/biz/ - Business & Finance

[Anonymous No.54805503]

What's the point of owning bonds?

I believe John Bogle was right and long term DCA into index funds is the only save investment long term, but bogleheads always add a % of bonds on their portfolios. What's the idea? I saw this study, and the higher % of stocks you own, the less chance to run out of money if you liquidate the %'s seen there. So if you were to have 100% in stocks, you could liquidate 3% yearly and not run out of money in 60 years. So basically have 1 million in MSCI World (or SP500, not sure what these stacks are when it says "100% stocks", but MSCI World sounds safer than 100% USA) and then basically you never run out of money if you liquidate 3% yearly.

So what's the point of adding bonds then if they just increase the chances to run out of money? Why not 100% MSCI World and be done with it? Why do I even need Emerging Markets or Small Caps for btw?

Im just considering buying this index fund going all in there: Vanguard Global Stock Index Fund EUR Acc - IE00B03HD191

[Anonymous No.54805569]

>>54805503
owning any bonds at all when you are less than 5 years from retirement is one of the biggest pussy moves possible in life, and will guarantee you never have any assets

more than 10 years from retirement you should be way leveraged up beyond merely SPY, SSO should be an absolute minimum. Leverage is how you make money, not owning 95% bonds from age 22 to 65 then retire on $38k a year.

Thats for pathetic retards, leverage is the way to an actual life

[Anonymous No.54805622]

>>54805569
>SSO
But if you get on leveraged stuff at the wrong moment you may be royally fucked. There's people in TQQQ that if they got at the wrong time they are still trying to break even.

Also what about gambling that the US will still be performing as it has done in the future too? we are talking decades.

Why not just buy the MSCI World?

[Anonymous No.54805626]

>>54805503
>30 to 60 year time horizon
Obviously you should be 100% in stocks if you know you don't need to touch the money for decades. Bonds are the margin of safety representing the probability that you will need cash before then.

[Anonymous No.54805671]

>>54805569
>owning any bonds at all when you are less than 5 years from retirement
You mean "more than"?

[Anonymous No.54805713]

>>54805503
Bonds usually perform well in a recession so the idea is that you start buying bonds before a recession, buy all the way through the recession, and sell when it's over
They have been the target of intense financial manipulation for the last 15 years however; to be honest, there's a bad stink hanging around public debt these days. I don't know if the old case for buying bonds still holds, it seems more like a speculative bet on reading central bank tea leaves these days.
I personally prefer gold

[Anonymous No.54805752]

>>54805713
The way you speculate on bonds is by betting yields go up or down btw. Then you either long or short long durated bonds (they have good 'leverage', not in the margin sense, to interest rates)

[Anonymous No.54805954]

>>54805622
mathematically wrong for anybody with an actual job who DCAs in monthly

[Anonymous No.54806022]

>>54805626
So how much time you should own bonds then? and what at % allocation?

And how do you know bonds will act good anyway? This is the bonds index fund I have for 10%:

Vanguard Global Bond Index Fund EUR Hedged Acc - IE00B18GC888

2019 2020 2021 2022 2023

5,3 4,8 -2,8 -15,1 2,7


My portfolio is basically this:

80% Vanguard Global Stock
10% Vanguard Global Bonds
10% Vanguard Emerging Markets

I was told that having that 20% adds extra diversification and can make a difference long term, but im not sure if I should just go 100% on Vanguard Global Stocks. Total invested is around 450k €.

[Anonymous No.54806132]

>>54805503
Some fairly wreckless disregard for the use of conditional formatting....

[Anonymous No.54806167]

>>54805954
How do you rate SP500 vs MSCI World?

I mean isn't it dumb to go 100% USA for many decades? who knows?

And what's the idea holding 3x leveraged ETFs long term that the SEC or whoever it was basically said they will not allow further funds to be released and they are only allowing these for legacy reasons? Who is to say they will not come up with some fuckery to stop these leveraged stuffs in the comming decades? Also if there is some massive spike wouldn't it wipe your account?

[Anonymous No.54806185]

>>54805713
>>54805752
Im not talking about speculation, bogle strategy is supposed to be permanent DCA no matter what, that's the point of passive investing. So I don't understand the role of owning bonds at all times in this context then.

[Anonymous No.54806258]

>>54806185
Best argument for Bonds is that if the market crashes by 50% your bond will suffer less. Maybe 10-20% drawdown and you can sell the bonds to get money to live off of.

That way you dont have to lock in large losses during a crash. Then when the market recovers you can rebalance your stock gains into bonds.

[Anonymous No.54806322]

>>54806167
there are billions of dollars in LETFs it would be political suicide to take away peoples opportunities to ever make actual money

and the USA is the best corporate enviroment in the world, so theres no reason to not be 100% USA. If the US collapses, then the World collapses, in which case who cares if you own some useless ass 3rd world countries shit ass equities

[Anonymous No.54806349]

>>54806258
How do you rate Warren Buffet's portfolio for his wife? He's basically set 90% SP500 10% short term t-bills.

So in order to live off that, how do they do it? I mean what % of the sp500 and or the bonds do they liquidate yearly?

[Anonymous No.54806382]

>>54806322
It wouldn't need to collapse, just challenged by other markets, which you wouldn't benefit from if you are 100% US. Or perhaps it would be a period. With MSCI World you are more balanced than SP500.

The leveraged stuff is insane in my book.

[Anonymous No.54806409]

>>54806132
It's clearly not used max 100 min 0, just the range of values within the selected grid

[Anonymous No.54806464]

>>54806349
Withdraw rate depends on a lot of factors. Check out this video.

https://www.youtube.com/watch?v=1FwgCRIS0Wg

The 4% number gets thrown around because its what worked for the last 100 years for Americans. But when you consider that people are living longer and the US likely wont be able to keep up stellar gains forever the safe withdraw rate drops quite a bit.

As for portfolio optimizations I think the Bogle camp is right. Total market ETFs and international diversification. If you want to go further down the rabbit hole you can still squeeze out more expected gain by adding in some small cap value.

[Anonymous No.54806508]

>>54805503
Bonds are harmonious for society

[Anonymous No.54806759]

Bonds are the white mans choice

[Anonymous No.54806810]

>>54805503

Imagine you are a 70 year old retiree, 100% in stocks, and the stock market drops 60% over the course of a year. That's why you MIGHT want to own bonds. It's an individual decision.

An alternate portfolio would be 60% stocks, 20% bonds, 20% gold.

"When you have won the game, stop playing" - if you've reached your retirement goals, why do you necessarily need all that equity risk?

[Anonymous No.54806850]

>>54806464

The optimal or most efficient portfolio with the best minimum 3, 5, 10 year rolling returns would be something like this;

30% global capweight (VT)
30% global small cap value
5% precious metal equity
20% intermediate developed market bonds
15% physical gold

The long-term CAGR wouldn't be that different from 100% stocks, and it would deliver that performance with way less heartburn.

[Anonymous No.54807751]

>>54805503
I don‘t own bonds, but: „The new historical record shows that over multi-decade periods, sometimes stocks outperformed bonds, sometimes bonds outperformed stocks, and sometimes they performed about the same.“

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3805927

[Anonymous No.54808719]

>>54806322
I've read before that you aren't supposed to hold leveraged etfs long term due to decay. Isn't that etf going to get demolished in the event that the return on the S&P falls below the cost of borrowing?

[Anonymous No.54809019]

>>54808719
You can read about leveraged ETFs here:
http://www.ddnum.com/articles/leveragedETFs.php
http://www.ddnum.com/articles/leveragedETFsandDCA.php

They answer your question regarding decay as well. For me personally, leveraged ETFs are a bit too much risk.

[Anonymous No.54809498]

>>54806810
So why does Warren Buffet use 90% Sp500 10% short term bonds?

Also who cares if it falls 60% if it eventually recovers? as long as you don't liquidate more than 3% yearly.

[Anonymous No.54809672]

>>54806349
His wife is gonna be long dead by the time the USA collapses or loses status as the global hegemon. Boomers can be invested 100% in the USA but anyone under 30 should diversify

[Anonymous No.54809763]

with historical analysis
adding in something like 10% bonds with rebalancing reduces volatility by a lot while only marginally reducing gains

living expenses often have reasonable ranges in absolute dollar terms
while portfolio allocation is expressed in percentages

big portfolio (buffet) means you don't need to allocate as much of your portfolio to possibly covering fixed expenses

[Anonymous No.54809787]

>>54806322
>the USA is the best corporate enviroment in the world, so theres no reason to not be 100% USA.
Mostly agree. Americans are market fundamentalists. People in other first world countries are more restrained in their embrace of market capitalism. And third world countries offer too much risk relative to the reward. I would allocate no more than 10% to ex-US equities.

[Anonymous No.54809962]

What's a good 2X leveraged global stock ETF?

[Anonymous No.54810948]

>>54809672
Well it's not only for his wife but for everyone in his family.

So if im 100% on Vanguard Global Stock does the 3% rule still apply? because if these percentages have been calculated on sp500 gains, those are higher than global stocks.

>>54809763
So if I have
80% Vanguard Global Stocks
10% Emerging Markets
10% Vanguard Global Bonds

1.000.000€ total invested, and I want to start actually enjoying the money, so I decide to liquidate 3% yearly. How do I liquidate this? I just liquidate 3% of all funds total, in separate amounts required for it to stay 80% 10% 10%?

Btw how do you rate owning Emerging Markets? should I just go 90% Global Stocks 10% Bonds?

Also like I said before, the picture I posted in the OP, this is calculated with 100% stocks meaning 100% SP500? I got it from there:

https://earlyretirementnow.com/2016/12/14/the-ultimate-guide-to-safe-withdrawal-rates-part-2-capital-preservation-vs-capital-depletion/

admiteldy I havent read the entire thing

[Anonymous No.54810980]

>>54809787
So what do you think about my portfolio as described here:
>>54810948
Would you remove the 10% of Emergin Markets and put it into Global Stocks to get a 90/10?

The paranoid in me sleeps better with that extra diversification, "just in case China takes over the world and surpasses USA or at least challenges it" or something like that, which would by inhertia push BRICs as a whole. Is this deluded? or the deluded are the americans thinking this cannot ever happen? Since im euro, I see this from outside both parties involved, maybe less biased.