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    Anyone here invest in individual bonds?

    I was wondering if any of you invest in individual bonds. If so, please share your experiences. Do you just buy Treasuries? Corporate bonds? Municipals? I know that individual bonds have some advantages over bond funds and give you much more control over your holdings and earnings. I've looked into it a little over the years but have never actually done it, even though my mom has had a large bond portfolio for as long as I can remember.
    Steve

    * Despite the high cost of living, it remains very popular.
    * Why should I pay for my daughter's education when she already knows everything?
    * There are no shortcuts to anywhere worth going.

    #2
    Originally posted by disneysteve View Post
    I was wondering if any of you invest in individual bonds. If so, please share your experiences. Do you just buy Treasuries? Corporate bonds? Municipals? I know that individual bonds have some advantages over bond funds and give you much more control over your holdings and earnings. I've looked into it a little over the years but have never actually done it, even though my mom has had a large bond portfolio for as long as I can remember.
    I just purchased Treasury bond funds (VIPSX) and corporate bond fund (VWETX). I have never purchased munis (not worth it for our income level) and I stay away from mortgages after a personal housing disaster in 2010. I usually prefer stock funds but did buy bond funds just to park our downpayment in (hope that doesn't backfire on me)

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      #3
      Originally posted by Scallywag View Post
      I usually prefer stock funds but did buy bond funds just to park our downpayment in (hope that doesn't backfire on me)
      Bond funds drop when interest rates rise, which isn't going to happen anytime soon, so you should be safe. And you certainly don't want to put money you need to protect in stock funds. That could end badly.
      Steve

      * Despite the high cost of living, it remains very popular.
      * Why should I pay for my daughter's education when she already knows everything?
      * There are no shortcuts to anywhere worth going.

      Comment


        #4
        Bought some muni bonds, lost a few thousand on them during the market crash and I found risk increased when every state was begging for relief money the government was not giving. So I took that money out at a loss and invested in stocks which tripled since I made that decision.

        I don't mind muni bonds but the yield needs to be higher.

        To me bonds have two major downside risks

        1. It's value drops as interest rate raises
        2. It's value also drops as the stock market crash(just crash at 1/3rd the rate).

        So bonds to me is only fine during market certainty...which can be said about anything else. So given the same interest between CDs and Bonds, I'll pick CDs every time unless for tax advantages like Muni bonds.

        Comment


          #5
          Originally posted by Singuy View Post
          Bought some muni bonds, lost a few thousand on them during the market crash and I found risk increased when every state was begging for relief money the government was not giving. So I took that money out at a loss and invested in stocks which tripled since I made that decision.

          I don't mind muni bonds but the yield needs to be higher.

          To me bonds have two major downside risks

          1. It's value drops as interest rate raises
          2. It's value also drops as the stock market crash(just crash at 1/3rd the rate).

          So bonds to me is only fine during market certainty...which can be said about anything else. So given the same interest between CDs and Bonds, I'll pick CDs every time unless for tax advantages like Muni bonds.
          #1 is false. Individual bonds neither lose nor gain value once purchased. Bond funds lose NAV value as interest rates rise but the yield goes up as interest rates rise. The time to break even is approximately 1/2 the duration of the fund. If you are holding a long bond fund with a duration of 25 years, it will take 12.5 years to break even unless rates go back down. If you are holding a short duration bond fund with a duration of 3 years, you will break even @ 1.5 years. That's why I'm in short duration bond funds right now.

          #2 is false. Stocks can crash and bonds rise. As a matter of fact, they did just that in 2009. By a LOT.

          ere.png

          Comment


            #6
            Originally posted by Singuy View Post
            To me bonds have two major downside risks

            1. It's value drops as interest rate raises
            2. It's value also drops as the stock market crash(just crash at 1/3rd the rate).

            So bonds to me is only fine during market certainty...which can be said about anything else. So given the same interest between CDs and Bonds, I'll pick CDs every time unless for tax advantages like Muni bonds.
            As I said in the other thread, though, the value only matters if you sell before maturity (just as there is a penalty for cashing out a CD early). If you hold the CD or the bond until it matures, you get back exactly what you put in and collect the interest along the way. It doesn't matter what happened to the value in the meantime.

            There is a possible opportunity loss but that's true with CDs and bonds. If rates rise and you're locked into a lower rate you're missing out on higher interest.
            Steve

            * Despite the high cost of living, it remains very popular.
            * Why should I pay for my daughter's education when she already knows everything?
            * There are no shortcuts to anywhere worth going.

            Comment


              #7
              Originally posted by corn18 View Post

              #1 is false. Individual bonds neither lose nor gain value once purchased.
              They do if you try to sell them before maturity.
              Steve

              * Despite the high cost of living, it remains very popular.
              * Why should I pay for my daughter's education when she already knows everything?
              * There are no shortcuts to anywhere worth going.

              Comment


                #8
                Originally posted by Singuy View Post
                So given the same interest between CDs and Bonds, I'll pick CDs every time unless for tax advantages like Muni bonds.
                I do agree with you on this. If the interest rate is the same, I'd go for the CD. It's FDIC-insured.

                But if CD rates and bond rates were the same, everybody would do that. That's not the case, though. CDs are paying nothing, like 1% for 5 years. You can easily get 3-4 times that with bonds.
                Steve

                * Despite the high cost of living, it remains very popular.
                * Why should I pay for my daughter's education when she already knows everything?
                * There are no shortcuts to anywhere worth going.

                Comment


                  #9
                  Originally posted by corn18 View Post

                  #1 is false. Individual bonds neither lose nor gain value once purchased. Bond funds lose NAV value as interest rates rise but the yield goes up as interest rates rise. The time to break even is approximately 1/2 the duration of the fund. If you are holding a long bond fund with a duration of 25 years, it will take 12.5 years to break even unless rates go back down. If you are holding a short duration bond fund with a duration of 3 years, you will break even @ 1.5 years. That's why I'm in short duration bond funds right now.

                  #2 is false. Stocks can crash and bonds rise. As a matter of fact, they did just that in 2009. By a LOT.

                  ere.png
                  About #2.

                  I wonder if you can spot the exact moment interest rate hit 0%in 2009

                  We are at 0% today, the worst time to buy bonds.

                  Comment


                    #10
                    Originally posted by disneysteve View Post
                    As I said in the other thread, though, the value only matters if you sell before maturity (just as there is a penalty for cashing out a CD early). If you hold the CD or the bond until it matures, you get back exactly what you put in and collect the interest along the way. It doesn't matter what happened to the value in the meantime.

                    There is a possible opportunity loss but that's true with CDs and bonds. If rates rise and you're locked into a lower rate you're missing out on higher interest.
                    Holding bonds till maturity in today's environment is borderline impossible because we know interest rate will go up, not down..from 0%.

                    Comment


                      #11
                      Originally posted by Singuy View Post

                      About #2.

                      I wonder if you can spot the exact moment interest rate hit 0%in 2009

                      We are at 0% today, the worst time to buy bonds.
                      If you believe in mean reversion, bonds are about 25% overpriced right now. Stocks and bonds are really expensive.

                      Comment


                        #12
                        Originally posted by Singuy View Post

                        Holding bonds till maturity in today's environment is borderline impossible because we know interest rate will go up, not down..from 0%.
                        How do you know that? I'm sure the Germans thought they knew that in 2010 and then their bond rates went negative. By a lot.

                        Comment


                          #13
                          Originally posted by corn18 View Post

                          How do you know that? I'm sure the Germans thought they knew that in 2010 and then their bond rates went negative. By a lot.
                          If we go negative then equities will explode even more. So I am being bullish on crappy bonds by stating that we wouldn't go negative.

                          Comment


                            #14
                            Originally posted by disneysteve View Post
                            I was wondering if any of you invest in individual bonds. If so, please share your experiences. Do you just buy Treasuries? Corporate bonds? Municipals? I know that individual bonds have some advantages over bond funds and give you much more control over your holdings and earnings. I've looked into it a little over the years but have never actually done it, even though my mom has had a large bond portfolio for as long as I can remember.
                            Yes, I have bonds in my Treasury Direct account. I have TIPS and Series EE Savings Bonds. The latter will be held for 20 years from the purchase date for the 3.5% interest rate equivalent. My last purchases were in 2014 and I don't know if I'll be buying any more in the future. Definitely not any more Series EE Savings Bonds - at a certain age it no longer makes sense to buy something you have to hold for 20 years for maximum benefit.
                            Last edited by scfr; 10-15-2020, 03:39 PM.

                            Comment


                              #15
                              Originally posted by Singuy View Post

                              Holding bonds till maturity in today's environment is borderline impossible because we know interest rate will go up, not down..from 0%.
                              First, it depends on the term. Second, what difference does it make what the rate is if you hold til maturity.

                              Let's say I go out tomorrow and buy a bond that matures in 2025 and has a yield to maturity of 3%. That's 3 times what a 5-year CD is paying. As long as I hold it until it matures, I will collect 3% interest until then. I don't care if rates go up, down, or sideways. If I put in 10K, I'll get out 10K. Why is doing that "borderline impossible"? The Fed has already indicated rates aren't changing anytime soon. Even if they do creep up between now and then, I'll still be getting 3% on my investment.
                              Steve

                              * Despite the high cost of living, it remains very popular.
                              * Why should I pay for my daughter's education when she already knows everything?
                              * There are no shortcuts to anywhere worth going.

                              Comment

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