Author Topic: Should I invest now and worry about bonds later?  (Read 4352 times)

alwaysonit

  • 5 O'Clock Shadow
  • *
  • Posts: 39
Should I invest now and worry about bonds later?
« on: October 06, 2014, 05:31:29 PM »
I've spent between 100-150 man hours researching how to invest and I have decided on my broker, equity fund and AA. I'm still very unsure as what to invest in for my fixed income portion.

Going by how slow a learner I have been is it a good idea to invest in my equity portion now and make a clear plan on my fixed income portion when I get a chance?

My fixed income would remain in Irish bonds and Irish bank accounts until I get the chance to do more research.

Should I invest in my equity portion now and worry about bonds later (leaving my bond portion in fixed income bank accounts), or spend another 2/3 months reading up online until I know enough about bonds to invest in both at the same time, but at the time losing out on dividends and the rise of the market?

Dodge

  • Pencil Stache
  • ****
  • Posts: 790
Re: Should I invest now and worry about bonds later?
« Reply #1 on: October 06, 2014, 05:37:54 PM »
What is it specifically that you think will take an additional 2/3 months to research?  Anything we can help with?

nyold

  • 5 O'Clock Shadow
  • *
  • Posts: 11
Re: Should I invest now and worry about bonds later?
« Reply #2 on: October 07, 2014, 09:41:39 AM »
Perhaps not the OP's original question but how do you exactly invest in bonds? Do you buy bond-based mutual funds, or do you buy the bonds directly (and stick to TBill or other low yields?)

LordSquidworth

  • Stubble
  • **
  • Posts: 124
Re: Should I invest now and worry about bonds later?
« Reply #3 on: October 07, 2014, 10:49:37 AM »
Perhaps not the OP's original question but how do you exactly invest in bonds? Do you buy bond-based mutual funds, or do you buy the bonds directly (and stick to TBill or other low yields?)

Most people buy bond funds. They're essentially mutual funds, just instead of equities they have bonds. Some funds have a mixture of the two.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3996
Re: Should I invest now and worry about bonds later?
« Reply #4 on: October 07, 2014, 10:55:51 AM »
With investing, the answer is basically always the sooner the better, so yes, you should go ahead with your equity investments. What would be the benefit of waiting to decide on an unrelated investment first? That makes no sense.

-W

GGNoob

  • Pencil Stache
  • ****
  • Posts: 726
  • Age: 33
  • Location: Colorado
Re: Should I invest now and worry about bonds later?
« Reply #5 on: October 07, 2014, 11:50:35 AM »
With investing, the answer is basically always the sooner the better, so yes, you should go ahead with your equity investments. What would be the benefit of waiting to decide on an unrelated investment first? That makes no sense.

-W

+1 There is no reason to wait, just go ahead and get started with what you are sure about. However, I am not sure what the issue is. You could simply got 100% Total US Bond Index for your bond allocation and be completely fine.

Left

  • Handlebar Stache
  • *****
  • Posts: 1157
Re: Should I invest now and worry about bonds later?
« Reply #6 on: October 07, 2014, 12:06:45 PM »
I had a similar question I think when I started, still do. I'm interpreting the question as deciding the order of which to buy investment once you decided the AA. Mine is I want 100k bonds (20%) and the rest in stocks (80%). Do I invest the first 100k in bonds or stocks first? Or keep it 80/20 as I go? I've decided to go 100% stocks until the first 100k then I'll add 50/50 with bonds from then on until I hit 20% bonds then go back to 100% stocks to hit 500k. I decided to go this route because bonds don't return as much as stocks and this early on in my investment building stage, I'd rather be in on the stock growth potential earlier than later. I could have went 100% stocks to 400k then the last 100k be bonds but this late to my "goal" would mean I'd be more open to market fluctuations than I'd like to be. Also being in stocks early on is since I'm doing this in my taxable account, I don't want the bond payouts to be taxed and stocks won't be taxed until I sell and only then at 15%.

Kaspian

  • Handlebar Stache
  • *****
  • Posts: 1535
  • Location: Canada
    • My Necronomicon of Badassity
Re: Should I invest now and worry about bonds later?
« Reply #7 on: October 07, 2014, 01:36:36 PM »
I decided to go this route because bonds don't return as much as stocks...

This is just wrong.  Bonds returned more than equities in 2000, 2001, 2002, 2008, and 2011.   That's 5 of the last 14 years--or 36% of the time.  More than a third!  You don't want to capitalize on that possibility?  By rebalancing you would have moved that bond money into equities (while they were on sale) and made even more.  US small/large cap equities have been the top of the asset call exactly **ONE** time over the same period.  (Well, maybe 2014--I'm not sure yet.)

I know I've very annoyingly pasted this chart everywhere in this forum, but here it is again:

BaldingStoic

  • 5 O'Clock Shadow
  • *
  • Posts: 84
Re: Should I invest now and worry about bonds later?
« Reply #8 on: October 07, 2014, 02:37:21 PM »
Personally I think it's better to invest sooner rather then later, but this doesn't need to be an either/or situation.  Depending on your risk profile, put the appropriate amount into stocks and then put the remainder into a short-term bond fund.  You can also buy treasuries directly from the government using TreasuryDirect.  Then continue your research.  If your desired Bond-Equity ratio changes based on your research simply reallocate. 

Left

  • Handlebar Stache
  • *****
  • Posts: 1157
Re: Should I invest now and worry about bonds later?
« Reply #9 on: October 07, 2014, 06:09:04 PM »
@Kaspian, even if bonds returned better 37% of the time, until I have enough money invested, what how much of a difference does it make? If i was investing 80/20 right from the start, when I get to my first 100k, I'd only have 20k in bonds. If bonds returned 10% more than stocks on the last year before 100k, it'd only be a 2k difference (excluding the drop in the equity price that is). I'll take my chances on the 63% of the time that equity did better in the last 14 years... and I don't see the future being the same as the last 14 years anyways. If it is, I hope it would be... everything would be cheaper for me to buy into

TreeTired

  • Bristles
  • ***
  • Posts: 451
  • Age: 136
  • Location: North Carolina
  • I think we can make it
Re: Should I invest now and worry about bonds later?
« Reply #10 on: October 07, 2014, 07:42:57 PM »
But bond yields are so low they have to go up and the Fed is about to start raising interest rates,  and TLT (a proxy for longish US Treasury bonds)  is up 17% ytd not counting dividends while the SPY is up 4.6% ytd not counting dividends.

Kaspian

  • Handlebar Stache
  • *****
  • Posts: 1535
  • Location: Canada
    • My Necronomicon of Badassity
Re: Should I invest now and worry about bonds later?
« Reply #11 on: October 08, 2014, 11:21:13 AM »
@Kaspian, even if bonds returned better 37% of the time, until I have enough money invested, what how much of a difference does it make?....

I agree with this, just get yourself started!  :)

@Kaspian,... and I don't see the future being the same as the last 14 years anyways.

I heavily disagree with this!  You can't predict the future of markets/asset classes so don't even try.  Look again at that chart I pasted.  If it was a roulette table, would you put all your money on dark blue?  Hell, no!  We're investing here, not gambling--so don't take "chances".