There are a thousand ways to skin a cat … alls one can do is understand what they are buying vs jumping into investment xyz and acting surprised when rates rise at a record clip and it has a down year. That’s is how the bond math works. No surprise.This has been pointed out many times this year to the “no BND, get a ladder” crowd. Not sure why, but the point seems rarely ignored. “What are you going to replace the maturing rung with?”
Also acknowledge that rungs in a bond ladder also lose value per the duration. They lose value when rates rise, just like bonds funds do. The recovery toward maturity is indeed a different trajectory, and you have to manage the duration of funds to avoid holding duration that is beyond what you intend.
I still think, long term, 2022 bond fund performance is going to be hugely positive. An awful lot of us are much better informed and educated on fixed income instruments. Sure, a bunch of us saw account balances dip, but so what, aren’t we in it for the long term? I don’t mind a few years of depressed balances for more knowledge for the next 50 years.
We have 35 % of our retirement portfolio in a 5 year treasury ladder in retirement. We have say three to four bonds mature each year. When one matures we either keep it in our mm account to spend, rebalance it to equities, or buy another rung. Yes the entire portfolio changes in value just like bnd when rates change. But we redeem at face value when the rungs mature and we always have a bond coming up with a duration that pretty much matches our spending needs. We control what we can control. That is all one can do.
Riding the bnd wave can work too!
Statistics: Posted by Parkinglotracer — Sat Nov 02, 2024 3:49 am — Replies 55 — Views 3889