Author Topic: Sell bond fund?  (Read 2708 times)

fiveoh

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Sell bond fund?
« on: October 03, 2012, 04:32:04 AM »
Long story short a few months ago I started managing an IRA account I had previously let a money manager run.  I've been selling off a lot of the high expense mutual funds and buying dividend stocks.  One of my largest holdings that I haven't touched yet is PBDAX which is a corporate bond fund.  It has a .90% expense ratio which I hate and only yields 3.85%.  I'm inclined to sell it and purchase some dividend stocks instead but then I would hold no bond related funds(or treasuries) in my portfolio.  I feel in this low rate environment that bonds aren't as good an investment as stocks...but should I keep this fund for some diversity in my portfolio?  I have a 10 year time horizon at least until I will need to touch this account.  Opinions?

grantmeaname

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Re: Sell bond fund?
« Reply #1 on: October 08, 2012, 03:55:10 PM »
How much of the holding is the bond fund? In fact, have you added everything up by asset class? (i.e, can you tell me "I've got 30% bonds, 55% stocks, 15% money market?)

You could sell it and buy a different bond fund. You definitely should do that, if you can find one that's suitable and has a low expense ratio.

The other question is whether you should put more weight on stocks and less on bonds. It is also a valid and reasonable question, but I'd say it's a separate issue and depends on your goals, time horizon, risk tolerance, and current portfolio.

fiveoh

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Re: Sell bond fund?
« Reply #2 on: October 08, 2012, 09:01:24 PM »
15% bonds(all in this fund) 10% precious metal related stuff and 75% stocks, mutual funds and etf

You are right I need to at a minimum look for one with a lower expense ratio

KingCoin

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Re: Sell bond fund?
« Reply #3 on: October 10, 2012, 08:09:00 PM »
I'd just reallocate into a lower expense ratio bond fund. I don't love bonds either, but 15% is a reasonable bond allocation for diversification purposes and the low yield is at least made better by the fact that it's in a tax free account. IG bonds also act as "dry powder" if we get another market puke and you want to rotate into some more stocks on the cheap.

Secret Stache

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Re: Sell bond fund?
« Reply #4 on: October 12, 2012, 11:09:33 AM »
I don't know too much about bonds and currently do not own any.  It has been on my to do list for awhile for diversification sake.

Would it not be better to purchase bonds directly vs purchasing a fund with fees?  Or are the fees worth it if the bond fund further diversifies by purchasing bonds with different maturity dates and from several markets?

KingCoin

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Re: Sell bond fund?
« Reply #5 on: October 12, 2012, 05:30:09 PM »
Quote
I don't know too much about bonds and currently do not own any.  It has been on my to do list for awhile for diversification sake.

Would it not be better to purchase bonds directly vs purchasing a fund with fees?  Or are the fees worth it if the bond fund further diversifies by purchasing bonds with different maturity dates and from several markets?

Unless you happen to be fluent in the bonds markets, putting together a diversified bond portfolio is going to be a tremendous hassle. Bonds are often illiquid (bid/offer tends to be 1pt or more, and brokers can take you for a serious ride) and contain features that warrant at least a little bit of research (callability, seniority, strength of indenture etc.). It's far easier and probably more economical to just buy an ETF like LQD and pay the 15bps.