Bonds vs stocks

I put my money in diversified equity funds. I have them in various mix groups and let them do all the figuring out. Then I just pray -

BillW, Forget the praying. Your diversified equity funds will do fine. Our's is somewhat similar, so when the market goes up or down 2-300 points, we see our funds go up and down, but nothing to get excited about. c.i.

Still gotta pray - government ain't gonna help me-I'm to poor!

My portfolio now stands at 33% stock and 67% bonds.

I plan on keeping it like this for a very long time.

New Haven, On 12/31/2002, our portfolio reflected the following breakdown: 22% Cash, 17% Annuities, 23% Bonds, and 37% Equities. c.i.

c.i.:

What's the breakdown on the annutiies?

22% in cash? Why so much?

New Haven, Our son just graduated with his masters from the University of Texas. I told him we will help him with the down payment on a house. For some unknown reason, he's still in Austin, although he told us he will never settle down there. The 22 percent cash is high, but most are in CD's with some earning over 7 percent. c.i.

I consolidated most of our annuities into one at the local bank, because they offered 6.25 percent for the first year - about a year ago. I can withdraw ten percent per year without any penalties, and it will be penalty free after five years. Since I won't need the money, it'll stay there until I need the money. The other one from Met Life had a penalty for withdrawal, so I left that one with Met Life. c.i.

I was in Austin for one week, during the Summer, several years ago.

Was it ever HOT!

CI:

I still have several CDs, but they're paying 6% and I bought them sometime ago.

New Haven, Six percent is still pretty good when compared to what they're paying today - less than two percent. The trick is to ladder your CD's to average out between the highs and lows. Better than being stuck with two-percenters for all that extra $$$$ you don't need immediately. c.i.

Just completed a reallocation for some of my wife's Prudential TARGET Funds to Vanguard Group Funds. Prudential was the worst performing of all of our funds, and their fees are one of the highest in the industry. What got my goat was that they charge some of the highest fees for the worst performance, and they continue to get 'their' money while the stock value keeps going down. In this transfer, the allocation to Vanguard is 40% equities and 60% bonds. I still think our economy will remain in the doldrums for another four-five years, but the 40% stock funds will balance any unexpected run-up in the market. My wife will retire in a couple years, and I think this is a good way to protect the principal. c.i.

I am finding that some of those high-interest bonds are being called.

It also seems to me that buying bonds in this current (historically low) interest rate environment means you'll be holding a future loss--when rates rise, perhaps as soon as next year, then bond prices will fall.

So is NOW a good time to buy bonds? It seems not, to me...

PDid, I never listen to the financial pundits. When have they ever come out with good information? Here's my take on the economy. Very few of the blue chip companies are now showing any profit. Any future turn-around in our economy is not going to happen over-night. Most of the p/e ratios of the good companies are +20 which means they're still over-valued. Yes, the bond rates are low, but that's better than the 30% loss experienced by most investors of equity just last year. Do you know how long it takes to recover a 30% loss? Our over-all loss of our retirement investments was 7.5%, but that included my withdrawals for living expenses. The actual loss was more like 3.5%. Warren Buffet lost over 13% of his investments last year. Over-all, most investors in equity have lost upwards of 80% during this downturn. Some of our bond funds have increased double digit during the same period. Finally, we still have 40% invested in mutual funds. They are essentially managed very well when compared to what most people lost in the markets the past four years. If there's a sudden upswing in the market (which I doubt will happen), we will share in the gains in our equities. The economy will not improve just because the war in Iraq is won. The economy will improve when the p/e ratios improve, and that's not going to happen any time soon. Bonds is a good place to be. After the fourth year of equity losses, there will be a greater demand on bonds, and prices will increase. Bonds are safe for another three-four years, IMHO. c.i.

I am in PDiddie's camp...if I am allowed, that is....

Because investments are basically about risk vs. reward....
yet bond yields are the lowest they have been, since about 40 years ago, any unexpected news, economic news.....

Does that not leave more far more risk to the downside, than to the reward side?

Remember the NASDAQ!

Other than that, I say Commodities is the way to go!
To quote Mr. David Letterman, " HEY, I GOT GAMBLING MONEY!!!!!"

Fatima, We all have our opinions about how to invest our retirement funds. In the long-term, we have out performed most of the financial 'experts.' My prognostications, although very conservative, have been proved out over time. I trust me more than I trust all the financial pundits "out there" making the big bucks for giving bad advise. You know what the financial pundits said about bonds in 2001 for 2002? They said bond prices were going to suffer, because our economy was going to pick up. Well, our bonds earned double digits while the market lost over 30 percent for most investors. c.i.

BTW, those folks who lost 30 percent last year will need to make up 1.45% of their original investment to break even. That's not about to happen in the next year or two - minimum. c.i.

Ci:

One thing you didn't specify was your definition of long vs short term. Could you do so?

If long term is something like 100 years, the yield in stock returns does not merit the corresponding risk, relative to bonds.


I like Vanguard bond funds. But I also like American Express Brokerage for my stock purchases.

I've just chosen an all equity fund for my pension plan (which I can change over time, it's just not that easy).

The fact is that, as a 31 year old, I don't need to have security of earnings over the next few years - my job should do that for me.

If I were 10 or 5 years from retirement, I would reduce my exposure to volatility (i.e. move away from equity into bonds and cash).

Currently, my "long term" for my pension investment is 30 years, so I'm not too fussed if there's a dent in equities along the way...plus they've "come off" so much that it's an OK time to invest.