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@Roy, you are getting great inputs from many posters here on your asset allocation. Target date fund’s glide path provides a good starting point for the major asset class allocations, and I use them as a reference point, just as @Observant1 is doing. I am several years older than you are and am approaching retirement too.
Several years ago, I gradually reduced stock exposure gradually to a 50/25/25 (stock/bond/cash) allocation. This conservative allocation was helpful to navigate through the difficult year of 2022 when both stocks and bonds fell simultaneously. This year has been the quite the reversal as both stocks and bonds move up amidst of banking crisis. Now that the bulk of rate hike is behind us, I am more optimistic that bonds will have more meaningful gain this year with respect to yields (4-5%) and some capital appreciation on the bond prices. T bills, CDs and money market are yielding 5%. And that is good enough for me.
Further, the investor would have less flexibility in selling off a CD (basically, all or nothing on a per-CD basis) as opposed to a bond fund where one can sell as little as 0.001 shares. In addition, the investor would take a big hit on the bid-ask spread that isn't present when selling bond fund shares.
Brokered CDs are sold in $1,000 units, so sure, you can't sell of $79 worth, but you could sell $1,000 from a $100,000 CD. That should be enough flexibility for anyone.
As for taking a loss, my broker tells me that in his experience, people are getting very close to face value and often a small profit. (The seller keeps all accrued interest). I don't have any direct experience with this and don't expect to be getting any.
After 25 years of retirement my allocation hasn’t changed much. Early on I looked to TRRIX, a 40/60 TRP fund for guidance. Currently own the fund and it’s one of several I watch to try and keep my feet firmly on the ground.
No X-Ray. Simply broke apart my holdings to get a rough picture.
* Some of the metals exposure is direct and some through PRPFX. The currencies are all through PRPFX. I own one long-short fund, making the total short position a bit higher than stated above and the net-long equity a bit lower.
What the discussion pretty much misses is that not all equities are the same. Some are relatively low volatility, while some can be be quite explosive. Exposure to EM may count as part of your equities, but is more risky than most U.S. domestics. Guess that’s for another day.
I am risk adverse by nature, but without a pension ( except SS) I knew my wife and I would have to depend on our investments for living expenses, vacations weddings etc when we retired.
Much of what I read pointed out that retiring into a multi year bear market would be a big problem, so we reduced equities after 60, and two years into retirement we are about 40%. If there is a significant pull back will increase it.
After two or three years into retirement I am more comfortable knowing our basic living expenxes etc.
The world is divided to have a pension and don't have a pension. These are 2 different worlds. The more pension you have, and the more it covers someone's expenses, the higher % in stocks someone can have.
@FD. I agree that folks with pensions and those who don’t are facing entirely different retirements. But I disagree with your second statement. If I had a pension ( and I don’t) I would have less reason to have “ a higher % in stocks.” Given a substantial pension and low expenses I would be very happy to ignore the markets as I did when i was a young man with nothing to invest. The markets don’t bring me great joy but have often given me indigestion.
My wife and I both have pensions, but they are not necessarily the great deal that some people think they are. Our pensions are with the state of North Carolina, and have no inflation adjustments. So we are totally dependent on our Republican controlled legislature for any increases to cope with inflation. Guess what, the legislature has made zero inflation adjustments since we retired 6-8 years ago, aside from a few minor one-time bonuses. So, our real income from our pensions have declined by at least 15% since we retired.
Fortunately, we both held off starting Social Security payments, and those are adjusted for inflation. Plus, we have sizable investments in IRAs that are invested about 60% in stocks. Our IRAs are essentially functioning as in inflation adjustments for our pensions that are steadily decreasing in value. I like having the pension payments because it frees me from worrying about the stock market, but they are like having annuities with no inflation adjustments.
For those who don't have pensions but wish that they had one should look at low-cost SPIA (for guaranteed lifetime income). There are several online quote services. Obviously, there is tradeoff - they have to give up the principal. Some in the annuity pool will not live long, but some will have long lives. For the insurance co, all this evens out for the pool. So, this is longevity risk transfer to an insurance/annuity co.
But AVOID fancy annuities sold by agents. These have the highest commissions around for the agents.
I am risk adverse by nature, but without a pension ( except SS) I knew my wife and I would have to depend on our investments for living expenses, vacations weddings etc when we retired.
Much of what I read pointed out that retiring into a multi year bear market would be a big problem, so we reduced equities after 60, and two years into retirement we are about 40%. If there is a significant pull back will increase it. After two or three years into retirement I am more comfortable knowing our basic living expenxes etc.
@sma3 - While some esteemed posters appear to disagree with you, the expert from Schwab I linked earlier would appear to agree:
As you put together your retirement portfolio, you also need to think about the role your savings will play in your overall income plan. For example, how much income do you expect from guaranteed sources like annuities, pensions, and Social Security? - "If these guaranteed income streams will generate enough income to cover the majority of your expenses, you might be able to maintain a more aggressive stance with your portfolio well into retirement … Conversely, if you'll rely on your portfolio for the majority of your income, you'll need to take a more balanced approach with your investments”
Having both pension and SS, I view investments mainly as a growth asset - an enhancement to an already comfortable subsistence. If it were all I had to live on, I’d probably view them more as an income generator. Those aren’t mutually exclusive. But it does, I think, highlight two very different perspectives. The other side of the coin is that folks with pensions paid for that during their working years, whether by regular payroll deductions or by working for lower compensation than they might have received elsewhere where a pension did not exist. So it’s likely the “non-pensioners” retired with a much greater nest-egg to safeguard - provided skill-sets were similar. -
PS - I’m actually somewhat more aggressive today than when I retired 25 years ago. Those 25 years didn’t go to waste. I read Fund Alarm and Mutual Fund Observer and learned immensely from those people. And, in retirement there’s time to read about and study the markets that you didn’t have while employed. I suppose to an extent the more advanced technology and “at demand” information flow has helped, although that one’s a 2-edged sword.
"Anyone investing in bond funds?" @hank put it very well. Our situation sounds very similar: Having both pension and SS, I view investments mainly as a growth asset - an enhancement to an already comfortable subsistence. If it were all I had to live on, I’d probably view them more as an income generator. Those aren’t mutually exclusive. But it does, I think, highlight two very different perspectives. The other side of the coin is that folks with pensions paid for that during their working years, whether by regular payroll deductions or by working for lower compensation than they might have received elsewhere where a pension did not exist. So it’s likely the “non-pensioners” retired with a much greater nest-egg to safeguard - provided skill-sets were similar.
My old-style pension is a godsend. With the crapola, frustration and all of the obstacles and junk along the way, I'd say I "earned" every penny. My own pension rises a bit each year, but not necessarily tied to the inflation rate. Normally it's 2+ percent, and in good years, 4+ percent. It all depends upon how well the denomination's portfolio has performed. It's a rather safe balanced mix.
Yes, since this thread was initiated, I'm still in junk. As for stocks, I prefer off-the-beaten-track, more un-crowded trades. But I'm not a trader. My regional bank stock is killing me in 2023, but I'm sticking with it. Speaking of stocks that are killing me, that pretty much goes for my entire single-stock sleeve. My funds are by far the majority of my money. They are doing pretty well this year: 2023.
”Of course, as soon as I increase my equity exposure substantially the markets will crash.”
- That’s a pretty safe bet. Slow and steady usually rules the day. Never be in a hurry to lose money.
I don’t think many folks who were in the markets throughout 2022 have reaped much of a reward yet. Nice run-up in 2023. But the Dow is still well below its January 2022 high - and the S&P is below its 2022 high as well. Those who really got hurt are the ones who panicked and sold midway into 2022. Now, many are beginning to “chase” again at much higher prices than they sold at - at least that’s what last week’s fund flow data coming out of Bloomberg suggests.
@FD. I agree that folks with pensions and those who don’t are facing entirely different retirements. But I disagree with your second statement. If I had a pension ( and I don’t) I would have less reason to have “ a higher % in stocks.” Given a substantial pension and low expenses I would be very happy to ignore the markets as I did when i was a young man with nothing to invest. The markets don’t bring me great joy but have often given me indigestion.
Someone with a bigger pension CAN(not MUST) have a higher % in stocks. It's a personal choice. I hate losing more than 3-5% and why I'm a bond trader. We don't have any pension but I would still invest this way because I did very well. BTW, I'm invested for several weeks at 99+% in just 2 bond funds.
Age is also a factor, if you retired at an earlier age, losses are a lot more important than losing at age 80 because of obvious reasons.
Truth is stranger than fiction. Particularly on suck-ass days like today, y'know what's saving my bacon??? Junk bonds. Not the ETF. It's the OEFs: TUHYX, flat on the day. And PRCPX. down by just a penny. Ya.
I have been out of bond oefs since 2022, but maintain watchlists of various bond categories. Just a few observations I have had is the overall 2023 performance strength of FR/BL funds. If I should decide to transfer some of my CD money back to bonds, this would be the category I would look at first. Some of the traders on this forum seem to be questioning whether this category has been overbought, and that is always a concern worth considering. PRFRX, MWFLX, and SAMBX are 3 well known funds I tend to follow most closely, but almost everything in this category is doing well.
I have also noticed that Corporate Junk bond funds have been doing pretty well--RSIIX is the fund I follow most closely in this category, but CSOAX is doing particularly well this year.
Then EM bond funds are doing well, but I have not invested in this category in many years. DBLEX is the fund I followed most closely, but AGEYX is doing very well in that category.
Then I will just note that SEMMX/SEMPX is having an excellent year in the nontraditional category--focusing on junk mortgages. I know this fund scares investors because of its recent downmarket performance, but it sure seems to be doing well this year.
I’ve had my eyes on ICEM - a new multi-asset ETF from Franklin Templeton with an ER of .38%. That helps explain why I jumped (unfairly perhaps) on @Crash’s post.
The fund is new (June 6) and there’s very little about how it actually invests either in the prospectus or other F/T literature. (Kind of a “trust us” portrait). By prospectus it can own up to 25% high yield. Yet, M* seems to show it with more than that if you include the around 25% “unrated.” Anyway, it’s heavily weighted towards junk and unrated paper. So that has given me pause. And it held up well yesterday but is off close to 1% today. Looks like it buys an equity based option index as part of its strategy to harvest gains in the S&P and still protect principal on the downside. That also gives me pause and might help explain why it’s falling today.
@Junkster knows so much about junk. Wish he’d weigh in sometime on spreads and relative valuation vs equities or high grade bonds. Probably hiking the Blue Ridge.
PS / All you “Giroux-Heads” - What can say? PRWCX held up exceptionally well yesterday, falling only .15% compared to 3X that much for VWINX. Keep this up and somebody will nominate him for Prez.
Excerpted from M* Q2 2023 fixed income retrospective.
"It was a mixed second quarter for bond fund investors. Funds sensitive to interest rates, like long government and intermediate core bonds, were once again beaten down. These funds, which invest sizable stakes in U.S. Treasuries, saw bond prices slip while U.S. Treasury yields rose during the period."
"Credit-sensitive funds also felt some pain, mostly in May. Still, lower-quality fixed-income assets, such as leveraged loans and high-yield corporate bonds, eked out gains for the full quarter amid interest-rate volatility thanks to their shorter-duration profiles. As such, the average bank loan and high-yield bond funds posted solid returns of 2.7% and 1.5%, respectively."
I hope to exit FFRHX soon. Bought it during rebalancing in December 2018. Return since then has been 4.3%. However, the unrealized loss is still in the red at 2.43. I don't like to sell anything in the IRA till it's out of the red. Proceeds will likely go into an allocation fund. Let those people worry about the bonds.
Then I will just note that SEMMX/SEMPX is having an excellent year in the nontraditional category--focusing on junk mortgages. I know this fund scares investors because of its recent downmarket performance, but it sure seems to be doing well this year.
Right, @dt, Semper is back. Haven't taken the plunge myself, still watching, and today's selloff might help evaluating it. A lot of the mortgage focus in the media has been on agencies, but they're not so hot now - the iShares etf is only barely positive ytd (but actively managed agencies seem to be doing a bit better than that.)
Then I will just note that SEMMX/SEMPX is having an excellent year in the nontraditional category--focusing on junk mortgages. I know this fund scares investors because of its recent downmarket performance, but it sure seems to be doing well this year.
Right, @dt, Semper is back. Haven't taken the plunge myself, still watching, and today's selloff might help evaluating it. A lot of the mortgage focus in the media has been on agencies, but they're not so hot now - the iShares etf is only barely positive ytd (but actively managed agencies seem to be doing a bit better than that.)
Hate to see this mentioned (the jinx effect) as it is among my favorites this year. MBS offers a lot of value and some even say it is a screaming buy. SEMPX has 13% in commercial and commercial ex office buildings is performing well this year. Considering how poorly the 10 year has performed recently it is a bit surprising how well the MBS market has held up. If there is one caveat about the MBS market it is if there is some surprise spike in the 10 year. Lots working in Bondland this year besides the obvious of bank loans. Tomorrow is yet another bond moving event with the June employment report.
Edit: Not among my favorites but a bond fund in the MBS category with about as tight a rising channel as you will see this year is BDKAX/NX
June labor market data will be released on this Friday. It appears more jobs are created than expected.
From Barron’s, Private-sector employers added 497,000 jobs in June, nearly double the consensus forecast of 250,000 among economists surveyed by FactSet.
This spooked the market and more rate hikes are coming. Just about all bonds fell, except for bank loans.
Anyone think to recall that students are all chasing summer jobs????? Anyhow, when every kind of anything gets counted, it's no wonder there's consternation all around. A full-time breadwinner is way different that a 3-month summer thing...
Anyone think to recall that students are all chasing summer jobs????? Anyhow, when every kind of anything gets counted, it's no wonder there's consternation all around. A full-time breadwinner is way different that a 3-month summer thing...
Crash, and pretty soon we will be evaluating the chase for holiday jobs, because of the importance of short term holiday jobs to the health and vitality of our business economy. The Feds look at all kind of "inflationary" factors that have variable factors associated with economic strength.
Jinxes aside, I seriously doubt that two brief observations will lead to a run on a fund like SEMPX, with its lousy downmarket record and a CEF-like yield that would make investors with any sense of risk aversion think twice. Then multiply those factors with a Fed doing its best to engineer a recession and a dash for trash that's getting long in the tooth, and I think SEMPX traders can rest easy.
@Observant1 posted: As such, the average bank loan and high-yield bond funds posted solid returns of 2.7% and 1.5%, respectively."
As of June 30, 2023, the total returns of my bank loan and high yield bond funds are doing a bit better than 2.7% and 1.5%, respectively. The conservative, short duration treasury bond funds are returning 2% while yielding 5% yield. (quite different from previous years). And that is good enough for us.
Comments
Several years ago, I gradually reduced stock exposure gradually to a 50/25/25 (stock/bond/cash) allocation. This conservative allocation was helpful to navigate through the difficult year of 2022 when both stocks and bonds fell simultaneously. This year has been the quite the reversal as both stocks and bonds move up amidst of banking crisis. Now that the bulk of rate hike is behind us, I am more optimistic that bonds will have more meaningful gain this year with respect to yields (4-5%) and some capital appreciation on the bond prices. T bills, CDs and money market are yielding 5%. And that is good enough for me.
Brokered CDs are sold in $1,000 units, so sure, you can't sell of $79 worth, but you could sell $1,000 from a $100,000 CD. That should be enough flexibility for anyone.
As for taking a loss, my broker tells me that in his experience, people are getting very close to face value and often a small profit. (The seller keeps all accrued interest). I don't have any direct experience with this and don't expect to be getting any.
No X-Ray. Simply broke apart my holdings to get a rough picture.
Equity 46%
Foreign / domestic bonds 20%
Convertible bonds 10%
Cash 10%
Precious metals 7%*
Foreign currencies 5%*
S&P short position -2%
Net long equity 44%
* Some of the metals exposure is direct and some through PRPFX. The currencies are all through PRPFX. I own one long-short fund, making the total short position a bit higher than stated above and the net-long equity a bit lower.
What the discussion pretty much misses is that not all equities are the same. Some are relatively low volatility, while some can be be quite explosive. Exposure to EM may count as part of your equities, but is more risky than most U.S. domestics. Guess that’s for another day.
Much of what I read pointed out that retiring into a multi year bear market would be a big problem, so we reduced equities after 60, and two years into retirement we are about 40%. If there is a significant pull back will increase it.
After two or three years into retirement I am more comfortable knowing our basic living expenxes etc.
Fortunately, we both held off starting Social Security payments, and those are adjusted for inflation. Plus, we have sizable investments in IRAs that are invested about 60% in stocks. Our IRAs are essentially functioning as in inflation adjustments for our pensions that are steadily decreasing in value. I like having the pension payments because it frees me from worrying about the stock market, but they are like having annuities with no inflation adjustments.
But AVOID fancy annuities sold by agents. These have the highest commissions around for the agents.
As you put together your retirement portfolio, you also need to think about the role your savings will play in your overall income plan. For example, how much income do you expect from guaranteed sources like annuities, pensions, and Social Security? - "If these guaranteed income streams will generate enough income to cover the majority of your expenses, you might be able to maintain a more aggressive stance with your portfolio well into retirement … Conversely, if you'll rely on your portfolio for the majority of your income, you'll need to take a more balanced approach with your investments”
https://www.schwab.com/retirement-portfolio
Having both pension and SS, I view investments mainly as a growth asset - an enhancement to an already comfortable subsistence. If it were all I had to live on, I’d probably view them more as an income generator. Those aren’t mutually exclusive. But it does, I think, highlight two very different perspectives. The other side of the coin is that folks with pensions paid for that during their working years, whether by regular payroll deductions or by working for lower compensation than they might have received elsewhere where a pension did not exist. So it’s likely the “non-pensioners” retired with a much greater nest-egg to safeguard - provided skill-sets were similar.
-
PS - I’m actually somewhat more aggressive today than when I retired 25 years ago. Those 25 years didn’t go to waste. I read Fund Alarm and Mutual Fund Observer and learned immensely from those people. And, in retirement there’s time to read about and study the markets that you didn’t have while employed. I suppose to an extent the more advanced technology and “at demand” information flow has helped, although that one’s a 2-edged sword.
Of course, as soon as I increase my equity exposure substantially the markets will crash.
Those of you who have been heavily invested in equities recently and enjoyed the run up, you have my low allocation to thank!
@hank put it very well. Our situation sounds very similar:
Having both pension and SS, I view investments mainly as a growth asset - an enhancement to an already comfortable subsistence. If it were all I had to live on, I’d probably view them more as an income generator. Those aren’t mutually exclusive. But it does, I think, highlight two very different perspectives. The other side of the coin is that folks with pensions paid for that during their working years, whether by regular payroll deductions or by working for lower compensation than they might have received elsewhere where a pension did not exist. So it’s likely the “non-pensioners” retired with a much greater nest-egg to safeguard - provided skill-sets were similar.
My old-style pension is a godsend. With the crapola, frustration and all of the obstacles and junk along the way, I'd say I "earned" every penny. My own pension rises a bit each year, but not necessarily tied to the inflation rate. Normally it's 2+ percent, and in good years, 4+ percent. It all depends upon how well the denomination's portfolio has performed. It's a rather safe balanced mix.
Yes, since this thread was initiated, I'm still in junk.
As for stocks, I prefer off-the-beaten-track, more un-crowded trades. But I'm not a trader. My regional bank stock is killing me in 2023, but I'm sticking with it. Speaking of stocks that are killing me, that pretty much goes for my entire single-stock sleeve. My funds are by far the majority of my money. They are doing pretty well this year: 2023.
I don’t think many folks who were in the markets throughout 2022 have reaped much of a reward yet. Nice run-up in 2023. But the Dow is still well below its January 2022 high - and the S&P is below its 2022 high as well. Those who really got hurt are the ones who panicked and sold midway into 2022. Now, many are beginning to “chase” again at much higher prices than they sold at - at least that’s what last week’s fund flow data coming out of Bloomberg suggests.
I hate losing more than 3-5% and why I'm a bond trader. We don't have any pension but I would still invest this way because I did very well. BTW, I'm invested for several weeks at 99+% in just 2 bond funds.
Age is also a factor, if you retired at an earlier age, losses are a lot more important than losing at age 80 because of obvious reasons.
Particularly on suck-ass days like today, y'know what's saving my bacon???
Junk bonds. Not the ETF.
It's the OEFs: TUHYX, flat on the day. And PRCPX. down by just a penny. Ya.
Junk bonds.”
I wish you luck. But it looks today like junk is falling in line with the S&P.
I have also noticed that Corporate Junk bond funds have been doing pretty well--RSIIX is the fund I follow most closely in this category, but CSOAX is doing particularly well this year.
Then EM bond funds are doing well, but I have not invested in this category in many years. DBLEX is the fund I followed most closely, but AGEYX is doing very well in that category.
Then I will just note that SEMMX/SEMPX is having an excellent year in the nontraditional category--focusing on junk mortgages. I know this fund scares investors because of its recent downmarket performance, but it sure seems to be doing well this year.
The fund is new (June 6) and there’s very little about how it actually invests either in the prospectus or other F/T literature. (Kind of a “trust us” portrait). By prospectus it can own up to 25% high yield. Yet, M* seems to show it with more than that if you include the around 25% “unrated.” Anyway, it’s heavily weighted towards junk and unrated paper. So that has given me pause. And it held up well yesterday but is off close to 1% today. Looks like it buys an equity based option index as part of its strategy to harvest gains in the S&P and still protect principal on the downside. That also gives me pause and might help explain why it’s falling today.
This link might pull it up. https://www.morningstar.com/etfs/arcx/incm/portfolio
@Junkster knows so much about junk. Wish he’d weigh in sometime on spreads and relative valuation vs equities or high grade bonds. Probably hiking the Blue Ridge.
PS / All you “Giroux-Heads” - What can say? PRWCX held up exceptionally well yesterday, falling only .15% compared to 3X that much for VWINX. Keep this up and somebody will nominate him for Prez.
"It was a mixed second quarter for bond fund investors. Funds sensitive to interest rates, like long government and intermediate core bonds, were once again beaten down. These funds, which invest sizable stakes in U.S. Treasuries, saw bond prices slip while U.S. Treasury yields rose during the period."
"Credit-sensitive funds also felt some pain, mostly in May. Still, lower-quality fixed-income assets, such as leveraged loans and high-yield corporate bonds, eked out gains for the full quarter amid interest-rate volatility thanks to their shorter-duration profiles. As such, the average bank loan and high-yield bond funds posted solid returns of 2.7% and 1.5%, respectively."
Link
Edit: Not among my favorites but a bond fund in the MBS category with about as tight a rising channel as you will see this year is BDKAX/NX