Thread: Bond Timing

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  1. #1
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    Bond Timing

    Anyone have any experience with a “Bond Timing Program”. I have a good fried that is a financial advisor and he’s a believer in this. Just for information for those that don’t know about it as I understand they invest your money in high yield bonds. There’s a “team” of folks that watch the market. As the market does well your money is in these high yield bonds, as they see a downturn coming your money is flipped over to cash, back to bonds on the upturn. This is done daily as they see fit.
    He’s showed me reports from 35 years back where they have averaged 10% growth for the period.
    Benifits to this is supposed to be very low risk, for older investors. I’m 64and retired. Sure sounds good?
    Id be putting 1/2 of my investment in stocks and the other in this program.
    Good idea or not?

    Thanks
    Mark Hopper
    Jackson Tn 38301
    htbboats@aol.com

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    #2
    Right now bonds funds are dead money, not earning anything hardly. In order to earn 10% in bonds at all, I would think they would have to be junk bonds below a B rating or worse. I would never invest in anything that I don’t understand 100% about. I sold the bond funds that I had last fall. All they did was keep losing money even though they were supposed to be paying a 3-4% yield. But I am far from an expert investor, plus I am quite older than you.

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    #3
    Here is the question I have. If you are earning 5-6 % in the bonds on interest where is the other 4% of the return coming from? It would have to be from increase in the price of the bonds so you would have to buy low and sell high. High yield bonds normally behave like stocks and do better when the stock market and economy are doing better and fall when there are concerns. I think it would be tough to time the entry and exit and then you may be waiting in cash for awhile until things change (and thus losing the interest). I prefer to buy defined maturity ETF's that hold investment grade corporate bonds and unwind on a specified maturity date. Then the price fluctuations do not matter and you can buy and hold based on yield. You can ladder these also. Be interesting to see if a laddered portfolio paying 3-4% in these would outperform the high yield bond timing when you take into account the time you may spend in cash.

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    #4
    Thanks for the replies so far. Just what I was after were opinions and thoughts on this.
    Mark Hopper
    Jackson Tn 38301
    htbboats@aol.com

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    #5
    There are many mutual funds that will show 10% growth over the last 35 years. I would not want 1/2 of portfolio in this type of investment, when there are normal funds that will be equal in long-term performance.

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    #6
    Again thanks for your opinions. As I understand this program has made 10% average per year over the 35 year period.
    Mark Hopper
    Jackson Tn 38301
    htbboats@aol.com

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    #7
    Being retired I would not want 50% of my money in one investment. I can’t imagine a bond fund that averages 10% average return without taking on a lot of risk. They have to be buying low grade, high risk bonds. When borrowing money has been so cheap for the last ten years, why would anyone want to pay you 10% to use yours? I would think that the bond issuers have to have poor credit ratings. This would even be more suspicious to me with short duration bonds. It sounds like Payday loans.

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    #8
    When I learn more about this I’ll let everyone know
    Mark Hopper
    Jackson Tn 38301
    htbboats@aol.com

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    #9
    If you want to track the volatility of junk bonds you can watch the HYG ETF. It is all junk bonds and it should give you a good indicator of how they behave. There are also defined maturity junk bonds rtfs you can ladder and which unwind on maturity so you can shorten or lengthen your duration risk.