful to get. Given the latest downturn, I'll be taking that money which is going to come to me soon and put it in an equity fund or "balanced" fund which holds both equities and bonds.
ASIOX is a loser. A quick look shows its risk is too high and its returns are low. It is lagging behind its benchmarks. And compared to its peers, it sits near the BOTTOM of the heap.
If you want, share with us here about what you own, both bonds and equities. Government policies which have been artificially deflating interest rates are responsible for what's going to become a big mess. It is inevitable. The Market is jittery. Anyhow, just don't do anything SUDDENLY--- except to get out of ASIOX.
Bonds? You'll get many different recommendations. I like FNMIX, PREMX, DLFNX and DODIX. I own SOME of those. "Break a leg." Welcome to the party.
I had been in BGNMX which has done very well for me over the years but I sold this earlier this year. The ASIOX is in a tax deferred account so I was thinking of transferring that back into BGNMX. However information on the performance of GNMA funds during rising interest rate conditions is a bit confusing. Maybe it will depend on how quickly rates go up? I suspect they will not unless something happens.
I have been doing this since the mid-eighties. I am retired but still believe in the 60/40 mix as attested to by Dr. Wm. Sharpe. Perhaps a bit aggressive for my stage in life but then again I watch it every day.