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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors

Gary, interesting discussion on what to use for risk assessment of fund discussions.  It will be interesting to see how each investor chooses to measure that going forward.  It will be interesting to see how much peak to trough losses, in 2020 for each fund, will influence what investors will use going forward.  If you are a buy and holder, you just sit back and watch, hopefully to see a rebound to recoup your losses.  If you are a trader, there will be an array of factors to consider in putting your cash to work in future investments.  I think I fall somewhere in between, "wanting to buy and hold" as long as possible, but I will turn into a cautious and slow trader when I view it as necessary.  I have to figure out what I am going to do with my accumulated cash, considering that I am not good at trading, but being very risk averse in my fund selections.  

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Re: Bond OEF Investing for More Conservative Investors

Derivative losses tend to be permanent - losses gone to money heaven. Recovery may take years in bond land - it is different for equities. Funds that used derivatives in past may stop using them going forward. Some funds may be merged away. Newer funds may be launched that won't have 2020 in their records, just as it happened after 2008-09, and M* would feature them as up & coming funds. Posters would soon start saying don't keep looking at 2020 forever - just as they said for 2008-09. 

M* SD based on monthly returns cannot catch what is going on now - monthly sampling cannot detect things that happen/happened in shorter timeframes. But one can easily switch to 15-yr tab in old M* SD area [tricks are available for this] to see how the funds that existed then were impacted by events then.

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Re: Bond OEF Investing for More Conservative Investors

Just a couple of thoughts that seem to relevant for this thread:

1.  Yesterday showed that HY Bond OEFs had a strong overall day, reflecting a pretty strong correlation with equities.  Although this thread is for "conservative investors", there is some logic to look at these bond oefs as a possible entry area, if you have some cash you want to put to work.  HY Bond OEFs do vary quite a bit in how well they performed in this sell off, but I would consider this category, as a less risky option alternative to equities, for some re-entry investing for bond holders.

2. There are some well known Core Plus Bond Oefs that are looking promising:  TGLMX, BCOIX, and DODIX did well yesterday and appear less risky opportunities to catch a rebound.

3. Multisector and nontraditional are still a mixed bag of options, so it is hard for me to say much.  Riskier options like PUCZX and LSBDX did well yesterday, showing some correlation to equities.

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Re: Bond OEF Investing for More Conservative Investors


@dtconroe wrote:

Gary, interesting discussion on what to use for risk assessment of fund discussions.  It will be interesting to see how each investor chooses to measure that going forward.  It will be interesting to see how much peak to trough losses, in 2020 for each fund, will influence what investors will use going forward.  If you are a buy and holder, you just sit back and watch, hopefully to see a rebound to recoup your losses.  If you are a trader, there will be an array of factors to consider in putting your cash to work in future investments.  I think I fall somewhere in between, "wanting to buy and hold" as long as possible, but I will turn into a cautious and slow trader when I view it as necessary.  I have to figure out what I am going to do with my accumulated cash, considering that I am not good at trading, but being very risk averse in my fund selections.  



I am out of bonds now. Most I got out early but some I rode down. I sold NVHAX early on to keep my profit since I was protecting that money which I have earmarked for couple of years down the road. The returns are so slim in bond funds one can’t B&H indiscriminately. 

Speaking of NVHAX it looks like the munis are leading the bond recovery.  It is tempting. ;-)

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Re: Bond OEF Investing for More Conservative Investors

I would agree that Munis look like the strongest bond category right now, that are worth considering.  Anything that is Corporate heavy in bond oefs, are doing well, but I think that is reflective of their strong correlation with equities.  When you are confident in equities rebound path, Corporate related bond oefs, will likely tag along, at a slower pace.  It appears that New York and Louisiana are starting to take on an Italy-like scenario, where deaths and sick people overwhelming our medical ability to respond, is looking more and more likely.  I just don't know if the financial markets will be able to rebound strongly when news of deaths and suffering become even more scary.

For a very risk averse investor, I am looking at "my criteria" to project risk, with potential investing options--it is hard for me to be confident in a very strong rebound right now, but with all of the news about bailouts, no risk loans, and cash in the mail, I think we are in store for a sugar high rebound for awhile--just not sure that has legs to continue very long with all of the unemployment numbers, and likely increasingly bad coronavirus impacts.

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Participant ○○

Re: Bond OEF Investing for More Conservative Investors

Munis did not look good at all until the gov't backstop came out. True Treasuries were the only safe haven bonds. Munis had outperformed and been bid up a huge amount, even over Treasuries for a while. I do not think that they will come back to that overvaluation over treasuries anytime soon. There will be too much pain remembered and there will be some that just don't come back to munis for a long time. That may mean that people will demand a higher yield over Treasuries because of the risk. Only my opinion.

MUB up almost 3% again today, good sign. Anyone notice that Vanguards Municipal MM fund is at 4.05% SEC yld as of yesterday. WOW!

My portfolio is feeling better.

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Re: Bond OEF Investing for More Conservative Investors

I’m thinking that munis at this depressed level and increasing is a temptation to buy. 

MBS is still declining. Even my old low duration “safe” fund is declining. 

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Re: Bond OEF Investing for More Conservative Investors


@dtconroe wrote:

Just a couple of thoughts that seem to relevant for this thread:

1.  Yesterday showed that HY Bond OEFs had a strong overall day, reflecting a pretty strong correlation with equities.  Although this thread is for "conservative investors", there is some logic to look at these bond oefs as a possible entry area, if you have some cash you want to put to work.  HY Bond OEFs do vary quite a bit in how well they performed in this sell off, but I would consider this category, as a less risky option alternative to equities, for some re-entry investing for bond holders.

2. There are some well known Core Plus Bond Oefs that are looking promising:  TGLMX, BCOIX, and DODIX did well yesterday and appear less risky opportunities to catch a rebound.

3. Multisector and nontraditional are still a mixed bag of options, so it is hard for me to say much.  Riskier options like PUCZX and LSBDX did well yesterday, showing some correlation to equities.


Paul:  I'd like to share my thinking I provided Win yesterday.  Win has a significant portfolio.  He wants his bond OEFs to provide stability for him.  He does not need income or higher yield.  A 6% loss YTD was not acceptable.  I contrast Win with me.  I have a much smaller portfolio.  I tilt my bond OEFs to those with current income as a primary focus.  My weighted average performance is minus 6% if not a little more.  That is the pain I endure for the yield, north of 3% for such funds.  So for an investor like Win, I like TGLMX and BCOIX and I also throw in ABNDX BFAFX as good core funds that should offer the stability, capital preservation that he is looking for.  They have yields well below 3% and based on data from my own portfolio this should be supportive for results Win is looking for.  

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Re: Bond OEF Investing for More Conservative Investors

Paul are you talking about the bond allocation only at -6%?

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Re: Bond OEF Investing for More Conservative Investors

 

Sorry Gary, yes, just read your comment more carefully.  I mean the bond OEF sleeve performance only.

Gary, I am talking about YTD performance.  Win had one fund that lost 6%.  Based on his needs, I imagine he will swap it out for some of these core funds that haven't lost as much year to date.  In my case, my 5 bond OEFs had a weighted average loss of 6%.  This would be terrible for Win but I can live with it if I can continue to get yield 3%+.  From what I have seen, the higher the bond fund yield, the greater the likelihood of poor performance during this crash.  Have you seen similar results?

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Re: Bond OEF Investing for More Conservative Investors

Paul, the problem is to make your portfolio bulletproof to ALL market possibilities. A black swan is rare but it happened already in 2008-9 and 2020.  We may be lucky in 2020 because the Fed and the Gov are using so much money and support to save everything. Then you own CEFs and as you discovered they lost more than stocks.  Then you also realized that buckets didn't help you either, buckets are just mental excuse to make your brain believe that you didn't lose as much.  That never fooled me.  If I had one million and after a month I have $800K then I lost 20%, there are no ifs and buts.

There are no easy leave-them-alone solutions but maybe the following:

1) sell some of your highest risk assets at certain criteria 

and/or

2) Don't go for higher yield, you can sell shares, the only thing that matters is total return. Find yield at places that don't hurt so much like NOBL vs SPY  PIMIX vs PCI.   There is a reason why I'm more afraid of CEFs than SPY, at certain points they lose so much and quickly. If you use CEFs think of them as risky stocks.  Do you know what is going to happen?  CEFs will do better than stocks from the bottom  ;-)

OR

Just get used to the volatility

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Explorer ○

Re: Bond OEF Investing for More Conservative Investors


@Fishingrod wrote:

Munis did not look good at all until the gov't backstop came out. True Treasuries were the only safe haven bonds. Munis had outperformed and been bid up a huge amount, even over Treasuries for a while. I do not think that they will come back to that overvaluation over treasuries anytime soon. There will be too much pain remembered and there will be some that just don't come back to munis for a long time. That may mean that people will demand a higher yield over Treasuries because of the risk. Only my opinion.

MUB up almost 3% again today, good sign. Anyone notice that Vanguards Municipal MM fund is at 4.05% SEC yld as of yesterday. WOW!

My portfolio is feeling better.


Rod,

Besides VWALX and VWIUX are you are in Vanguard Muni Money Market Fund? Do you have any concerns about gates (liquidity) or breaking the buck?

This is a tough one because we are in a place that we have not seen before.

Hootz

 

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Re: Bond OEF Investing for More Conservative Investors

FD ...  We differ in investing philosophy and strategy.  I need 4% from my Rollover IRA to fund my gap expenses in retirement.  So I want a portfolio that yields 4%.  And I want 50% equity for growth.  And I don't want to bob in and out of the market.  I want to remain fully invested.  I invested in 3 buckets knowing full well likely worst case in each bucket.  Bucket 1 bond OEFs I know I can lose 6% or maybe a little more but it is liquid.  Bucket 2 bond CEFs can lose 25% or more but historically have recovered by the following year.  My Bucket 3 equity can lose 50%.  Buckets of Money has helped me immensely.  In the GFC, I was plan-less, compass-less, and totally lost, so bad I gave my money to a boutique financial advisor shop to reconstruct.  Today, I have a plan, I have confidence and I know what to do.  I  do not have to do anything.  My bucket 1 is fallback liquidity so I can just wait and let Bucket 2 and 3 to recover.  If my distributions get cut, I can augment my needs with my Bucket 1 bond OEFs by yes selling them but that is my last resort.  I have cash for all my gap expenses through December and re-assess then.  I have enough liquidity in Bucket 1 to sell if have to and cover at least 8 years of gap expenses.  The biggest benefit is I don't have to decide when to get back into the market, when and how much to buy.  Buying into a volatile market is unsettling and hard to do and easy to get whip-sawed by the volatility.  Buckets of Money provides me with an easy leave-them-alone strategy, notwithstanding your belief.  Most importantly, Bucket 1 provides me time for markets to recover without me doing anything.  And I am not complaining about the volatility.  That's enough tangent on this thread.  If you want more discussion, start a new thread entitled Buckets of Money are Useless, and I will comment further there.  You should read some books about it before you spout off your opinions.  

Also, you say "If I had one million and after a month I have $800K then I lost 20%, there are no ifs and buts."  That is essentially where I am today.  But so what?  It is an unrealized loss.  I am not selling,  And Bucket 1 allows me time such that it will recover and be much larger than that down the road.  You are much too focused and worried about losses of any kind.  Un-tighten your shorts dude.  Do you really need all that liquidity?  

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Re: Bond OEF Investing for More Conservative Investors

@Hootz 

I have not put money in VMSXX tax free MM recently. I may transfer some over just to see how long the yield will stay up. I personally do not feel much concern right now about the gates and such, but that doesn't mean it won't happen. I wouldn't put my ready cash there as the gates might pop up.

I imagine if our muni money markets do something bad then our longer munis would suffer even more. Remember the VMSXX has a duration of 39 days.

Only opinions, good luck.

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Re: Bond OEF Investing for More Conservative Investors


@PaulR888 wrote:

 

Sorry Gary, yes, just read your comment more carefully.  I mean the bond OEF sleeve performance only.

Gary, I am talking about YTD performance.  Win had one fund that lost 6%.  Based on his needs, I imagine he will swap it out for some of these core funds that haven't lost as much year to date.  In my case, my 5 bond OEFs had a weighted average loss of 6%.  This would be terrible for Win but I can live with it if I can continue to get yield 3%+.  From what I have seen, the higher the bond fund yield, the greater the likelihood of poor performance during this crash.  Have you seen similar results?


Paul:  Replying to myself, I seldom hear bond funds discussed on CNBC but this morning David Faber briefly made the point of distinction between short term bond funds and longer term bond funds.  He said many investors went into some short term bond funds they thought were relatively safe.  These bonds give a little yield and to do so venture into some HY and MBS and other credit bond asset classes, most I would think in better quality and with prudence and diversification.  When these bond funds lost 6% or 7%, these investors said whoa, this is not what I expected and they sold out.  I am hoping this is an anomaly and we get back normal.  I am happy to say all my bond OEFs were in the black yesterday including DBLSX.  I am sticking with my all my bond funds even though some got hit harder than I expected.  My hope is this one month's performance was a perfect storm that was a one off.  I don't want to sell a fund that has been good to me for the first multiple years of my retirement.  I will give it time to get back on its feet and get its mojo back. 

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Re: Bond OEF Investing for More Conservative Investors

I have started "wading" back into bond oefs this week, and will make a few more purchases today.  I am nervous about this re-entry so I am going slowly and cautiously, and using funds I consider a bit safer at this stage.  If they hold up, and the rebound gains strength, I will consider moving back into some other funds, but for now I am watching funds closely to see if their losses have started settling, along with what funds are showing strength and rebounds in the last week.  I am not a confident trader, so I am watching my purchases closely now, and will exit them if I don't like what I see in the next week.


@PaulR888 wrote:

@PaulR888 wrote:

 

Sorry Gary, yes, just read your comment more carefully.  I mean the bond OEF sleeve performance only.

Gary, I am talking about YTD performance.  Win had one fund that lost 6%.  Based on his needs, I imagine he will swap it out for some of these core funds that haven't lost as much year to date.  In my case, my 5 bond OEFs had a weighted average loss of 6%.  This would be terrible for Win but I can live with it if I can continue to get yield 3%+.  From what I have seen, the higher the bond fund yield, the greater the likelihood of poor performance during this crash.  Have you seen similar results?


Paul:  Replying to myself, I seldom hear bond funds discussed on CNBC but this morning David Faber briefly made the point of distinction between short term bond funds and longer term bond funds.  He said many investors went into some short term bond funds they thought were relatively safe.  These bonds give a little yield and to do so venture into some HY and MBS and other credit bond asset classes, most I would think in better quality and with prudence and diversification.  When these bond funds lost 6% or 7%, these investors said whoa, this is not what I expected and they sold out.  I am hoping this is an anomaly and we get back normal.  I am happy to say all my bond OEFs were in the black yesterday including DBLSX.  I am sticking with my all my bond funds even though some got hit harder than I expected.  My hope is this one month's performance was a perfect storm that was a one off.  I don't want to sell a fund that has been good to me for the first multiple years of my retirement.  I will give it time to get back on its feet and get its mojo back. 


 

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Re: Bond OEF Investing for More Conservative Investors

I agree with you. I think there are buys but who knows if there is still downside risk like equities. I have my eye on a couple of funds I have not owned before. No MBS for sure right now.


@dtconroe wrote:

I have started "wading" back into bond oefs this week, and will make a few more purchases today.  I am nervous about this re-entry so I am going slowly and cautiously, and using funds I consider a bit safer at this stage.  If they hold up, and the rebound gains strength, I will consider moving back into some other funds, but for now I am watching funds closely to see if their losses have started settling, along with what funds are showing strength and rebounds in the last week.  I am not a confident trader, so I am watching my purchases closely now, and will exit them if I don't like what I see in the next week.


@PaulR888 wrote:

@PaulR888 wrote:

 

Sorry Gary, yes, just read your comment more carefully.  I mean the bond OEF sleeve performance only.

Gary, I am talking about YTD performance.  Win had one fund that lost 6%.  Based on his needs, I imagine he will swap it out for some of these core funds that haven't lost as much year to date.  In my case, my 5 bond OEFs had a weighted average loss of 6%.  This would be terrible for Win but I can live with it if I can continue to get yield 3%+.  From what I have seen, the higher the bond fund yield, the greater the likelihood of poor performance during this crash.  Have you seen similar results?


Paul:  Replying to myself, I seldom hear bond funds discussed on CNBC but this morning David Faber briefly made the point of distinction between short term bond funds and longer term bond funds.  He said many investors went into some short term bond funds they thought were relatively safe.  These bonds give a little yield and to do so venture into some HY and MBS and other credit bond asset classes, most I would think in better quality and with prudence and diversification.  When these bond funds lost 6% or 7%, these investors said whoa, this is not what I expected and they sold out.  I am hoping this is an anomaly and we get back normal.  I am happy to say all my bond OEFs were in the black yesterday including DBLSX.  I am sticking with my all my bond funds even though some got hit harder than I expected.  My hope is this one month's performance was a perfect storm that was a one off.  I don't want to sell a fund that has been good to me for the first multiple years of my retirement.  I will give it time to get back on its feet and get its mojo back. 


 


 

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Re: Bond OEF Investing for More Conservative Investors

I'm sticking with the core bond funds I have kept though all this mess. Before the market downturn, I felt only bond funds were sensible investments. Who wants to buy equities when the market was at an all time high? I still took more of a loss than I imagined with some higher yielding multi sector bond funds. Like a scalded dog, I'm not looking to reenter into lower credit bond funds in the future. I am hoping my individual bonds are not called?

For me conservative bonds are investment grade credit bonds and higher. My bond funds now are A, or higher rated.

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Re: Bond OEF Investing for More Conservative Investors

Hi Kat ....  Would you share a couple of your best performing core bond funds for us to take a look at?  The one I have so far for watching is BFAFX which M* says I believe has been revamped in last several years.  

Mahalo ....

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Valued Contributor

Re: Bond OEF Investing for More Conservative Investors

Mortgage relief under CARES Act may be a cloud over MBS funds [dedicated or those rely heavily on MBS and related derivatives] - it may counter what the Fed has announced so far on agency MBS support. Mortgage industry is looking at the Fed to address this. See this thread,   https://community.morningstar.com/t5/Bond-Squad/CARES-Act-and-Mortgage-Relief/m-p/688125#M5601

YBB
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