{"id":194339,"date":"2021-03-05T00:07:03","date_gmt":"2021-03-04T21:07:03","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/dont-stop-believing-in-bonds\/"},"modified":"2021-03-05T00:07:03","modified_gmt":"2021-03-04T21:07:03","slug":"dont-stop-believing-in-bonds","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/dont-stop-believing-in-bonds\/","title":{"rendered":"#\n  Don\u2019t stop believing in bonds"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_88 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6ace9b1d91a7b\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6ace9b1d91a7b\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/dont-stop-believing-in-bonds\/#How_to_find_the_right_bonds_for_your_needs\" >How to find the right bonds for your needs<\/a><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><ul class='ez-toc-list-level-4' ><li class='ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/dont-stop-believing-in-bonds\/#Robert_Powell\" >Robert Powell<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong>#<br \/>\n  Don\u2019t stop believing in bonds<br \/>\n<\/strong>&#8221;<\/p>\n<h2 class=\"article__subhead\" itemprop=\"alternativeHeadline\"><span class=\"ez-toc-section\" id=\"How_to_find_the_right_bonds_for_your_needs\"><\/span>\n  How to find the right bonds for your needs<br \/>\n<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><\/p>\n<div class=\"column column--full article__content\">\n<div id=\"js-article__body\" class=\"article__body article-wrap at16-col16 barrons-article-wrap\" itemprop=\"articleBody\" data-sbid=\"AFB23588-7B9A-11EB-B3F4-4B4827AD503E\">\n<div class=\"barrons-article-ad-wrapper\">\n<div data-track=\"barrons-article-ad-wrap\" class=\"barrons-article-ad sticky_item\">\n<div class=\"barrons-main-article-ad-target sticky_target body_ad\" aria-hidden=\"true\"><\/div>\n<\/p><\/div>\n<\/p><\/div>\n<p>       Given the current doom and gloom, with the occasional spell of relief, over interest rates rising, does it still make sense to invest in bonds when saving for or living in retirement?<\/p>\n<p> Well, it sure didn\u2019t seem to make sense when interest rates were (and still are) at historic lows. Like, who in their right mind wants to earn 0.318% on a 10-year Treasury, which is what it was earning roughly one year ago?<\/p>\n<div class=\"paywall\">\n       And it might not make sense now that rates have risen from the March 2020 lows. Remember, the principal value of your bond does decline when interest rates rise.<\/p>\n<p>But what folks might be missing in the current topsy-turvy environment is the role that bonds should or ought to play in a portfolio.<\/p>\n<p><strong>Safety, not income<\/strong><\/p>\n<p>According to Larry Swedroe, co-author of Your Complete Guide to a Successful Retirement and director of research at Buckingham Strategic Wealth, the main role of fixed income in your portfolio should be safety, not return, not income, not cash flow.<\/p>\n<p>In other words, if all else goes to pot, if stocks should crater, bonds are there to provide safety of principal\u2014at least at maturity.<\/p>\n<p>Plus, bonds are there for diversification purposes. Bond prices should rise when in value when other assets, say, stocks are falling in value, and vice versa.<\/p>\n<p>\u201cRule No. 1 that every investor should abide by is that you want to make sure your portfolio has a sufficient amount of safe, fixed income to dampen the overall risk of the portfolio to an acceptable level,\u201d he said. \u201cBecause if not, and equities drop, which they tend to do once every 10, 15 years or so, 40, 50% or whatever, then you\u2019re going to exceed your tolerance for risk.\u201d<\/p>\n<p>At best, he said, you won\u2019t be able to sleep, enjoy your life, and everything else. And, at worse, you\u2019ll engage in the worst thing you could do: panic and sell. \u201cAnd once you sell\u2026I think you\u2019re virtually doomed to fail unless you just get lucky.\u201d<\/p>\n<p>Bottom line for Swedroe: \u201cYou have to have enough safe bonds.\u201d<\/p>\n<p>Now how much you should invest in bonds, stocks and cash is, according to S\u00e9bastien Page, author of Beyond Diversification and head of global multiasset at T. Rowe Price, \u201cis, without doubt, the most important portfolio construction decision an investor makes.\u201d<\/p>\n<p><strong>How much to invest in bonds?<\/strong><\/p>\n<p>According to Swedroe, how much you should invest in fixed income is a function of your ability to take risk. And your ability to take risk is determined by four factors: your investment horizon, the stability of earned income, your need for liquidity, and options that can be exercised should the be a need for a plan B. What\u2019s more, Swedroe said owning bonds whose maturity is beyond your investment horizon takes on more risk than is in<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>ropriate.<\/p>\n<p><strong>Ability to take risks<\/strong><\/p>\n<table>\n<tbody>\n<tr class=\"data odd\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      Investment horizon (years)<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      Maximum equity allocation (%)<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data even\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      0-3<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      0<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data odd\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      4<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      10<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data even\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      4<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      20<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data odd\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      6<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      30<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data even\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      7<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      40<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data odd\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      8-9<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      50<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data even\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      10<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      60<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data odd\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      11<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      70<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data even\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      12-15<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      80<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data odd\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      16-19<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      90<\/p>\n<\/td>\n<\/tr>\n<tr class=\"data even\">\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      20+<\/p>\n<\/td>\n<td align=\"left\" valign=\"top\" colspan=\"\">\n      100<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p><em>Source: Your Complete Guide to a Successful &amp; Secure Retirement<\/em><\/p>\n<p>Like Swedroe, Page also believes the decision turns in part on one\u2019s human capital, the present value of your future salary income. And once you factor in a person\u2019s human capital, which Page argues acts more like a bond than a stock, a balanced portfolio with a healthy allocation to stocks, not bonds, is the answer.<\/p>\n<p>To be fair, the allocation to bonds isn\u2019t static throughout the life cycle in either Page\u2019s or Swedroe\u2019s model portfolios.<\/p>\n<p>For instance, in Page\u2019s model portfolios, you\u2019d allocate 15% to bonds in the 20 years before retirement, 45% at retirement, and 69% some 20 years into retirement, which is close to the rule-of-thumb that would have you subtract your age from 120 to determine how much to invest in stocks and how much in bonds. So, if you were 47, you\u2019d invest 73% in stocks and if you were 87 you\u2019d invest 33% in stocks.<\/p>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetMediaIllustration\n              full-width\n              \n    \n            \n  article__inset\n          article__inset--type-InsetMediaIllustration\n              article__inset--inline\n  \"><\/p>\n<figure class=\"\n        media-object-image\n        enlarge-image\n        renoImageFormat-20210304123707\n        img-inline\n        article__inset__image\n      \" itemscope itemtype=\"http:\/\/schema.org\/ImageObject\"><\/p>\n<div style=\"padding-bottom:82.2656%;\" data-mobile-ratio=\"82.2656%\" data-layout-ratio=\"82.2656%\" data-subtype=\"illustration\" class=\"image-container  responsive-media article__inset__image__image\">\n        <img decoding=\"async\" srcset=\"https:\/\/ei.marketwatch.com\/Multimedia\/2021\/03\/04\/Photos\/OR\/MW-JC337_asset__20210304123707_OR.jpg?uuid=3d98caf8-7d10-11eb-8f75-001cc448aede 1260w\" sizes=\"1260px\" src=\"https:\/\/ei.marketwatch.com\/Multimedia\/2021\/03\/04\/Photos\/OR\/MW-JC337_asset__20210304123707_OR.jpg?uuid=3d98caf8-7d10-11eb-8f75-001cc448aede\" data-enlarge=\"https:\/\/ei.marketwatch.com\/Multimedia\/2021\/03\/04\/Photos\/OR\/MW-JC337_asset__20210304123707_OR.jpg?uuid=3d98caf8-7d10-11eb-8f75-001cc448aede\" alt=\"\" title=\"\"><\/div><figcaption class=\"wsj-article-caption article__inset__image__caption\" itemprop=\"caption\"><\/figcaption><\/figure>\n<\/div>\n<p>       <strong>The right bonds depend on your investment objectives<\/strong><\/p>\n<p>Investing in the right bonds is equally important as investing in bonds, said Massi De Santis, a certified financial planner with DESMO Wealth Advisors. According to De Santis, the right bonds help you avoid unnecessary risks and make the most out of your portfolio, particularly in a low interest rate environment.<\/p>\n<p>What are the right bonds? That depends on your investment objective.<\/p>\n<p>For growth portfolios, De Santis recommends that the bond component should be diversified across the bond universe, including government, government agency, investment-grade corporate and global bonds. The duration should be in the inter<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/social-mediaa\/\" data-internallinksmanager029f6b8e52c=\"1\" title=\"Social Media\" target=\"_blank\" rel=\"noopener\">media<\/a>te range (about 5-7 years). <\/p>\n<p>The Vanguard Total Bond Market Index Fund ETF<br \/>\n        BND,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/203732548\/composite\" class=\"negative\">-0.32%<\/bg-quote><span>,<\/span><br \/>\n       the SPDR Bloomberg Barclays International Treasury Bond ETF<br \/>\n        BWX,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/209464760\/composite\" class=\"negative\">-0.70%<\/bg-quote><span>,<\/span><br \/>\n       and iShares Core US Aggregate Bond<br \/>\n        AGG,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/200660887\/composite\" class=\"negative\">-0.29%<\/bg-quote><br \/>\n      \u00a0are ETFs that would work for this objective.<\/p>\n<p>For conservative portfolios, De Santis recommends highly rated short- to intermediate- bond durations that are similar to the horizon of the goal. The iShares 0-3 Month Treasury Bond<br \/>\n        SGOV,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/218669372\/composite\" class=\"positive\">+0.02%<\/bg-quote><span>,<\/span><br \/>\n       SPDR Bloomberg Barclays 1-3 Month T-Bill ETF<br \/>\n        BIL,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/209499658\/composite\" class=\"\"><\/bg-quote><span>,<\/span><br \/>\n       Vanguard Short-Term Treasury Index Fund ETF<br \/>\n        VGSH,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/201326875\/composite\" class=\"\"><\/bg-quote><span>,<\/span><br \/>\n       Vanguard Short-Term Bond Index Fund<br \/>\n        BSV,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/208505980\/composite\" class=\"negative\">-0.11%<\/bg-quote><span>,<\/span><br \/>\n       iShares Core 1-5 Year USD Bond ETF<br \/>\n        ISTB,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/204171010\/composite\" class=\"negative\">-0.02%<\/bg-quote><span>,<\/span><br \/>\n       and iShares 1-3 Year International Treasury Bond ETF<br \/>\n        SHG,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/208869909\/composite\" class=\"negative\">-0.10%<\/bg-quote><br \/>\n       are ETFs that would work for this objective.<\/p>\n<p>And for income-focused portfolios, De Santis recommends government, inflation-protected and investment-grade corporate bonds where the duration of the goal is the average maturity. The iShares TIPS Bond ETF<br \/>\n        TIP,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/200600110\/composite\" class=\"negative\">-0.38%<\/bg-quote><br \/>\n       and the Vanguard Long-Term Bond Index Fund ETF<br \/>\n        BLV,<br \/>\n        <bg-quote field=\"percentchange\" format=\"0,000.00%\" channel=\"\/zigman2\/quotes\/208144347\/composite\" class=\"negative\">-0.79%<\/bg-quote><br \/>\n      \u00a0are examples of ETFs that would work for this objective.<\/p>\n<div data-layout=\"\n                inline\" data-layout-mobile=\"\" class=\"\n          media-object\n          type-InsetCommentingPromo\n              \n              inline\n  article__inset\n          article__inset--type-InsetCommentingPromo\n              article__inset--inline\n  \"><\/p><\/div>\n<\/p><\/div>\n<\/div><\/div>\n<p><\/p>\n<div class=\"byline article__byline\">\n<p>      <span>By<\/span><\/p>\n<div class=\"author  hasMenu\" data-scrim='{\"type\":\"author\",\"header\":\"Robert Powell\",\"subhead\":\"The Wall Street Journal\",\"list\":[]}' itemscope itemprop=\"author\" itemtype=\"http:\/\/schema.org\/Person\">\n<h4 itemprop=\"name\"><span class=\"ez-toc-section\" id=\"Robert_Powell\"><\/span>Robert Powell<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<\/p><\/div>\n<\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"http:\/\/www.marketwatch.com\/news\/story.asp?guid=%7BAFB23588-7B9A-11EB-B3F4-4B4827AD503E%7D&#038;siteid=rss&#038;rss=1\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Don\u2019t stop believing in bonds &#8221; How to find the right bonds for your needs Given the current doom and gloom, with the occasional spell of relief, over interest rates rising, does it still make sense to invest in bonds when saving for or living in retirement? Well, it sure didn\u2019t seem to make&#8230;<\/p>\n","protected":false},"author":1,"featured_media":194340,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[],"class_list":["post-194339","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/194339","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=194339"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/194339\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/194340"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=194339"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=194339"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=194339"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}