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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors


@FD1001 wrote:

Your approach is most likely the best for 99.9% of investors. It could be a very painful ride to B&H but I believe it will all come back. The biggest worry is for hose that need current income from their portfolio is selling depressed assets. That I cannot deal with.

You see a train comes toward you, you can stay and wait or maybe get off the train.  I looked at several bucket portfolios and I couldn't find any with a loss remotely at 7.8% in bucket one.

Why you should worry if you need income? if you set your portfolio correctly you must have ballast funds like VBTLX which is up YTD over 3%.

But...Your approach is most likely the best for 99.9% of investors...wow

KISS.  


FD...  My bucket 1 was a result of my AA, I had 25% each into 3 of my highest confidence funds, and 2 of them were stinkers, Pimco Income and DoubleLine Flex.  I consciously stretched for a little extra yield and wanted to have that AA.  I could have used your VBTLX but the whopping 1.8% yield would not cut it for me.  It was working fine for years until the Black Swan hit the Perfect Storm.  Most people (perhaps not 99.9%) want stocks in the portfolio.  How much stocks?  I would tell an investor to first sock away 8yr to 10yr in Bucket 1 (they can dial up their own risk profile) but keep it in liquid money, then the rest of their money they can prudently put in their stock bucket.  Buckets of Money is an AA and portfolio management tool.  It allows one to weather a storm.  One does not have to cut and run and then decide when and how much to get back in.  You can do that because you only deal with bonds.  Most investors want GROWTH in their portfolio.  Your style is dangerous for them.  For me, with 50:50 AA, if you think I would retire and use your analogy of cashing out if I see an oncoming train, believe me I would crap in my pants first and go back to work.  Your investment philosophy is lousy model for others, but your bond fund analysis can be helpful I guess.  The perplexing thing for me is bond funds are generally defensive for one's portfolio but yet you do not hang around for defense.  You cash out.  I wonder what your followers think about that?  All this analysis, Sharp ratios, etc and you cut and run.  LOL.  Whatever. ......

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Explorer ○○

Re: Bond OEF Investing for More Conservative Investors

I am confused. By Christine's standard Bucket 1 is supposed to hold only cash, which at present would not see any loss. Bucket 2 would be the one holding bonds.


@PaulR888 wrote:

@FD1001 wrote:

Your approach is most likely the best for 99.9% of investors. It could be a very painful ride to B&H but I believe it will all come back. The biggest worry is for hose that need current income from their portfolio is selling depressed assets. That I cannot deal with.

You see a train comes toward you, you can stay and wait or maybe get off the train.  I looked at several bucket portfolios and I couldn't find any with a loss remotely at 7.8% in bucket one.

Why you should worry if you need income? if you set your portfolio correctly you must have ballast funds like VBTLX which is up YTD over 3%.

But...Your approach is most likely the best for 99.9% of investors...wow

KISS.  


FD...  My bucket 1 was a result of my AA, I had 25% each into 3 of my highest confidence funds, and 2 of them were stinkers, Pimco Income and DoubleLine Flex.  I consciously stretched for a little extra yield and wanted to have that AA.  I could have used your VBTLX but the whopping 1.8% yield would not cut it for me.  It was working fine for years until the Black Swan hit the Perfect Storm.  Most people (perhaps not 99.9%) want stocks in the portfolio.  How much stocks?  I would tell an investor to first sock away 8yr to 10yr in Bucket 1 (they can dial up their own risk profile) but keep it in liquid money, then the rest of their money they can prudently put in their stock bucket.  Buckets of Money is an AA and portfolio management tool.  It allows one to weather a storm.  One does not have to cut and run and then decide when and how much to get back in.  You can do that because you only deal with bonds.  Most investors want GROWTH in their portfolio.  Your style is dangerous for them.  For me, with 50:50 AA, if you think I would retire and use your analogy of cashing out if I see an oncoming train, believe me I would crap in my pants first and go back to work.  Your investment philosophy is lousy model for others, but your bond fund analysis can be helpful I guess.  The perplexing thing for me is bond funds are generally defensive for one's portfolio but yet you do not hang around for defense.  You cash out.  I wonder what your followers think about that?  All this analysis, Sharp ratios, etc and you cut and run.  LOL.  Whatever. ......


 

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

Hi Poor .....   There are many versions of buckets of money, not just Christine Benz.  For simplicity, if talking Benz, I am merging her bucket 1 and bucket 2 into one bucket.  My liquid cash is my portfolio dividends (4%) that go into my Fidelity Core.  The rest are bond OEFs.  Benz does recommend 8yr to 10yr of gap expense coverage in this or these buckets.  As I mentioned many times here, I reach for a little yield in my bucket 1 and this last month I lost 7.8%.  That is not a killer for me as I am not selling any bucket 1 now.  I have dividends I am living off of.  If you can't live with that volatility, don't go for yield in bucket 1 like me.  Go for Core bond funds or any other less volatile funds.  The key is to create a camel's hump or cookie jar you can tap at any time sell for needed liquidity and not worry about tapping or selling at depressed prices.  If I have to liquidate any bucket 1 I will sell one of the 3 other funds that are not stinkers at the time.  Why buckets of money continues to be controversial among some posters boggles my mind.  Even if one if an income centrist investor, I would caution against no bond OEFs and being all stocks (i.e., all bucket 3) because what if dividends are cut and you need liquidity?  What the heck are you going to do?  Bucket 1/2 provides the backstop for you.  I learned about buckets of money by reading 2 of Ray Lucia's books many years ago.  I am thankful that I did.  If only one book, I would suggest his Buckets of Money Retirement Solution, The Ultimate Guide.  Over 7 years in retirement, buckets of money have served me well.  This too shall pass.  Without this approach and understanding to do-it-yourself investing given my particular situation, I would be f'ed now and not sleeping well at all.  The plan and having confidence in the plan and sticking too it is calming.  Quite different from the GFC in '07/'09 where I was completely lost.  

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Re: Bond OEF Investing for More Conservative Investors

https://www.sandiegouniontribune.com/business/economy/sdut-sec-rules-fraud-ray-lucia-investing-bucke...

Lucia’s ‘Buckets of Money’ investing pitch full of holes

Last week a judge found that Lucia knowingly and fraudulently misled potential investors about the hypothetical historical performance of his strategy, for the purpose of selling real estate investment trusts in one of his “buckets.”

In the likely event that the commission agrees, Lucia will lose his investment adviser registration, be barred from associating with any investment firm, and pay $300,000 in fines.

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

WOW.   Just as I predicted to myself this would be next comment.  I have personally attended NUMEROUS Lucia seminars in Northern California and NEVER, I REPEAT NEVER did anything that the SEC claimed he did, did I witness in the seminars.  The seminars were extremely helpful.  I wish the SEC would have interviewed me.  And his 2 books were invaluable to me.  If SEC aledges bother you, fine.  Do what you want to do.  Personally, it would and does not sway me the least.  I see constant bashing here in past when I post about Lucia or Gundlach.  If all the bashers know it all, good for them.  If they have better sources of information, let's hear  I have learned from Lucia and Rick Plum for that matter and Gundlach.  Wish all you bashers contribute with more useful comments that are better than what I mentioned instead of always finding the negatives.  I have taken sabbatical from Forum in past and may very well have to revisit that in the near future without the Ignore button.  Too much, beyond belief.

BTW, do you realize your SEC article is almost 7 years old.  I have no idea what the resolution was.  To me, it was a witch hunt that never impacted me in the least.  

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Re: Bond OEF Investing for More Conservative Investors


@Gary1952 wrote:

I know it is hard for you to relate to investors, versus traders like you. I get it when you are aiming for razor-thin margins of 4-6%. Most will sell in a panic then get back in too late. I know you have heard the term "whipsawed". Thus my reference to 99.9%. You are the 0.1%. Again, you will mot likely understand. It is too bad because you can be a pretty nice guy, them turn around and be a jerk. I have not been able to figure that out.

BTW I believe your buys and sells.....



I have said many times so let's say it again.  I have helped hundreds of investors over the years, just last week I did 2.  I never recommend trading, no ifs or buts.  I set it up according to what they need, their funds, indexes no indexes, LT, whatever.

Example: An older relative retired around 2001-2 and told me he saw several financial advisors and thinks they just to charge him 1% and he really doesn't trust him and markets got volatile and he wants a stable LT simple portfolio and all his money is at Vanguard.  Based on his portfolio, he needed about 3% maybe 3.5% yearly withdrawal.   I told him he can be in just 35-40% stocks and the rest bond and to invest in just 2 funds VWIAX+VCCGX.  Every 2-3 years this guy calls me and thank me how I saved him so much money and how it works.

I knew VWIAX would be better but I wanted to diversify a bit more.  Below are the results(link)
 
PortfolioCAGRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
70/30 VWIAX/VSCGX6.09% 6.03%16.41%-12.71%-21.50% 0.791.17
VWIAX6.54% 5.89%16.47%-9.79%-18.72% 0.881.34

 

And what happened with 3.5 annual withdrawal (link).

PortfolioInitial BalanceFinal BalanceCAGRTWRRMWRRStdevBest YearWorst YearMax. DrawdownSharpe RatioSortino Ratio
70/30 VWIAX/VSCGX1 M$1,55 M 2.42% 6.09%6.15%6.03%16.41%-12.71%-21.50% 0.791.17
VWIAX1 M$1.67 M 2.86% 6.54%6.62%5.89%16.47%-9.79%-18.72% 0.881.34

The above KISS "stupid" portfolio survived 19 years with twice 50% losses for stocks.  Yes, you can do it.

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

My bucket 1 is all cash now and bucket 2 is made up of simple aggregate bond funds now. I have very little in any other bond funds and what little I have are way down, but I think they will break even again in a few years. My bucket is stocks, which have taken a beating, but I will not need to touch bucket 3 until I am about 95 years old.

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

For those investors accustomed to using Standard Deviation as a metric of risk, I found it interesting to see revised SDs now showing up in some of our "favorite" funds:

                                                             SD

IOFIX                                                    22.55

SEMMX                                               13.11

VCFAX                                                  8.94

DFLEX                                                  8.05

JMSIX                                                  7.86

JMUTX                                                 7.70

PUCZX                                                  7.47 

 

For a period of time going forward, how Bond OEFS handled the 2020 market crash, will be reflected in its SD.

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

Congrats FatKat from one fellow bucketeer to another.  

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

Your welcome Paul, I started a new thread asking about VCOBX, Vanguard Core Bond Fund which I would use in place of my last $50G of Vanguard Ultrashort Bond fund, which has been dropping the past ten days with lower short term loans now made available.

I have most of my bond fund investment in funds like bnd/VBTLX, AGG, aggregate bond fund Baird BAGIX, some mortgage-Backed Securities, VMBSX, and Vanguard GNMA fund. So far so good.

 

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Re: Bond OEF Investing for More Conservative Investors

@dtconroe , thanks for the alert for M* updated SD/data. Normally, there is a few days of blackout at M* for updating data around month-start. May be it has new computers.

Good news is that Portfolio Visualizer also has updated SDs. I checked 3 funds and those match exactly with M*. Link, Run 4/1/17-3/31/20

So, posters can now update their portfolio SD and Relative SD.

Relative SD with respect to SP500 are IOFIX 1.48, SEMMX 0.86, JMSIX 0.52.

YBB
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Re: Bond OEF Investing for More Conservative Investors


@dtconroe wrote:

For those investors accustomed to using Standard Deviation as a metric of risk, I found it interesting to see revised SDs now showing up in some of our "favorite" funds:

                                                             SD

IOFIX                                                    22.55

SEMMX                                               13.11

VCFAX                                                  8.94

DFLEX                                                  8.05

JMSIX                                                  7.86

JMUTX                                                 7.70

PUCZX                                                  7.47 

 

For a period of time going forward, how Bond OEFS handled the 2020 market crash, will be reflected in its SD.


DT, I do have a little, very little, of JMUTX and figure it will recover, eventually, and will keep it. This market has been full of surprises. I wish they were happier surprises.

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Re: Bond OEF Investing for More Conservative Investors


@FatKat wrote:

Your welcome Paul, I started a new thread asking about VCOBX, Vanguard Core Bond Fund which I would use in place of my last $50G of Vanguard Ultrashort Bond fund, which has been dropping the past ten days with lower short term loans now made available.

I have most of my bond fund investment in funds like bnd/VBTLX, AGG, aggregate bond fund Baird BAGIX, some mortgage-Backed Securities, VMBSX, and Vanguard GNMA fund. So far so good.

 


Offhand, VCOBX looks fine to me as an intermediate core bond fund.  My plan for the rest of the year is to read and listen to the PMs to understand their explanation/excuse for crappy performance of a couple of my bond OEFs.  Right now I am leaning to trim back and start new allocation of 20% intermediate core bond funds in my bucket 1 bond OEF sleeve.  
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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

I guess it is "relevant" for yet another debate to ensue regarding the appropriateness of bucket investing, compared to more of a trading oriented approach--depending on how you define "trading".  I have long said that I am not a good trader, and I still feel the same way.  I am a preservation of principal investor, using relatively conservative investments, that change more slowly. I can hold my investments for a longer period in more typical corrections, but I do not have a safety net in the form of a company pension, to keep me financially secure in a major market crash. Fortunately, because my investments were very conservative, I had a chance to evaluate fund losses, without feeling panicky.  You can be a lot more philosophical about your investing approach, if you have that company pension in place to protect you financially.  Because my Retirement Nest Egg is totally in investing assets, I was not willing to let my retirement nest egg go down to an alarming amount, so I sold all of my investments when my assets pushed my total principal slightly negative on a YTD basis.  I am now in money markets, with a small percentage loss.  Yes, I am looking for my opportunity to re-enter this market, when I am more confident that my retirement principal is not significantly in danger any longer.  I fully expect to buy new assets well below what they were valued when I sold them--will I be successful?  I am not sure, but I am glad I made my decision to sell when I did, and I am optimistic I will recoup my small YTD loss before the year is over. 

I am not a good trader.   Others made a much better trade decision than I did and have lost less than I did.  Even though I am not a good trader,  I am glad that I am not a classic bucket investor, based on what I now know about the nature of this coronavirus bear market, which will almost certainly move into recession status soon.

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Re: Bond OEF Investing for More Conservative Investors

DT, a well-balanced approach for a retiree who has enough and likes to preserve his portfolio and sanity.  For every rule, there is an exception and black swan is definitely one of them.

The biggest problem many investors have is when they don't sell on time and then they lose 10% and then they think it will rebound and then comes the 15-20% and then they can't sell because it's too late OR even worse, sell at the bottom.  Sure, I know, many of you never done it and always buy and hold no matter what  ;-)

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Re: Bond OEF Investing for More Conservative Investors

I hope investors will continue posting on this thread.  I am happy to support discussing bond oefs that are worth evaluating and hope those discussions will be of value to posters and readers.  When it comes to the "best" investing strategy, time will give us the answer, and I suspect we are now locked into what we have chosen, good or bad.   I am now trying to figure out the best way of monitoring this market mess, the best way to determine when I want to start spending my money market money, and when I feel more comfortable that the market mess will not get worse, and  I will start some process of re-entering the market with carefully calculated choices.  Until then, I don't much care to speculate if bucket investing is better or worse than any other form of investing--we can talk about that in hindsight when the economy is not under siege.

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Re: Bond OEF Investing for More Conservative Investors

I will honor your request Dt but with this final comment.  I glanced over Ray Lucia's book yesterday and re-read the Ben Stein forward which I quote in part:  "... And if you find a better way to invest, go for it.  You won't hurt my feelings,  In fact, I want to hear about it.  I might put it this way:  If you can find a way to stay afloat in water by yourself indefinitely without a life jacket, let me know.  Ray's ideas are the life jacket."

Portfolio maintenance:  I've reminded myself to change the Reinvest vs Core decision for distributions of each of my holdings.  Up to now, all distributions had been going into Core.  With the market correction, I am now reinvesting all LC growth,LC Blend, LC Value, Int'l and EM mutual fund distributions.  But to support the Income needs of my portfolio, all distributions from my bond OEFs, bond CEFs, REITs, BDCs and HQL will continue to go into Core.  This will support a 4.5% portfolio yield unless cuts to distribution are made.  

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Frequent Contributor

Re: Bond OEF Investing for More Conservative Investors

I keep monitoring a large number of category watchlists I maintain at M*, to help me identify bond oefs that have done reasonably well in March, when the market crash was at its worst.  Intermediate Core Plus funds are one of the better performing categories, with a large number of funds positive for one week and YTD, but have varying performance during the month of March.  One of the best performing funds is TGLMX.  It is one of the better performing funds, being positive for both one week and YTD, and only a .32% loss in March.  M* has its portfolio assets with a Credit Rating of BB, in the junk category--I have not found many junk bond funds in the Intermediate Core Plus category, and in general BB Credit Rated funds have not had very good performance in 2020.  However, when I looked closer at TGLMX holdings, 85% are in AAA assets, with almost 90% of its total portfolio being in Investment Grade assets.  It seems to me that TGLMX higher Credit Rated assets are probably the reason it is doing very well in this category, and why you may want to look past that M* Credit Rating of BB, to consider for an investment. Its managers are long tenured, and they invest their own money pretty heavily in this fund.

Just a fund to keep in mind when digging through the rubble of this market crash.

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Re: Bond OEF Investing for More Conservative Investors

M* shows that TGLMX had 9.43% in below B at 12/31/19 and the fund website shows 9.89% below B as of 2/29/20. That may have changes by now.

But that is the reason for M* poor avg credit rating as it is based on weighted average of related defaults, not weighted average of credit ratings [often used by funds]. Fund website doesn't provide style box info, but if it did, that would probably differ from the M* style box info.

YBB
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Re: Bond OEF Investing for More Conservative Investors


@yogibearbull wrote:

M* shows that TGLMX had 9.43% in below B at 12/31/19 and the fund website shows 9.89% below B as of 2/29/20. That may have changes by now.

But that is the reason for M* poor avg credit rating as it is based on weighted average of related defaults, not weighted average of credit ratings [often used by funds]. Fund website doesn't provide style box info, but if it did, that would probably differ from the M* style box info.


I guess my point is that when you look at the Credit Rating of funds, using M* information, that can be very misleading when you look at total return performance of similar funds during the March market crash period.  For example, DBLTX and TGLMX both have the same BB Credit Rating by M*, but TGLMX has about 15% more of its assets in Investment Grade Categories than DBLTX.  DBLTX has about twice as much Not Rated assets than TGLMX, and that shows up in performance over this market crash period.  TGLMX has a far superior total return performance in the March crash period, than DBLTX.  TGLMX actually has a better performance record than its peers rated by M* as having an Investment Grade rating.  TGLMX has far far superior performance history than most BB rated funds.  

Investment Grade bond oefs have performed much better than Junk Grade bond oefs during the March crash--the M* Credit Rating can be very misleading in due diligence metrics involving Credit Rating, when you see the reality of how bond oefs performed in the month of March.

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