High Yield Bonds are just completely stupid
Moderator: Global Moderator
High Yield Bonds are just completely stupid
If you go to portfolio visualizer.com or similar modeling software, and compare 15% US Stocks + 85% Intermediate US Treasuries (blue), you get the exact same long-term CAGR, as High Yield Corporate Bonds (red) but less drawdown, better Sharpe and Sortino ratios. From a total return POV, no one should ever buy High Yield Bonds. If you want them... just build a better one yourself with two ETFs! Now, if you're just stuck on that idea of "income" (why do you want it, it's taxed worse than LT cap gains), then yeah, junk bonds for you.
-
mathjak107
- Executive Member
- Posts: 4456
- Joined: Fri Jun 19, 2015 2:54 am
- Location: bayside queens ny
- Contact:
Re: High Yield Bonds are just completely stupid
my best returns for 2016 were in sphix , fidelity high yield which returned 16% . they beat the s&p 500 returns and had almost half the beta while doing it . it was the smartest move i made in 2016 buying high yield after they got beaten to a pulp when oil fell .
the market discounted high yield like more than 1/2 the high yield market was going to default . it was just silly . high yield is not about time in the market , like any sector it is about timing the market . except for a tiny tiny portion all my high yield is gone now .
last year high yield made up 20% of my portfolio . i used high yield as a proxy for stocks so i allocated less to stocks and more to high yield instead . the high yield had less risk . it was well worth doing it that way .
the market discounted high yield like more than 1/2 the high yield market was going to default . it was just silly . high yield is not about time in the market , like any sector it is about timing the market . except for a tiny tiny portion all my high yield is gone now .
last year high yield made up 20% of my portfolio . i used high yield as a proxy for stocks so i allocated less to stocks and more to high yield instead . the high yield had less risk . it was well worth doing it that way .
Last edited by mathjak107 on Sat Feb 04, 2017 9:19 am, edited 1 time in total.
Re: High Yield Bonds are just completely stupid
I noticed the same thing about corporate bonds when I was researching the PP, before I bought into it. It made me realize just how well the PP's investments were chosen: they're an elemental set with the minimum number of components needed to reflect all market forces. All other assets can be roughly expressed as a combination of one or more of the PP elements.
Very appealing to the mathematician in me, and refreshing to realize I didn't have to worry about missing out on a gold mine by not going with one of those complicated portfolios that try to include every asset class under the sun.
Very appealing to the mathematician in me, and refreshing to realize I didn't have to worry about missing out on a gold mine by not going with one of those complicated portfolios that try to include every asset class under the sun.
-
mathjak107
- Executive Member
- Posts: 4456
- Joined: Fri Jun 19, 2015 2:54 am
- Location: bayside queens ny
- Contact:
Re: High Yield Bonds are just completely stupid
certain segments of asset classes are not buy and die . they have their windows of opportunity but nothing i would sit with day in and day out forever . high yield , emerging market stuff , sector funds , commodity's , even foreign stocks are more about timing the markets than time in the markets if you choose to buy them in my opinion ..
these are not assets generally for people who have a buy and hold mentality and to compare them as such really does not make a whole lot of sense .
i could never imagine planning on sitting on any of that stuff i listed forever . there are just times certain things make sense and times they don't .
how bad would that chart look had you bought gold and sat with it in isolation since it hit 850 decades ago ?
a T-bill would have likely beat it . so certain things have to be locked at not in isolation but either in a strategy or in the time frame it made sense . there are just some segments that do not lend themselves well to buy and die
these are not assets generally for people who have a buy and hold mentality and to compare them as such really does not make a whole lot of sense .
i could never imagine planning on sitting on any of that stuff i listed forever . there are just times certain things make sense and times they don't .
how bad would that chart look had you bought gold and sat with it in isolation since it hit 850 decades ago ?
a T-bill would have likely beat it . so certain things have to be locked at not in isolation but either in a strategy or in the time frame it made sense . there are just some segments that do not lend themselves well to buy and die
Last edited by mathjak107 on Sat Feb 04, 2017 10:15 am, edited 4 times in total.
Re: High Yield Bonds are just completely stupid
Principal Component Analysis and Eigenvectors!sophie wrote:I noticed the same thing about corporate bonds when I was researching the PP, before I bought into it. It made me realize just how well the PP's investments were chosen: they're an elemental set with the minimum number of components needed to reflect all market forces. All other assets can be roughly expressed as a combination of one or more of the PP elements.
Very appealing to the mathematician in me, and refreshing to realize I didn't have to worry about missing out on a gold mine by not going with one of those complicated portfolios that try to include every asset class under the sun.