very fair point. another interesting question: is the interest rate ever going back above 0% given that most developed societies are older / have too much savings? if no, will all banks look like japanese (effectively going side ways since decades) since it is a lot harder to make money that way.
professionally, i am over-over-over exposed to the tech sector (rsus, etc). for my FIRE stash i am currently mostly interested in solid companies with decent cash flows and reasonable diversification (ideally also not too heavily taxed at the source). that is what brought my to ISF (currently roughly back to where i entered one week ago - hsbc and shell will clearly get hit ā¦ but unilever, glaxosmithkline , diageo, vodafone, etc are essentials).
my dream would be to have a sufficient stash that the VT 2% yield minus tax would be still sufficient to sustain my regular expenses. at that point i would probably really stop watching the stock marktet
(you basically buy 100-200 bonds and you hold till then in a basket. they also have high yield etfsā¦ but question is whether 4% is compensating for the risk of defaults across that portfolio of bonds.)
According to the iShares site "The iShares 20+ Year Treasury Bond ETF seeks to track the investment results of an index composed of U.S. Treasury bonds with remaining maturities greater than twenty years.
US 30Y yield is at a historical all time low as we speak
Buying TLT is betting that it will go even lower than that (although it did fall another 4.5% just this morning which will translate in another large gain of TLT).
Pandemic law gives the government quite a bit of power. It can shutdown public transport, travel, companies and events. Quarantines where healthy and sick people are not separated are not that effective as the diamond princess showed.
-can you hold stocks through downturns? are you ok seeing -30% at the portfolio level?
-are you really greedy when others are fearful?
-are you trying to time the market? what do you know that the rest doesnt know?
-is your allocation too risky (while you still liked seeing the nice projections when you selected 100% equity and 0% bonds)?
I am certainly acting slightly different that I would have thought just a few weeks ago.
Iām having a field day, every day, learning new things which will help me profit and thrive on my way to retirement.
I have lots of positions in my portfolio (as I once described in my All Country Equal Weight tilt thread).
There are indices which are at multi year lows (Chile etf, ECH is 1$ from touching the 2008 crisis levels).
Iām taking lots of risks now, but I really feel confident doing it.
I also think weāve been miseducating people about bond allocation in portfolios. Nobody holds long term bonds for their coupon but for price appreciation on downturns. Bonds are the single reverse-correlated asset to stocks, and itās for times like this itās worth to have them.
EDIT: Bond market panic continues. US30Y yields crashed -9.5% just this morning. TLT will be very green today.
Well everybody should begin to understand what they invest in. For ETFās the minimum is to read the fact sheet. For bonds, itās crucial to understand the relationship between coupon, duration and yield before you click on the āBuyā button!
Be careful with your betsā¦ You may end up HODLing a position with a yield below inflation rate for the next 20 years, and perhaps a deeply depreciated value if rates bottomā¦
Iāve found a very interesting interview about the confusion stocks vs. bonds: people gambling with bonds, and buying stocks as if they were bonds (and confusing dividends for coupons).
Link here.
In French. The title is āHouston, we haveā¦ two problemsā.
I have 60% of my portfolio in fixed allocations of VTI,VEA, IEMG, VSS and VTI. 40% are invested in dynamic allocations of (VTI, TLT, KWEB, PBW, VDE) and sometimes I add some single stocks. In January I thought the near-east conflict will increase oil prices, but I did not look to much into the oil business, apparently america is just pumping too much oil with their gas fraction technique. At the same time I invested in TLT to balance the risk. Both were at low contributions of 2-6% of the whole portfolio. Now I reduced VDE because oil price is going to decrease (OPEC is trying to stabilize it by lowering the production capacity) and I increased TLT (today 4%+) and KWEB. So I did not sell something that went down and bought something that went up, I just rebalanced to sleep better
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