I'm not the poster you're asking, but I'm not timing the market and I still don't want bond funds.May I ask why not? Is it simply because you're timing the market, or are there other reasons (too)?
I want my fixed income to be ultra predictable, and turn liquid, with the full principal, at the time that I told it to turn liquid when I bought it.
Sure, it's possible that the day will come when I need some of that money early, and have to take it while bonds are low. But a bond fund will also be low at precisely that same time, so I'm not seeing the advantage of the bond fund.
Now, if I had a LOT more money--enough money to live off the dividend from a bond fund--my view might be very different. But to get, say, $100K in annual income from a bond fund, if we assume average dividends of three percent....100/.03=3.3 million.
I do not have 3.3 million, and certainly not 3.3 million to put in my fixed income allocation--that would suggest that my total liquid assets are at least 7 million.
Now, for rebalancing, it would be logical for me to want a glob of fairly liquid fixed income money. That is a messier problem, I admit. But is it an actual problem of numbers, or a problem of complexity? Figuring out which of my "slush" bonds, the ones not irrevocably dedicated to my ladders, to sell to rebalance, is definitely more work than just selling shares of a bond fund.
But will I gain less or lose more from selling individual bonds than from selling the fund? Is the bid/ask spread immensely larger than the bid-ask spread for an ETF--large enough to overwhelm the ER of the bond and to overwhelm the advantage of sometimes, perhaps usually, having a bond coming close to its maturity date when I want to rebalance?
That's probably something I should figure out.
Statistics: Posted by BirdFood — Thu Aug 22, 2024 6:21 pm — Replies 14 — Views 737