Post by Admin on Aug 23, 2021 15:09:12 GMT -5
It depends.
A young accumulator, can have only 0-20% in bonds.
A retiree can have 20-80% in bonds depending on several factors; Does she have a pension? How big is the portfolio. If she has enough already, so why take a lot of risk with stocks.
If this retiree knows how to trade, then she has other options.
If she knows rates are going up, she should stay out of higher-rated bond funds.
Bonds are the only true diversifiers for stocks. Most articles/books/experts discuss simple higher-rated bond, AKA treasuries and/or US total bond index funds. Bond come in different categories with different risk+SD(volatility) and behavior in different market conditions.
In a crash, treasuries are the best.
In rising rates, bank loans do well
HY Munis have done pretty well over the years because of their tax advantage and demand.
Specialized MBS fund managers find great risk/reward opportunities, but the category can crash during a meltdown.
Leveraged CEFs is another tricky category with higher performance + higher risk/SD. IMO, it suited for more advanced investors and especially traders.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. Duration works best with treasuries, but don't depend on it when you analyze flexible bond funds. You can have a fund with duration=1 and it can lose a lot more than another one with 3 years duration regardless of a rate change.
The higher % you own in stocks (above 70%) the more you want to own higher-rated bond funds which suite accumulators.
Retirees who own higher % in bond, need/want higher income + more diversification + i higher tax brackets can look at other bond categories. This is what I mainly own since retirement.
A young accumulator, can have only 0-20% in bonds.
A retiree can have 20-80% in bonds depending on several factors; Does she have a pension? How big is the portfolio. If she has enough already, so why take a lot of risk with stocks.
If this retiree knows how to trade, then she has other options.
If she knows rates are going up, she should stay out of higher-rated bond funds.
Bonds are the only true diversifiers for stocks. Most articles/books/experts discuss simple higher-rated bond, AKA treasuries and/or US total bond index funds. Bond come in different categories with different risk+SD(volatility) and behavior in different market conditions.
In a crash, treasuries are the best.
In rising rates, bank loans do well
HY Munis have done pretty well over the years because of their tax advantage and demand.
Specialized MBS fund managers find great risk/reward opportunities, but the category can crash during a meltdown.
Leveraged CEFs is another tricky category with higher performance + higher risk/SD. IMO, it suited for more advanced investors and especially traders.
Duration is a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. Duration works best with treasuries, but don't depend on it when you analyze flexible bond funds. You can have a fund with duration=1 and it can lose a lot more than another one with 3 years duration regardless of a rate change.
The higher % you own in stocks (above 70%) the more you want to own higher-rated bond funds which suite accumulators.
Retirees who own higher % in bond, need/want higher income + more diversification + i higher tax brackets can look at other bond categories. This is what I mainly own since retirement.