reallocation of bonds

[sk55]

guys,

i was thinking of instead of holding 25% TLT,  switch to something more like 20%/5% TLT:IEI  or 15%/10%  TLT:IEI?

The rising interest rate fear has me worried.  first i am seeing gold drop... it would be difficult to see the bonds get wacked as well.

any insight will be helpful.

thanks

[Pointedstick]

What I think you should really be worried about is a stock collapse. Stocks are at record highs without the underlying problems in the economy having been addressed, IMHO. It looks pretty bubbley to me.

Something's always gonna be falling with the PP. No asset goes up forever. For each asset, your four options are:

1. Don't own the asset (preferably you choose this before it drops )
2. Go all in with the asset
3. Try to time the asset
4. Hedge your bets by holding other assets


#1 is risky since you can lose out on gains. #2 is risky since you can be wiped out when that asset is falling. #3 is risky since you can get wiped out when you're wrong. #4 is risky since you gain less than a concentrated position. Gotta pick your poison.

[sk55]

i am thinking option 4.  hedge it out with some IEI.

i checked a some historical data Long term bonds, had years when you had 0 to slightly negative returns 4 years in a row.

[Pointedstick]

i am thinking option 4.  hedge it out with some IEI.

i checked a some historical data Long term bonds, had years when you had 0 to slightly negative returns 4 years in a row.

We already hedge our long bonds with shorter-duration bonds by holding an equal amount of cash in the form of T-bills or short-duration-bond-backed funds like SHV or SHY.

But in general, don't sweat what the individual assets are doing. Gold had negative returns for more than a decade; during that time, stocks were soaring, and it was actually the perfect time to buy gold to prepare for its meteoric rise. If you try to avoid assets during their losing years, you're usually doing nothing but missing out on the opportunity to buy them when they're on sale.

[Austen Heller]

But in general, don't sweat what the individual assets are doing. Gold had negative returns for more than a decade; during that time, stocks were soaring, and it was actually the perfect time to buy gold to prepare for its meteoric rise. If you try to avoid assets during their losing years, you're usually doing nothing but missing out on the opportunity to buy them when they're on sale.

Nicely worded.  And unlike gold, if bonds get crushed for a decade, at least you are getting increasingly larger interest payments which will cushion the blow.