Stocks vs. bonds for long term investors

Stocks vs. bonds for long term investors

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Stocks vs. bonds for long term investors
  #1  
Old 02-26-2018, 12:22 PM
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Default Stocks vs. bonds for long term investors

I agree with what Warren Buffett had to say about incorporating bonds into long term investing plans. I only bought bonds way back when interest rates were very, very high and had nowhere to go but down. I bought them for both yield and capital gain - which worked out nicely. Of course once one reaches retirement age and is looking for income that probably changes. Unfortunately at today's ridiculously low interest rates bonds are in a bear market. Buffett says 'terrible mistake' for long-term investors to be in bonds | Reuters
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  #2  
Old 02-26-2018, 01:21 PM
retiredguy123 retiredguy123 is online now
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I believe in being diversified. One third in stocks, one third in bonds and one third in cash is a conservative mix. I just checked my Vanguard index funds. For the past 10 years, the average annual returns are 8.49 percent for S&P 500 stocks, 3.95 percent for intermediate term bonds, and 0.5 percent for the money market. The problem with trying to time the market is that most people cannot do it accurately, and sometimes they fail with horrible results. Back in the 70's, I thought interest rates were high at 8 percent until they went to 16 percent.
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  #3  
Old 02-26-2018, 01:37 PM
dave042 dave042 is offline
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With this new administration, you are going to make a killing in any US index stocks. My return rate has been 15%-20% every quarter in S&P small cap. Make sure you have a nestegg to dip into during any correction.

Nobody is issuing bonds with a decent return. Corporations are repatriating their funds from overseas. They don't need to borrow money now. Municipals are waiting for the infrastructure stimulus package soon to released. The Fed is barely raising their rates so Treasure Bonds won't even keep up with inflation.

Your best buy on bonds were during Jimmy Carter's administration. And I don't think anybody wants to revisit that!
  #4  
Old 02-26-2018, 01:43 PM
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Originally Posted by dave042 View Post
With this new administration, you are going to make a killing in any US index stocks. My return rate has been 15%-20% every quarter in S&P small cap. Make sure you have a nestegg to dip into during any correction.

Nobody is issuing bonds with a decent return. Corporations are repatriating their funds from overseas. They don't need to borrow money now. Municipals are waiting for the infrastructure stimulus package soon to released. The Fed is barely raising their rates so Treasure Bonds won't even keep up with inflation.

Your best buy on bonds were during Jimmy Carter's administration. And I don't think anybody wants to revisit that!
You make some good points. Repatriated money held by large corporations and a greatly reduced corporate tax rate will strengthen the economy. My only concern is P/E's are currently relatively high.

The otherwise devastating Carter years were when I loaded up on bonds. I will not buy bonds now but I do keep what I consider to be an adequate cash reserve in short term instruments. historic interest rates graph - Google Search
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Last edited by manaboutown; 02-26-2018 at 01:49 PM.
  #5  
Old 02-26-2018, 01:52 PM
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As I get closer to retirement I'm starting to "protect" a bit more of my money. I'm up to about 20% in tax free muni's. You can get almost 4% yield on AA+ rated bonds. It's not the kind of returns I'm getting in the market but it beats the heck out of the bank.

If I still had 20 years until retirement my risk tolerance would be much higher.
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  #6  
Old 02-26-2018, 01:53 PM
dave042 dave042 is offline
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Quote:
Originally Posted by retiredguy123 View Post
I believe in being diversified. One third in stocks, one third in bonds and one third in cash is a conservative mix. I just checked my Vanguard index funds. For the past 10 years, the average annual returns are 8.49 percent for S&P 500 stocks, 3.95 percent for intermediate term bonds, and 0.5 percent for the money market. The problem with trying to time the market is that most people cannot do it accurately, and sometimes they fail with horrible results. Back in the 70's, I thought interest rates were high at 8 percent until they went to 16 percent.
retiredguy123 and i are in near concurrence except i would not invest into bonds until the Fed raises interest rates. you have a better ROI in stocks with the current US administration. 80% stock, 20% money market to use as next a nestegg to ride out any correction.

totally agree with S&P and index funds. look at manufacturing, military, energy, and technology stocks for the next 7 years.
  #7  
Old 02-26-2018, 01:57 PM
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I use some short term munis in my cash reserve but avoid those subject to the AMT. Are Municipal Bonds Exempt From the AMT? - MunicipalBonds.com
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  #8  
Old 02-26-2018, 02:03 PM
dave042 dave042 is offline
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Originally Posted by Kenswing View Post
As I get closer to retirement I'm starting to "protect" a bit more of my money. I'm up to about 20% in tax free muni's. You can get almost 4% yield on AA+ rated bonds. It's not the kind of returns I'm getting in the market but it beats the heck out of the bank.

If I still had 20 years until retirement my risk tolerance would be much higher.
yep Marine, you've got a solid OPLAN. four squads on line with with one in reserve.
  #9  
Old 02-26-2018, 02:05 PM
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yep Marine, you've got a solid OPLAN. four squads on line with with one in reserve.
Investing with the Platoon method.. lol
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