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Coffee Shop
Selling all of the cows.
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<blockquote data-quote="WalnutCrest" data-source="post: 1493149" data-attributes="member: 21715"><p>Best question yet.</p><p></p><p>**************</p><p></p><p>I've spent most of my adult life dealing with investments of all sorts of types and styles.</p><p></p><p>A few observations ... realizing I'm no longer a registered investment advisor and what follows isn't unlicensed investment advice. <img src="data:image/gif;base64,R0lGODlhAQABAIAAAAAAAP///yH5BAEAAAAALAAAAAABAAEAAAIBRAA7" class="smilie smilie--sprite smilie--sprite1" alt=":)" title="Smile :)" loading="lazy" data-shortname=":)" /></p><p></p><p>1 -- Generally, I believe bond funds are a bad idea in a rising rate environment ... especially if you have enough dough to own a moderately diveresified bond portfolio directly. If you do, get a laddered bond portfolio stretching out 3-10 years (shorter ladder as rates are rising, and longer when they're falling) so that, as long as the borrower repays, you're not ever going to take a loss on principal. A bond fund cannot provide that same certainty as to principal value -- rising rates kills bond values, but if you don't sell, you don't take that loss, and since there is a required maturity, the gap between market price and maturity values shrinks each day closer to maturity. With a bond fund, sometimes those mark-to-market losses can turn into realized losses due to the portfolio management efforts of the mutual fund manager.</p><p></p><p>2 -- You can build a reasonable bond ladder with 8-30 individual bonds (depending on how long you want to go out on maturities).</p><p></p><p>3 -- Generally, you don't need to own more than 10-15 stocks to have a reasonably diversified portfolio. Unless there is an enormously compelling reason, there's not really any good reason to have more than 10-15% in any single stock.</p><p></p><p>4 -- There are many simple and effective ways to pick investments in a buy-and-hold approach, where you're able to scale in over time (i.e., avoid the risk of putting it all to work at exactly the wrong time), where your time horizon on your bonds is however far out your ladder goes ... and ... on stocks, 13-36 months (depending on strategy).</p></blockquote><p></p>
[QUOTE="WalnutCrest, post: 1493149, member: 21715"] Best question yet. ************** I've spent most of my adult life dealing with investments of all sorts of types and styles. A few observations ... realizing I'm no longer a registered investment advisor and what follows isn't unlicensed investment advice. :) 1 -- Generally, I believe bond funds are a bad idea in a rising rate environment ... especially if you have enough dough to own a moderately diveresified bond portfolio directly. If you do, get a laddered bond portfolio stretching out 3-10 years (shorter ladder as rates are rising, and longer when they're falling) so that, as long as the borrower repays, you're not ever going to take a loss on principal. A bond fund cannot provide that same certainty as to principal value -- rising rates kills bond values, but if you don't sell, you don't take that loss, and since there is a required maturity, the gap between market price and maturity values shrinks each day closer to maturity. With a bond fund, sometimes those mark-to-market losses can turn into realized losses due to the portfolio management efforts of the mutual fund manager. 2 -- You can build a reasonable bond ladder with 8-30 individual bonds (depending on how long you want to go out on maturities). 3 -- Generally, you don't need to own more than 10-15 stocks to have a reasonably diversified portfolio. Unless there is an enormously compelling reason, there's not really any good reason to have more than 10-15% in any single stock. 4 -- There are many simple and effective ways to pick investments in a buy-and-hold approach, where you're able to scale in over time (i.e., avoid the risk of putting it all to work at exactly the wrong time), where your time horizon on your bonds is however far out your ladder goes ... and ... on stocks, 13-36 months (depending on strategy). [/QUOTE]
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