Certainly it is ok to use short bonds and to adjust the portfolio as a whole to suit, or even not to make much adjustment. It may make very little difference anyway.I’ve been keeping my bond fund holdings really short duration (~1-year average) ever since I started putting $ in bonds a few years back. It benefitted me during the recent bond downturn, but I know in the long-term that this approach will underperform as it will behave more like cash and less like bonds. But I’m having the hardest time switching to total bond or intermediate-term bond index. Why is this? What does this mean in terms of investment psychology or behavioral error? Is it ok to just continue to stay in short bonds funds and hold a higher % of equities to produce equivalent long-term risk-adjusted returns?
As to psychology, throwing out diagnosis in response to a post is kind of absurd, but if one wants to invent a diagnosis I would say you are wedded to the framing that it matters whether or not bonds are "safe." This is probably irrational for the long term holder of a stock and bond portfolio. It may be appropriate if one serves a purpose by having some assets that are "safe." You have to decide what your purposes are and what suits your interests best.
Statistics: Posted by dbr — Mon May 27, 2024 7:02 pm — Replies 17 — Views 1982