STC wrote:If anyone knew the answer to this, they would be a billionaire. Unfortunately, predicting the rate curve is a futile endeavor.
ResNullius wrote:Since reallocating my portfolio a number of years ago to have around 60% in fixed assets, I have read quite a bit about the various ideas on how to invest fixed assets, both in general and with respect to current conditions. While I think it's a major error to try to time the market, I find myself doing a little of that with my fixed portfolio. I've been about 50% in short investment grade and about 50% in intermediate investment grade. My thought is that if rates start going up in what appears to be a long-term upward swing (i.e., Fed rate increases in response to high inflation), then I just might move my intermediate term into the MM while rate go up a few percentage point, then move it back into intermediate. If rates continue to go up and then inflation is brought under control, I might then move most of my short term into long term. The fact is I probably won't do anything, because I've seen too many people lose far too much money by jumping around and trying to time the market. I don't fully understand bonds or bond funds, which is why I'm staying shorter and why I'm probably just going to stay the course. I'm fully retired, so our portfolio is where we get our financial support, in addition to SS, so I want to be conservative, but still try to get a real rate of return of at least 1.5% (more would be much better) in our overall portfolio. Our withdrawal rate is around 1.5% per year, hence the desire to at least maintain a stable perpetual net asset value portfolio, adjusted for inflation and adjusted for our yearly withdrawals. Good luck.
mephistophles wrote:Do it now. Trying to time the bond, or any market, is a losers game.
Doc wrote:STC wrote:If anyone knew the answer to this, they would be a billionaire. Unfortunately, predicting the rate curve is a futile endeavor.
No that's not true. Larry Swedroe has stated that their is evidence that the best estimate of future yield curve is the current yield curve albeit it is not a very good one. If one had zero transaction costs one can make money by "riding the yield curve". That is buying longer notes in a rising yield curve environment and selling them before they mature. You can also see this strategy implemented in index funds. Just compare the theoretical yield difference between a 1-5 and a 0-5 Treasury index with a positive sloped yield curve. The 1-5 wins by more than can be accounted for by the duration difference. The thread I referenced earlier builds on this concept.
gotherelate wrote:When the moon is in the Seventh House and Jupiter aligns with Mars. (With all due respect to the Fifth Dimension and songwriters James Rado, Gerome Ragni and Galt MacDermot) I mean, why not?
STC wrote: If momentum plays like this worked, then funds would start to play it, nullifying the effect. That is the nature of the market. So even if you can prove that this strategy did work, I would not go on betting that it will continue to work.
hoops777 wrote:I fully understand the reasoning in many people recommending staying short term because of inflation.What is confusing is when do you switch out of shorter term back to total bond?How do you determine that magic moment?
My other question is after reading so many posts about the inevitable decline of total bond when inflation kicks in,would it not be better in this unique bond environment to be in some well respected managed funds instead like dodge and cox or a pimco?Wouldn't a managed fund be better able to adjust to the inflation factor?It just seems like the total mkt index has no option but to take it's medicine for a few years when the inevitable inflation kicks in.Maybe a better solution would be to split your bond allocation in 3 well respected managed funds 1/3 1/3 1/3.???