Maximum Bond Upside

Discussion of the Bond portion of the Permanent Portfolio

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vnatale
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Re: Maximum Bond Upside

Post by vnatale » Fri Oct 08, 2021 9:35 pm

Stay Above the Interest Rate Fray

Your best bets now are venerable, managed diversified bond funds. You'll get a fair yield and peace of mind.

https://www.kiplinger.com/investing/bon ... -rate-fray


"This year, by contrast, housing and oil prices are soaring, wages are climbing, economic growth is robust. Those seem like reasons for the Fed to stand back and let the markets push interest rates higher, and the current Fed leadership is under pressure to tighten credit or at least stay neutral – a scenario right out of any 1970s first-year economics textbook.

Instead, on Aug. 6, the 10-year bond settled at 1.30%, down from a top of 1.75% in the spring. Bond funds that started 2021 dripping red ink are now up slightly, while presumptive beneficiaries of higher rates are backtracking."

"Your best bets now: venerable, managed diversified bond funds such as Dodge & Cox Income (DODIX), Metropolitan West Total Return Bond (MWTRX), PGIM Total Return Bond (PDBAX) and Vanguard Long-Term Investment Grade (VWESX). These funds have managers who have seen it all and represent the group that has done well over the past three months following early 2021 struggles. You will get a fair yield and peace of mind.

As for your individual bonds, hold them to maturity and be glad that defaults are all but nonexistent. You can stay comfortably above the interest-rate fray."


Looking at one of his recommended funds: Vanguard Long-Term Investment Grade (VWESX)...and then going to its summary: "This fund provides diversified exposure to medium-and high- quality investment-grade corporate bonds with an average maturity of 15 to 25 years. Reflecting this goal, the fund invests primarily in corporate bonds, with a small percentage in taxable municipal bonds, within that maturity range."

Is this not somewhat similar to the prescribed bond investment for the Permanent Portfolio? Roughly equivalent in terms of years but primarily corporate bonds rather than 100% Treasury. Therefore, seems akin to being a cousin to the recommended Permanent Portfolio bond investment.

Seems that one could do worse in making a bond investment than what he recommends?
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
dockinGA
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Re: Maximum Bond Upside

Post by dockinGA » Sat Oct 09, 2021 5:45 am

vnatale wrote:
Fri Oct 08, 2021 9:35 pm
Stay Above the Interest Rate Fray

Your best bets now are venerable, managed diversified bond funds. You'll get a fair yield and peace of mind.

https://www.kiplinger.com/investing/bon ... -rate-fray


"This year, by contrast, housing and oil prices are soaring, wages are climbing, economic growth is robust. Those seem like reasons for the Fed to stand back and let the markets push interest rates higher, and the current Fed leadership is under pressure to tighten credit or at least stay neutral – a scenario right out of any 1970s first-year economics textbook.

Instead, on Aug. 6, the 10-year bond settled at 1.30%, down from a top of 1.75% in the spring. Bond funds that started 2021 dripping red ink are now up slightly, while presumptive beneficiaries of higher rates are backtracking."

"Your best bets now: venerable, managed diversified bond funds such as Dodge & Cox Income (DODIX), Metropolitan West Total Return Bond (MWTRX), PGIM Total Return Bond (PDBAX) and Vanguard Long-Term Investment Grade (VWESX). These funds have managers who have seen it all and represent the group that has done well over the past three months following early 2021 struggles. You will get a fair yield and peace of mind.

As for your individual bonds, hold them to maturity and be glad that defaults are all but nonexistent. You can stay comfortably above the interest-rate fray."


Looking at one of his recommended funds: Vanguard Long-Term Investment Grade (VWESX)...and then going to its summary: "This fund provides diversified exposure to medium-and high- quality investment-grade corporate bonds with an average maturity of 15 to 25 years. Reflecting this goal, the fund invests primarily in corporate bonds, with a small percentage in taxable municipal bonds, within that maturity range."

Is this not somewhat similar to the prescribed bond investment for the Permanent Portfolio? Roughly equivalent in terms of years but primarily corporate bonds rather than 100% Treasury. Therefore, seems akin to being a cousin to the recommended Permanent Portfolio bond investment.

Seems that one could do worse in making a bond investment than what he recommends?
I, for one, and very nervous about corporate bonds. The yield may be higher, but when the crap hits the fan with the stock market, the same companies whose stock is declining usually have bonds that are declining in value as well. Whereas, with long term treasuries, those can oftentimes drive the portfolio forward during times of stock market uncertainty. Just one person's opinion.
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Re: Maximum Bond Upside

Post by vnatale » Sat Oct 09, 2021 9:05 am

dockinGA wrote:
Sat Oct 09, 2021 5:45 am

king a bond investment than what he recommends?

I, for one, and very nervous about corporate bonds. The yield may be higher, but when the crap hits the fan with the stock market, the same companies whose stock is declining usually have bonds that are declining in value as well. Whereas, with long term treasuries, those can oftentimes drive the portfolio forward during times of stock market uncertainty. Just one person's opinion.
[/quote]

Your opinion is one of the foundational principles of the Permanent Portfolio!
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats." AND "I'm a more-is-more person."
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I Shrugged
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Re: Maximum Bond Upside

Post by I Shrugged » Sat Oct 09, 2021 1:28 pm

Just look at 2009 for living proof of that.
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