Author Topic: Bonds  (Read 2071 times)

OneCoolCat

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Bonds
« on: August 14, 2016, 09:43:15 AM »
Do bonds typically do better when investors believe the equities are overvalued?  It looks like bonds are very high right now, as are the equities.  Has this ever happened before?  I have everything in equities right now and was considering trading some of my 401k mutual funds for bond funds.  I know its speculative, but does anyone have a reason why I should or shouldn't do this?  My thought is that if I diversify now, then if the markets do drop then I can convert the bonds to equity funds.  It may take many years for this to happen so I would adjust my contribution allocation to something like 80/20 (equities/bonds).

Heckler

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Re: Bonds
« Reply #1 on: August 14, 2016, 10:11:38 AM »
Bond prices go up when interest rates go down, and vice versa.  Their subsequent dividends then eventually move with the interest rate.

jjandjab

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Re: Bonds
« Reply #2 on: August 14, 2016, 10:22:01 AM »
I personally have an 80/20 stock/bond split and rebalance between stocks and bonds for this reason - my stocks had recently created an 86/14 split in my IRA and so I sold enough stock to bring it back to 80/20. MY 401k my set-up is automatically set to do that every quarter.

But the general advice, is if you go to 80/20 from 100% stocks, or some other allocation, make sure thats what you do going forward, don't try to time the market, jumping back and forth. Just choose an asset allocation and stick with it going forward.

DavidAnnArbor

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Re: Bonds
« Reply #3 on: August 14, 2016, 11:36:30 AM »
Don't try to guess which direction bonds or stocks will go next. Read the thread near this one, "Why I am reducing mkt exposure+have been since 2015."  In this thread market timing is ill-advised by most of those posting.

Paul der Krake

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Re: Bonds
« Reply #4 on: August 14, 2016, 12:40:35 PM »
Long periods of low rates make for some interesting graphs, that's for sure.

Like others have said, there is no guarantee that bonds have hit their peak. We haven't seen negative rates in the US yet. You should come up with an asset allocation that you can live with regardless of the market conditions of the day.

Mighty-Dollar

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Re: Bonds
« Reply #5 on: August 14, 2016, 04:07:45 PM »
When stocks fall, money runs to the safety of bonds and vice versa.
No, bonds AND stocks are not going to both collapse.
You can study historical returns here http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html