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@Edmond, I agree with your assessment. I review Vanguard's information from time to time, but it is difficult to conceive how a low interest environment can provide reasonable returns on bonds in the future, say risk free instruments such as treasury. Don't forget that in part of Europe and Japan, government bonds have negative yields. So what are the choices going forward for bond investors without taking on additional risk in terms of credit quality, duration, currency and geo-political?
@Sven, That is the multi-billion dollar question. My holdings in bond funds have dropped dramatically. Besides these Multi-asset income funds, the only other bond fund I own directly is a GNMA fund which has done okay while facing the rising rate environment.
For us older pilgrims, this has been a quest of sorts. We are looking for income in whatever way it can be produced. Quality plays a important role here as well.
@JohnChisum- Quite a while ago you recommended that I consider ACMVX. I took a position, about 6% of portfolio, and have been very happy with that. I'm wondering if you have any other favorites at American Century?
@JohnChisum, Like you I am facing the same issues with bonds. Perhaps I am a bit early, I reallocated high yield and emerging market debts to US investment grade bonds, intermediate term. Also I am keeping some in Vanguard Total Bond Index In my 401(K). I also notice that some balanced fund such as TRP Capital Appreciation, PRCWX, has reduced bond allocation while holding double digit in cash. Are they telling us something?
@Sven- Not sure that they are "telling us something" that we don't already know. The income sectors, generally, have been bid up to such high levels that sooner or later something's gonna break. The great amount of profit in those sectors has been in (greater fool?) price appreciation, not in interest income. Looks like a classic merry-go-round, which has to come to a stop sooner or later. This of course is one of several reasons that the Fed is almost paralyzed with fear regarding increasing interest rates.
@Old_Joe, That is my exact point. Those who seek income are being forced into riskier bond sectors in order to get higher yields. Other are moving into dividend paying stocks. Both of which carry higher risk profiles, especially in down market. The other concern is rich valuation as you pointed out. So there are few choices with a decent (not even respectable) yields. The Fed has been disappointing, and if another recession comes there are very few options left with the already low interest rate.
@Sven- Well, for sure we are seeing the same game, and are both worried about the almost inevitable results. That's why I'm wondering if it might be wise to move no-income MMKT accounts to FDIC coverage. At least there's some slight potential advantage to that.
I have a small amount in ALNNX as well. That fund has hedging capabilities. According to my advisor, AMJVX seeks maximum income while ALNNX is more stable. I plan on just sticking with AMJVX in the future.
I sold BGNMX when the Fed rate increase boogeyman made its appearance. Everything I read says these funds get hit hard. So far it has been mildly affected. I got back in the beginning of the year.
I also picked up BULIX earlier this year as well. Utilities have done well and I missed some of the run up. Not sure how long that will last though.
I've noticed that same cash allocation in some of my funds as well. It does make me wonder as well.
I get the impression that the Fed is very timid right now. They don't want to hurt anyone or any group but their inaction most likely will do that anyway.
Comments
I know not many people get up before the Linkster, but this is quite early......
Cheers
Regards,
Ted
Pilgrim:
For us older pilgrims, this has been a quest of sorts. We are looking for income in whatever way it can be produced. Quality plays a important role here as well.
Thanks- OJ
I have a small amount in ALNNX as well. That fund has hedging capabilities. According to my advisor, AMJVX seeks maximum income while ALNNX is more stable. I plan on just sticking with AMJVX in the future.
I sold BGNMX when the Fed rate increase boogeyman made its appearance. Everything I read says these funds get hit hard. So far it has been mildly affected. I got back in the beginning of the year.
I also picked up BULIX earlier this year as well. Utilities have done well and I missed some of the run up. Not sure how long that will last though.
John
I've noticed that same cash allocation in some of my funds as well. It does make me wonder as well.
I get the impression that the Fed is very timid right now. They don't want to hurt anyone or any group but their inaction most likely will do that anyway.