what to do with indexed bond funds
Hi Terry thank you for your time.
We are early 60s I work part time my wife is still working full time. We are looking to retire in the next few years. On a portfolio of approx $1.5 million we have 48% stocks (allocated large cap/mid cap /small cap /international index funds) 15% cash (CDs) and 38% bond index funds (US Bond, International, and Short Term). We are getting killed in Bonds (lost about $40K so far this year on bonds alone) and with interest rates projected to continue to rise I am wondering should we be keeping these bonds? What to do….should we just swallow hard and ride it out as I’m willing to do with the stock index funds or convert to cash which is .5% interest or what should we be doing with this money?
Terry Says
That is the toughest question of the year. Bonds have fallen farther than stocks this year. Andwill fall farther as rates rise — either because of the Fed trying to win the battle against inflation, or becuase the Fed is losing the battle against inflation! I think we have passed a major inflection point and don’t have any of my funds in long term bonds (except for a TIPS fund inside my IRA).
I’m just writing a column about that. There are three losing choices in your question: Stocks, Bonds, and cash. Bonds are my least favorite. Pick your poison.
