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Today is the day! Sell stocks, invest bonds!
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2022 Nov 11, 8:30am 8,002 views 68 comments
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62
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2024 May 27, 9:29am
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2024 May 27, 9:29am
Al_Sharpton_for_President says
From August 2021 to October 2023, Vanguard Total Bond Market Fund decreased about 25% in price from around $90 to $68.
Its been likely one of the worst extended period for investment grade bonds within the last 40 years.
That is why I think the worse is behind for the Vanguard Total Bond Market Fund as annual inflation has steadied around 3.25%.
Keep eye on the 31 May 2024 report for Personal Consumption Expenditures (PCE), which the Federal Reserve uses to set the Federal Reserve Funds rate based on inflation.
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I sold off my underwater bond funds and instead am investing in 13 week UST’s. Will use the loss to decrease my income taxes.
From August 2021 to October 2023, Vanguard Total Bond Market Fund decreased about 25% in price from around $90 to $68.
Its been likely one of the worst extended period for investment grade bonds within the last 40 years.
That is why I think the worse is behind for the Vanguard Total Bond Market Fund as annual inflation has steadied around 3.25%.
Keep eye on the 31 May 2024 report for Personal Consumption Expenditures (PCE), which the Federal Reserve uses to set the Federal Reserve Funds rate based on inflation.
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63
clambo
2024 May 27, 10:31am
Don't expect capital appreciation from a bond fund.
Conversely, a falling NAV of a bond fund should not bother you; the purpose of the fund is income.
If or when interest rates are decreased, the average bond fund NAV should go up.
Over long time periods, the return of a bond fund is just the interest income it pays out.
Conversely, a falling NAV of a bond fund should not bother you; the purpose of the fund is income.
If or when interest rates are decreased, the average bond fund NAV should go up.
Over long time periods, the return of a bond fund is just the interest income it pays out.
64
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2024 May 27, 10:40am
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2024 May 27, 10:40am
clambo says
I agree as a NAV does not show the annual return from the yield.
Right now the yield for Vanguard's Total Bond Market Fund (BND) is 4.7% which is expected given what Treasuries (1 year to 10 year duration) are at now
But I agree as far as the long term for a bond, as far as holding for at least 10 years, hopefully in a couple of years the 10-Year average annual return for BND is at least 1% above annual inflation, as BND recovers
I was just pointing out from summer of 2021 to fall of 2023 how the net asset value (NAV) dropped that much for the ticker BND (as expected because of inflation increasing around start of summer of 2021).
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Don't expect capital appreciation from a bond fund.
Conversely, a falling NAV of a bond fund should not bother you; the purpose of the fund is income.
If or when interest rates are decreased, the average bond fund NAV should go up.
Over long time periods, the return of a bond fund is just the interest income it pays out.
I agree as a NAV does not show the annual return from the yield.
Right now the yield for Vanguard's Total Bond Market Fund (BND) is 4.7% which is expected given what Treasuries (1 year to 10 year duration) are at now
But I agree as far as the long term for a bond, as far as holding for at least 10 years, hopefully in a couple of years the 10-Year average annual return for BND is at least 1% above annual inflation, as BND recovers
I was just pointing out from summer of 2021 to fall of 2023 how the net asset value (NAV) dropped that much for the ticker BND (as expected because of inflation increasing around start of summer of 2021).
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65
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2024 May 27, 11:18am
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2024 May 27, 11:18am
I do remember hearing on financial news shows that for every 1% increase in interest rates there is generally a 1% drop in price of a bond for every year of duration.
The host of these shows were trying to relate interest rate increases to the value (price or NAV) of the bond.
The host of these shows were trying to relate interest rate increases to the value (price or NAV) of the bond.
66
Al_Sharpton_for_President
2024 May 27, 11:58am
Al_Sharpton_for_President
2024 May 27, 11:58am
Quite a few “experts” have been recommending longer duration UST’s, not so much for their yield, but for capital gains after interest rates fall. Of course they have been recommending this for quite a while, while rates remain higher for longer.
67
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2024 May 27, 2:30pm
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2024 May 27, 2:30pm
Al_Sharpton_for_President says
Good point, as I figure the worst is behind bond funds until the Fed increases rates in the next inflationary cycle or period.
So the worse is behind bond funds like Vanguard's Total Stock Market Bond Fund for this cycle and likely the next stage is a recession as far as stocks crashing +20% and inflation decreases as well (based on no stagflation conditions). My best guess is all of this will be held off until right after the November election.
Even with the way Vanguard manages its bond funds like the Vanguard Total Stock Market Bond Fund with its bond-ladder-strategy, there will be at least some or a little capital appreciation or gains with bond prices increasing due to interest rates decreasing.
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Quite a few “experts” have been recommending longer duration UST’s, not so much for their yield, but for capital gains after interest rates fall. Of course they have been recommending this for quite a while, while rates remain higher for longer.
Good point, as I figure the worst is behind bond funds until the Fed increases rates in the next inflationary cycle or period.
So the worse is behind bond funds like Vanguard's Total Stock Market Bond Fund for this cycle and likely the next stage is a recession as far as stocks crashing +20% and inflation decreases as well (based on no stagflation conditions). My best guess is all of this will be held off until right after the November election.
Even with the way Vanguard manages its bond funds like the Vanguard Total Stock Market Bond Fund with its bond-ladder-strategy, there will be at least some or a little capital appreciation or gains with bond prices increasing due to interest rates decreasing.
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68
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2024 May 30, 10:20pm
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2024 May 30, 10:20pm
The stock market is erasing a lot of the COVID pandemic gains.
On one of several websites that track the stock market metrics, I saw that the inflation-adjusted S&P 500 is at the same level it was in October 2021 and only about 13.5% above its January 2021 level.
https://www.multpl.com/inflation-adjusted-s-p-500
This equates to an average annualized real gain of about 3.7% from January 2021.
I suspect it may drop from 3.7% to below 2% by this September as evidenced by recent major earnings disappointments such as today by SalesForce.
Historically the S&P 500's real annual gain or return is at least 7%.
On one of several websites that track the stock market metrics, I saw that the inflation-adjusted S&P 500 is at the same level it was in October 2021 and only about 13.5% above its January 2021 level.
https://www.multpl.com/inflation-adjusted-s-p-500
This equates to an average annualized real gain of about 3.7% from January 2021.
I suspect it may drop from 3.7% to below 2% by this September as evidenced by recent major earnings disappointments such as today by SalesForce.
Historically the S&P 500's real annual gain or return is at least 7%.
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I reinvested my investments in bonds yesterday, and switched my kids’ 529 college savings plan investments to bonds today. So I’m putting my own money on this bet, and I’m going all in.
BEAR MARKET alert!