Down goes the Dow

comfortably retired from the other ipad wrote:

M.a.s.e.r.a.t.iii wrote:

Today’s “inflation print” is slaughtering my 20-yr’s and TLT. I bought at about 4.1%, yield is now 4.441% and rising.

Hmmm glad I didn’t twice as much, as I was thinking of doing. I can afford to wait it out and it’s only a paper loss, and not a lot, but it sucks. It’s my one negative this year.

lol when do I add to the position?

Personally, I’m ignoring the price fluctuations on bonds I hold, as I intend to hang onto them until maturity to generate income. Also, bonds continue to look very attractive to me, and with yields rising, more attractive than recently.

I don’t remember whether I’ve already made this point on here, but low volatility has real value, both mathematically and psychologically. I’m not at home near my computer to share graphs to illustrate the point, but compound returns of ~5% per year over 20 years with little or no volatility are very likely to outperform conventional 60/40 or 70/30 portfolios over the same duration, which makes the current yields on investment grade corporate bonds pretty sweet.

comfortably retired from the other ipad wrote:

M.a.s.e.r.a.t.iii wrote:

Today’s “inflation print” is slaughtering my 20-yr’s and TLT. I bought at about 4.1%, yield is now 4.441% and rising.

Hmmm glad I didn’t twice as much, as I was thinking of doing. I can afford to wait it out and it’s only a paper loss, and not a lot, but it sucks. It’s my one negative this year.

lol when do I add to the position?

Personally, I’m ignoring the price fluctuations on bonds I hold, as I intend to hang onto them until maturity to generate income. Also, bonds continue to look very attractive to me, and with yields rising, more attractive than recently.

I don’t remember whether I’ve already made this point on here, but low volatility has real value, both mathematically and psychologically. I’m not at home near my computer to share graphs to illustrate the point, but compound returns of ~5% per year over 20 years with little or no volatility are very likely to outperform conventional 60/40 or 70/30 portfolios over the same duration, which makes the current yields on investment grade corporate bonds pretty sweet.

comfortably retired from the other ipad wrote:

M.a.s.e.r.a.t.iii wrote:

Today’s “inflation print” is slaughtering my 20-yr’s and TLT. I bought at about 4.1%, yield is now 4.441% and rising.

Hmmm glad I didn’t twice as much, as I was thinking of doing. I can afford to wait it out and it’s only a paper loss, and not a lot, but it sucks. It’s my one negative this year.

lol when do I add to the position?

Personally, I’m ignoring the price fluctuations on bonds I hold, as I intend to hang onto them until maturity to generate income. Also, bonds continue to look very attractive to me, and with yields rising, more attractive than recently.

I don’t remember whether I’ve already made this point on here, but low volatility has real value, both mathematically and psychologically. I’m not at home near my computer to share graphs to illustrate the point, but compound returns of ~5% per year over 20 years with little or no volatility are very likely to outperform conventional 60/40 or 70/30 portfolios over the same duration, which makes the current yields on investment grade corporate bonds pretty sweet.

agip wrote:

M.a.s.e.r.a.t.iii wrote:

Today’s “inflation print” is slaughtering my 20-yr’s and TLT. I bought at about 4.1%, yield is now 4.441% and rising.

Hmmm glad I didn’t twice as much, as I was thinking of doing. I can afford to wait it out and it’s only a paper loss, and not a lot, but it sucks. It’s my one negative this year.

lol when do I add to the position?

I'm with you - I extended duration on my fixed income over the last couple of months, figuring with inflation settling in at 2%, interest rates would fall. they didn't. Getting hurt on that.

immensely amusing that since the Fed cut rates...interest rates have risen.

The Fed's power is overestimated.

But I do think the real inflation rate is 1-2% right now and that will bring interest rates down.

agip wrote:

comfortably retired from the other ipad wrote:

Personally, I’m ignoring the price fluctuations on bonds I hold, as I intend to hang onto them until maturity to generate income. Also, bonds continue to look very attractive to me, and with yields rising, more attractive than recently.

I don’t remember whether I’ve already made this point on here, but low volatility has real value, both mathematically and psychologically. I’m not at home near my computer to share graphs to illustrate the point, but compound returns of ~5% per year over 20 years with little or no volatility are very likely to outperform conventional 60/40 or 70/30 portfolios over the same duration, which makes the current yields on investment grade corporate bonds pretty sweet.

curious about the volatility idea...I'm not a great source on these things since I'm not very mathematical...but seems like volatility in bonds might be a help on returns since most of your return comes from regular interest payments.

If there is volatility, your regular interest payments would buy more reinvested bond 'shares' when bond prices are lower and fewer 'shares' when bond prices are higher.

If that is the major factor - and lord knows it probably isn't - then volatility in bond prices might increase return. Because you buy more when bonds are cheap and less when they are expensive.

If you spend the coupon payments and own actual bonds (and not funds) then I don't see how volatility matters.

comfortably retired from the other ipad wrote:

M.a.s.e.r.a.t.iii wrote:

Today’s “inflation print” is slaughtering my 20-yr’s and TLT. I bought at about 4.1%, yield is now 4.441% and rising.

Hmmm glad I didn’t twice as much, as I was thinking of doing. I can afford to wait it out and it’s only a paper loss, and not a lot, but it sucks. It’s my one negative this year.

lol when do I add to the position?

Personally, I’m ignoring the price fluctuations on bonds I hold, as I intend to hang onto them until maturity to generate income. Also, bonds continue to look very attractive to me, and with yields rising, more attractive than recently.

I don’t remember whether I’ve already made this point on here, but low volatility has real value, both mathematically and psychologically. I’m not at home near my computer to share graphs to illustrate the point, but compound returns of ~5% per year over 20 years with little or no volatility are very likely to outperform conventional 60/40 or 70/30 portfolios over the same duration, which makes the current yields on investment grade corporate bonds pretty sweet.

agip wrote:

comfortably retired from the other ipad wrote:

Personally, I’m ignoring the price fluctuations on bonds I hold, as I intend to hang onto them until maturity to generate income. Also, bonds continue to look very attractive to me, and with yields rising, more attractive than recently.

I don’t remember whether I’ve already made this point on here, but low volatility has real value, both mathematically and psychologically. I’m not at home near my computer to share graphs to illustrate the point, but compound returns of ~5% per year over 20 years with little or no volatility are very likely to outperform conventional 60/40 or 70/30 portfolios over the same duration, which makes the current yields on investment grade corporate bonds pretty sweet.

curious about the volatility idea...I'm not a great source on these things since I'm not very mathematical...but seems like volatility in bonds might be a help on returns since most of your return comes from regular interest payments.

If there is volatility, your regular interest payments would buy more reinvested bond 'shares' when bond prices are lower and fewer 'shares' when bond prices are higher.

If that is the major factor - and lord knows it probably isn't - then volatility in bond prices might increase return. Because you buy more when bonds are cheap and less when they are expensive.

If you spend the coupon payments and own actual bonds (and not funds) then I don't see how volatility matters.

comfortably retired from the other ipad wrote:

agip wrote:

curious about the volatility idea...I'm not a great source on these things since I'm not very mathematical...but seems like volatility in bonds might be a help on returns since most of your return comes from regular interest payments.

If there is volatility, your regular interest payments would buy more reinvested bond 'shares' when bond prices are lower and fewer 'shares' when bond prices are higher.

If that is the major factor - and lord knows it probably isn't - then volatility in bond prices might increase return. Because you buy more when bonds are cheap and less when they are expensive.

If you spend the coupon payments and own actual bonds (and not funds) then I don't see how volatility matters.

I’ll try to explain with one very simple example. Imagine two years in a row where you have an average return of 20% per year. That can happen with no volatility (even returns of 20%) or in any number of other ways. One way would be 40% in either year and 0% in the other year. With no volatility, you have $144 after two years if you started with $100, whereas in the other case you end up with $140. Over a longer time period the difference gets bigger. You can pick any other example you like and you will always find that adding volatility (variability, risk) always deteriorates returns over time for the same average annual return.

Ghost of Igloi wrote:

agip wrote:

curious about the volatility idea...I'm not a great source on these things since I'm not very mathematical...but seems like volatility in bonds might be a help on returns since most of your return comes from regular interest payments.

If there is volatility, your regular interest payments would buy more reinvested bond 'shares' when bond prices are lower and fewer 'shares' when bond prices are higher.

If that is the major factor - and lord knows it probably isn't - then volatility in bond prices might increase return. Because you buy more when bonds are cheap and less when they are expensive.

If you spend the coupon payments and own actual bonds (and not funds) then I don't see how volatility matters.

The biggest risk for new retiree is sequence of return risk. One glaringly ignored by Flagpole and Sally, or anyone that believes equity indexing is all empowering. If you are near fully invested in equities at a top, and retire at that period, not the exact day, month, or even year, you could have financial plan failure. It becomes the opposite of compounding returns, withdrawals at the same time of large portfolio losses.