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If you sold your bond funds before a 4 to 6 percent decline and bought your other funds before they moved higher than of course, fantastic timing. Making such a move over the past 10 years (maybe longer) when many talking heads were saying yields can only go higher would have been a very different story. I stick to my plan of mostly buying assets when out of favor. With bonds, as yields move higher so will returns (over time). No reason to bail, and especially in taxable accounts.Summarizing some things I've posted recently...
We sold all of our dedicated bond funds earlier this year and kept small toeholds in NHMAX and RPHYX. Last Friday we sold the NHMAX toehold.
ALL of the dedicated bond funds we owned are DOWN a little-to-significantly this year. Dedicated bond fund proceeds were invested FFGCX and FNARX an the below-described ladder.
Bond proceeds from the more recent sales of allocation funds were/are being re-deployed into a relatively ST CDs/TNotes ladder (6 mos - 2-yrs, the latter being the sweet spot).
And now adding comments related to this thread...
There can be NO denying that this was the proper way to invest this year, and IMO for the coming months, maybe years.
For this year, who would you rather be, an investor faithfully hanging onto dedicated bond funds DOWN 1%-10-??%%, or an investor who saw opportunity and acted, currently holding FFGCX, UP ~35% YTD, having sold FNARX UP ~30% (at the time), and holding a ST CD/TNote ladder averaging ~2% APY?
BUYing an equity crash is COMPLETELY DIFFERENT than BUYing a bond market crash because the reasons for the respective crashes are different and the prospects for recovery are different. No investor should look at them as the same or even similar.
And don't let easy excuses for investment decision failures and confirmation bias for those failures cloud your thinking.
Sadly, an investor takes on much greater risk now with the equity plays noted in this post. But on dedicated bond funds vs a ST CD/TNote ladder, which investor would you rather be, one faithfully holding onto dedicated bond funds for the next couple of months/years, or an investor with a ST CD/TNotes ladder paying an FDIC'd/Full Faith'd 2% average APY?
It was a tough year in this space, but your numbers seem off based on my personal data and MS. BSV was down 1.09 but BBBMX was up 1.18%. For the year as a whole in 2021, my "near cash" holdings were down .04%. Not great but I can live with it. Wish there were better options but I've yet to find one's I'm comfortable with. Hard to argue about RPHYX, which I hold, but would be reluctant to put big dollars into (or most of these vehicles). While things like SNGVX had a bad year I'm OK with that (based on rising rates) rather then risking a serious loss on defaults as is a bit more likely with most of the others. It happened with ZEOIX, which recovered, but stung when it happened.But since I use MERFX as a cash substitute, 2%-3% per year is fine with me
The problem is for me a cash substitute fund cannot have sustained a loss greater than 2% in a year, and preferably no loss ever. Why take the risk with such meager returns? My cash subs include, SNGVX (1 off year in 31, so it gets a pass on my 2% rule); BBBMX; GILPX, VNLA (ETF) and even good old BSV (ETF). You can buy with confidence that any loss will be small and temporary. Not so clear with MERFX, which suffered a 5.67% loss in 2002 and 2.26% loss in 2008.
Not picking on anyone here, just remembering the statement that SNGVX had only one losing year out of 31. It's now 2 losing years out of 34, with nearly a 1% loss last year. Not much, but something one hopes not to see with a fund used in lieu of cash.
FWIW, BBBMX stayed in the green, gaining 0.01%.
GILPX did not, losing 0.07%. Likewise, MERFX lost 0.19%, VNLA lost 0.18% and BSV lost 0.12%.
These five funds, win or lose, came so close to zero that one might as well think of them all as having broken even. SNGVX was a different story.
Meanwhile, RPHYX kept chugging away, gaining 1.8% last year. Only 11 calendar years so far, but not a single loss.
I'm also taking a closer look at VMLTX. Only 1 losing year out of 34; that was just a loss of 0.16% in 2016. It normally maintains a higher than average duration to get higher returns. But it has shortened its duration to bring it in line with its peers, showing that it can be managed conservatively if conditions warrant.
My parents used this fund in retirement. Yes,this is still your father's VMLTX.
Not picking on anyone here, just remembering the statement that SNGVX had only one losing year out of 31. It's now 2 losing years out of 34, with nearly a 1% loss last year. Not much, but something one hopes not to see with a fund used in lieu of cash.But since I use MERFX as a cash substitute, 2%-3% per year is fine with me
The problem is for me a cash substitute fund cannot have sustained a loss greater than 2% in a year, and preferably no loss ever. Why take the risk with such meager returns? My cash subs include, SNGVX (1 off year in 31, so it gets a pass on my 2% rule); BBBMX; GILPX, VNLA (ETF) and even good old BSV (ETF). You can buy with confidence that any loss will be small and temporary. Not so clear with MERFX, which suffered a 5.67% loss in 2002 and 2.26% loss in 2008.
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