If You're Going To Sin, Sin A Little
Posted: Wed Oct 14, 2020 8:47 pm
I'm going to sin, but just a little.
This is, of course, a famous phrase frequently uttered by Cliff Asness. For him it's usually in reference to increasing one's tilt towards value when the value-growth spread reaches extremes, like we have today. A similar action was taken by even John Bogle himself during the height of the dotcom bubble. With stock valuations at incredible extremes and bonds yielding attractive valuations, a tilt from equity to fixed income was a prudent move.
I am buying the argument of sinning a little. Asness isn't saying that one should go 100% into value. Bogle didn't abandon stocks. They just tilted during market extremes. I do believe we are in a bond environment that is warranting a such a shift.
As such I have shortened the duration of the bond portion of my PP. I am not abandoning bonds. They are still 25% of my portfolio, but my weighted average duration is now dropping from 17.62 years to 7.28 years.
I have replaced the Long Federal Bond Index ETF (ZFL)...
...in favour of the Mid Federal Bond Index ETF (ZFM).
Again, if you're going to sin, sin a little. And only at extremes. This new allocation to intermediate terms bonds will allow me to maintain the basic principles and allocation consistent with the PP, while also exercising my own prudence.
This is, of course, a famous phrase frequently uttered by Cliff Asness. For him it's usually in reference to increasing one's tilt towards value when the value-growth spread reaches extremes, like we have today. A similar action was taken by even John Bogle himself during the height of the dotcom bubble. With stock valuations at incredible extremes and bonds yielding attractive valuations, a tilt from equity to fixed income was a prudent move.
I am buying the argument of sinning a little. Asness isn't saying that one should go 100% into value. Bogle didn't abandon stocks. They just tilted during market extremes. I do believe we are in a bond environment that is warranting a such a shift.
As such I have shortened the duration of the bond portion of my PP. I am not abandoning bonds. They are still 25% of my portfolio, but my weighted average duration is now dropping from 17.62 years to 7.28 years.
I have replaced the Long Federal Bond Index ETF (ZFL)...
- zfl.png (65.72 KiB) Viewed 1317 times
...in favour of the Mid Federal Bond Index ETF (ZFM).
- zfm.png (69.07 KiB) Viewed 1317 times
Again, if you're going to sin, sin a little. And only at extremes. This new allocation to intermediate terms bonds will allow me to maintain the basic principles and allocation consistent with the PP, while also exercising my own prudence.