Comments on: Using an All Bond Portfolio Approach for Tough Times http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/ Helping a unique generation achieve financial independence. Sat, 20 Mar 2010 15:15:15 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: Sean http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-121641 Sean Fri, 28 Aug 2009 15:17:00 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-121641 Another aspect your forgetting to mention is that they strongly argue against the use of bond funds. A bond fund works exactly like stock fund. There is no maturity date for the fund so you are never going to absolutey get your principal back like a true bond. Given the last year, you would have actually lost a lot of money if you were to get out of that bond fund now. I like the basic idea of this book and can absolutely understand where they are coming from. Some people just absolutely DON'T want to be in the market, and to say there aren't options out there to get similar returns is crazy! Another aspect your forgetting to mention is that they strongly argue against the use of bond funds. A bond fund works exactly like stock fund. There is no maturity date for the fund so you are never going to absolutey get your principal back like a true bond. Given the last year, you would have actually lost a lot of money if you were to get out of that bond fund now.

I like the basic idea of this book and can absolutely understand where they are coming from. Some people just absolutely DON’T want to be in the market, and to say there aren’t options out there to get similar returns is crazy!

]]> By: Ace http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-101475 Ace Tue, 13 Jan 2009 20:38:55 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-101475 Interesting article. In the last paragraph you mention that there is an annual extra 3% over bonds. For a 10% return on stocks, you are looking at capital gains of 10 ~ 15% long term, or if short term, maybe 28 ~ 35%. And then, it might put you into AMT, reducing a lot of your deductions like property tax. Now for bonds, chances are you'll get some type of tax exemption, either from federal or state and local. The great thing about municipals, for example, is that you don't pay ANY tax on the interest, AND it's not subject to AMT. Additionally, if you even hold the bond till maturity, you get the full principal back, so you can play the waiting game if your bond tanks. As for myself, I've been making a minimum of 7% per annum, and some bonds, after tax and fees, I get an equivalent ROI of between 10 ~ 14% per annum. The added benefit is I don't sweat bricks looking at the DJ index Interesting article. In the last paragraph you mention that there is an annual extra 3% over bonds. For a 10% return on stocks, you are looking at capital gains of 10 ~ 15% long term, or if short term, maybe 28 ~ 35%. And then, it might put you into AMT, reducing a lot of your deductions like property tax. Now for bonds, chances are you’ll get some type of tax exemption, either from federal or state and local. The great thing about municipals, for example, is that you don’t pay ANY tax on the interest, AND it’s not subject to AMT. Additionally, if you even hold the bond till maturity, you get the full principal back, so you can play the waiting game if your bond tanks.

As for myself, I’ve been making a minimum of 7% per annum, and some bonds, after tax and fees, I get an equivalent ROI of between 10 ~ 14% per annum. The added benefit is I don’t sweat bricks looking at the DJ index

]]> By: Sunday Money Madness | Rich Credit Debt Loan http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-82274 Sunday Money Madness | Rich Credit Debt Loan Sun, 10 Aug 2008 14:00:23 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-82274 [...] Generation X Finance writes on Using an All Bond Portfolio Approach for Tough Times. [...] [...] Generation X Finance writes on Using an All Bond Portfolio Approach for Tough Times. [...]

]]> By: Jeremy http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81930 Jeremy Wed, 06 Aug 2008 23:54:11 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81930 That's right Matt. MPT and the efficient frontier is something I planned on exploring here, but I haven't gotten around to it yet. Plus I don't want to make anyone's head explode :D That’s right Matt. MPT and the efficient frontier is something I planned on exploring here, but I haven’t gotten around to it yet. Plus I don’t want to make anyone’s head explode :D

]]> By: Matt Hubbard http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81906 Matt Hubbard Wed, 06 Aug 2008 20:31:49 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81906 Great Post. Just to add a twist: a 100% bond portfolio offer less returns and more risk than a 50% stock 50% bond portfolio. Ya, it baked my noodle the first time I read it too. But that's the magic of Modern Portfolio theory. Wikipedia or investopedia has a pretty good description of it. It's around 60/40 stock/bond where you have the least risk, according the MPT, higher than that you can start to take on more risk, commiserate with the returns you are looking for. As long as you stay on the Efficient Frontier. (again, see the investopedia) Great Post. Just to add a twist: a 100% bond portfolio offer less returns and more risk than a 50% stock 50% bond portfolio. Ya, it baked my noodle the first time I read it too. But that’s the magic of Modern Portfolio theory. Wikipedia or investopedia has a pretty good description of it. It’s around 60/40 stock/bond where you have the least risk, according the MPT, higher than that you can start to take on more risk, commiserate with the returns you are looking for. As long as you stay on the Efficient Frontier. (again, see the investopedia)

]]> By: Jeff http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81739 Jeff Tue, 05 Aug 2008 21:38:18 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81739 From your review it almost sounds as if they don't spend much time contemplating returns. Is this the case? Are these guy bond industry spokesman? Did they mention that it probably isn't a good time to buy bonds when yields are so low? Or that buying a bond fund when yields are so low could put a serious damper on returns when yields start rising again (say the gov't actually wants to encourage dollar appreciation or inflation becomes a problem) From your review it almost sounds as if they don’t spend much time contemplating returns. Is this the case? Are these guy bond industry spokesman? Did they mention that it probably isn’t a good time to buy bonds when yields are so low? Or that buying a bond fund when yields are so low could put a serious damper on returns when yields start rising again (say the gov’t actually wants to encourage dollar appreciation or inflation becomes a problem)

]]> By: Jeremy http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81738 Jeremy Tue, 05 Aug 2008 21:38:13 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81738 Well, ETFs, mutual funds, index funds, all can be applied the same way when constructing the portfolio. I just mentioned mutual funds since that was what the article used for a comparison. Well, ETFs, mutual funds, index funds, all can be applied the same way when constructing the portfolio. I just mentioned mutual funds since that was what the article used for a comparison.

]]> By: Jessica http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81729 Jessica Tue, 05 Aug 2008 18:45:17 +0000 http://genxfinance.com/2008/08/05/using-an-all-bond-portfolio-approach-for-tough-times/#comment-81729 How about using an ETF protfolio? There was an article by Nasdaq about the ETF portfolio http://www.nasdaq.com/investing/3-steps-profitable-etf-portfolio.stm How about using an ETF protfolio? There was an article by Nasdaq about the ETF portfolio http://www.nasdaq.com/investing/3-steps-profitable-etf-portfolio.stm

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