Why buy Bonds?

[GarrettKimmel]

I'm a huge fan of the http://canadiancouchpotato.com/ blog. I follow his models (I use the aggressive model as I am 28 - long time to go). His aggressive model is as followed 60% VXC, 30% VCN, 10% VAB.

My question is, looking at VAB (Bonds ETF) it hasn't increased in value, other than some dividend... I understand that during a crash it stays pretty steady, but would I not be ahead just as much by paying my mortgage earlier rather than saving on bonds? Sorry if I'm blind to something obvious.

 

[ETcallhome]

I'm a huge fan of the http://canadiancouchpotato.com/ blog. I follow his models (I use the aggressive model as I am 28 - long time to go). His aggressive model is as followed 60% VXC, 30% VCN, 10% VAB.

My question is, looking at VAB (Bonds ETF) it hasn't increased in value, other than some dividend... I understand that during a crash it stays pretty steady, but would I not be ahead just as much by paying my mortgage earlier rather than saving on bonds? Sorry if I'm blind to something obvious.

you got it right. There is no place for bonds in a 28 year olds portfolio. Take a look at them when you turn 50.

 

[zdreg]

I'm a huge fan of the http://canadiancouchpotato.com/ blog. I follow his models (I use the aggressive model as I am 28 - long time to go). His aggressive model is as followed 60% VXC, 30% VCN, 10% VAB.

My question is, looking at VAB (Bonds ETF) it hasn't increased in value, other than some dividend... I understand that during a crash it stays pretty steady, but would I not be ahead just as much by paying my mortgage earlier rather than saving on bonds? Sorry if I'm blind to something obvious.

your post is the way one should be done. it gives a useful piece of information followed by a question.

as to your question if you have the ability to analyze bonds you should consider adding near junk bonds to your portfolio but not a bond etf.
you will have to the math to figure out if the return on the bonds vs. paying off the mortgage is better for you.

 

[TheNotSoGreatGatsby]

I would personally invest in the growth/value markets to grow my savings. I don't mean gamble on speculation, but invest in stocks that haven't already gotten too big to grow, and spends their cash on dividends rather than R&D, expanding, etc. TSLA over GM, F, etc. NFLX over your typical cable company. AMZN over your WMT and other huge brick and mortars. Investing in bonds and dividend stocks is for the rich that want to keep up with inflation. The closer I come to retirement, the more of my savings I would be swapping over to bonds or other low risk investments, because the worst feeling I could have financially is the market crashing around the time I plan to retire. I would probably start doing so 10-15 years before my planned retirement age. I personally don't ever bother with bonds, but I keep all of my money that isn't in stocks or ETFs in a money market account, because the interest is higher than a regular savings account.

I'm no financial adviser, but that's my $0.02 from watching webinars of successful people.

 

[Maverick74]

I'm a huge fan of the http://canadiancouchpotato.com/ blog. I follow his models (I use the aggressive model as I am 28 - long time to go). His aggressive model is as followed 60% VXC, 30% VCN, 10% VAB.

My question is, looking at VAB (Bonds ETF) it hasn't increased in value, other than some dividend... I understand that during a crash it stays pretty steady, but would I not be ahead just as much by paying my mortgage earlier rather than saving on bonds? Sorry if I'm blind to something obvious.

You are asking the wrong question. It's not a matter of should you buy bonds as an asset class but rather at what price? Bonds are way too expensive right now but over two decades being long bonds actually outperformed equities with about half the volatility. But there is no value there right now. So it's not really a question of age. Same goes for moving your money into bonds at 50 or 60. It's not a function of age but a function of value.

 

[ETcallhome]

You are asking the wrong question. It's not a matter of should you buy bonds as an asset class but rather at what price? Bonds are way too expensive right now but over two decades being long bonds actually outperformed equities with about half the volatility. But there is no value there right now. So it's not really a question of age. Same goes for moving your money into bonds at 50 or 60. It's not a function of age but a function of value.

age is related to monthly income. If you are in the accumulation stage of life, volatility is good, and that's what you want. When you are in the preservation stage of life bonds start to play a role. I don't know the duration of that fund, but I wouldn't want to be out more than one year for the seeable future. But then again, predicting is difficult and timing is hard. That's why many just use an asset allocation model. And there is no place for bonds at any price for a 28 year old.

 

[Maverick74]

age is related to monthly income. If you are in the accumulation stage of life, volatility is good, and that's what you want. When you are in the preservation stage of life bonds start to play a role. I don't know the duration of that fund, but I wouldn't want to be out more than one year for the seeable future. But then again, predicting is difficult and timing is hard. That's why many just use an asset allocation model. And there is no place for bonds at any price for a 28 year old.

No, still missing the point. Bonds can be a lot more volatile then equities. Everything is variable. Everything depends on price. A 20-something would have made bundles more being long bonds for close to 3 decades vs equities. Bundles!!!! Everything depends on price. That age crap is what Charles Schwab financial advisors tell their clients. LOL. Age is not a mathematical variable.

 

[ETcallhome]

No, still missing the point. Bonds can be a lot more volatile then equities. Everything is variable. Everything depends on price. A 20-something would have made bundles more being long bonds for close to 3 decades vs equities. Bundles!!!! Everything depends on price. That age crap is what Charles Schwab financial advisors tell their clients. LOL. Age is not a mathematical variable.

If you can accurately predict rates you should quit your job and trade bonds and make "bundles."

(and I've been long bonds for a long time and my 10 year return has been about 6%. Hardly call that bundles. But it should continue as long as the fed keeps lowering rates like they did.)

 

[zdreg]

That age crap is what Charles Schwab financial advisors tell their clients.

it is a major commission generator for the financial advisor, who then flip the aging client into some large fee based product or some bonds with a wide spread. quite similarly, the active retail trader pays for the market makers' mistresses and cocaine habit.

 

[ETcallhome]

it is a major commission generator for the financial advisor, who then flip the aging client into some large fee based product or some bonds with a wide spread. quite similarly, the active retail trader pays for the market makers' mistresses and cocaine habit.

such false info. Anybody who posts on et already knows who the sharks are. We are not even talking about a cap gains taxable event. We are just saying when you turn 50 you can stop adding to your stocks and start adding to bonds.