Investing in bonds – Question for investing gurus

[moneymaker]

yeah the fund managers made 250% more money than I did and it was my money! I guess it is like the local politician making 2 1/2 times what his constituency earns. I guess that just proves my fund manager is smarter than I am.

[enron_by_the_sea]

[1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)

[enron_by_the_sea]

[1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)

[enron_by_the_sea]

[1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)

[enron_by_the_sea]

[1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)

[enron_by_the_sea]

[1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)

[equalizer]

For the short term (5 years) I would look at alternative investments for at least 25% of your portfolio, esp higher yield and emerging. Not lowest cost, but better risk management. Here’s a list starting with the least volatile:

Alpine Ultra Short Tax Optimized Inc Inv
ATOIX

Hussman Strategic Total Return
HSTRX

Janus Flexible Bond T
JAFIX

DoubleLine Total Return Bond N
DLTNX

PIMCO Unconstrained Bond D PUBDX

DoubleLine Emerging Markets Income N
DLENX

Permanent Portfolio (lots of gold, silver)
PRPFX

Matthews Asia Dividend
MAPIX

Harbor High-Yield Bond Inv
HYFIX

For longer term I would suggest variable annuity, but the benefits and guarantees by the Prudential’s and MetLife’s of the world have been greatly reduced since 2008.

From Financial Planning (Sep 2010), “VA’s Head for a Slowdown” – “Strong compensation and the continuation of guarantees, albeit somewhat more expensive and restrictive, are clearly appealing to the independent advisor.”

Damn, I just don’t know when to keep my mouth shut, that’s why I don’t have a Ferrari like the Grammy winning poster who was screaming about the value of VA’s earlier this year.

[equalizer]

For the short term (5 years) I would look at alternative investments for at least 25% of your portfolio, esp higher yield and emerging. Not lowest cost, but better risk management. Here’s a list starting with the least volatile:

Alpine Ultra Short Tax Optimized Inc Inv
ATOIX

Hussman Strategic Total Return
HSTRX

Janus Flexible Bond T
JAFIX

DoubleLine Total Return Bond N
DLTNX

PIMCO Unconstrained Bond D PUBDX

DoubleLine Emerging Markets Income N
DLENX

Permanent Portfolio (lots of gold, silver)
PRPFX

Matthews Asia Dividend
MAPIX

Harbor High-Yield Bond Inv
HYFIX

For longer term I would suggest variable annuity, but the benefits and guarantees by the Prudential’s and MetLife’s of the world have been greatly reduced since 2008.

From Financial Planning (Sep 2010), “VA’s Head for a Slowdown” – “Strong compensation and the continuation of guarantees, albeit somewhat more expensive and restrictive, are clearly appealing to the independent advisor.”

Damn, I just don’t know when to keep my mouth shut, that’s why I don’t have a Ferrari like the Grammy winning poster who was screaming about the value of VA’s earlier this year.

[equalizer]

For the short term (5 years) I would look at alternative investments for at least 25% of your portfolio, esp higher yield and emerging. Not lowest cost, but better risk management. Here’s a list starting with the least volatile:

Alpine Ultra Short Tax Optimized Inc Inv
ATOIX

Hussman Strategic Total Return
HSTRX

Janus Flexible Bond T
JAFIX

DoubleLine Total Return Bond N
DLTNX

PIMCO Unconstrained Bond D PUBDX

DoubleLine Emerging Markets Income N
DLENX

Permanent Portfolio (lots of gold, silver)
PRPFX

Matthews Asia Dividend
MAPIX

Harbor High-Yield Bond Inv
HYFIX

For longer term I would suggest variable annuity, but the benefits and guarantees by the Prudential’s and MetLife’s of the world have been greatly reduced since 2008.

From Financial Planning (Sep 2010), “VA’s Head for a Slowdown” – “Strong compensation and the continuation of guarantees, albeit somewhat more expensive and restrictive, are clearly appealing to the independent advisor.”

Damn, I just don’t know when to keep my mouth shut, that’s why I don’t have a Ferrari like the Grammy winning poster who was screaming about the value of VA’s earlier this year.

[equalizer]

For the short term (5 years) I would look at alternative investments for at least 25% of your portfolio, esp higher yield and emerging. Not lowest cost, but better risk management. Here’s a list starting with the least volatile:

Alpine Ultra Short Tax Optimized Inc Inv
ATOIX

Hussman Strategic Total Return
HSTRX

Janus Flexible Bond T
JAFIX

DoubleLine Total Return Bond N
DLTNX

PIMCO Unconstrained Bond D PUBDX

DoubleLine Emerging Markets Income N
DLENX

Permanent Portfolio (lots of gold, silver)
PRPFX

Matthews Asia Dividend
MAPIX

Harbor High-Yield Bond Inv
HYFIX

For longer term I would suggest variable annuity, but the benefits and guarantees by the Prudential’s and MetLife’s of the world have been greatly reduced since 2008.

From Financial Planning (Sep 2010), “VA’s Head for a Slowdown” – “Strong compensation and the continuation of guarantees, albeit somewhat more expensive and restrictive, are clearly appealing to the independent advisor.”

Damn, I just don’t know when to keep my mouth shut, that’s why I don’t have a Ferrari like the Grammy winning poster who was screaming about the value of VA’s earlier this year.

[equalizer]

For the short term (5 years) I would look at alternative investments for at least 25% of your portfolio, esp higher yield and emerging. Not lowest cost, but better risk management. Here’s a list starting with the least volatile:

Alpine Ultra Short Tax Optimized Inc Inv
ATOIX

Hussman Strategic Total Return
HSTRX

Janus Flexible Bond T
JAFIX

DoubleLine Total Return Bond N
DLTNX

PIMCO Unconstrained Bond D PUBDX

DoubleLine Emerging Markets Income N
DLENX

Permanent Portfolio (lots of gold, silver)
PRPFX

Matthews Asia Dividend
MAPIX

Harbor High-Yield Bond Inv
HYFIX

For longer term I would suggest variable annuity, but the benefits and guarantees by the Prudential’s and MetLife’s of the world have been greatly reduced since 2008.

From Financial Planning (Sep 2010), “VA’s Head for a Slowdown” – “Strong compensation and the continuation of guarantees, albeit somewhat more expensive and restrictive, are clearly appealing to the independent advisor.”

Damn, I just don’t know when to keep my mouth shut, that’s why I don’t have a Ferrari like the Grammy winning poster who was screaming about the value of VA’s earlier this year.

[patb]

[quote=enron_by_the_sea][1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)[/quote]

look at utility preferred shares also.

fixed dividend, decent biz model

look at SCE or CMS

[patb]

[quote=enron_by_the_sea][1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)[/quote]

look at utility preferred shares also.

fixed dividend, decent biz model

look at SCE or CMS

[patb]

[quote=enron_by_the_sea][1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)[/quote]

look at utility preferred shares also.

fixed dividend, decent biz model

look at SCE or CMS

[patb]

[quote=enron_by_the_sea][1] for your situation, there are only 3 catagories of bonds that you should consider – Treasury, GNMA and CA GO. Or spread money in these 3 catagories. [If you don’t know about them google or wikipedia them.] Default risk in everything else is too high.

[2] Do not expect miracles in investing in above catagories. I would expect returns of 3% or less going forward.

[3] Do not buy individual bonds (transaction costs may be too high and less diversification.) Consider low cost bond funds from Vanguard for example. I do not recommend bond ETFs because most of them do not have sufficient trading volume so that their price can diverge from NAV by a lot during periods of market stress (e.g. flash crash)

[4] You CAN lose money by investing in bonds – either because of default or because interest rates rise. You have reduced default probability by staying with above catagories. You can estimate the sensitivity of bond fund to interest rates changes by looking at its “duration”. For example, If “duration” is 5 years then 1% rise in rates translates into 5% loss of principal. Intermediate bond funds will typically have duration of 3-7 years.

[3] If you can not take risk of losing 5-10% ( to earn a return of ~3% per year) do not invest in bonds. ( Or you can buy gold & gun – someone is bound to suggest this sooner or later 🙂 ….)[/quote]

look at utility preferred shares also.

fixed dividend, decent biz model

look at SCE or CMS

[Author]

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