...Thanks for the analysis and the conclusion are too different than part 1. I have some questions.Thanks again for the education.
- Based on what you are saying, you are saying Treasury are better than Total Bond probably due to its lower correlation and probably because corporate bonds don't bring additional return in a total portfolio sense?
- Does the correlation play a factor in bond asset selection and how much difference before it matters. For example, if you find something that has a very similar return to Treasury but lower correlation, the that might be even better?
- You are saying that a combination of 60/30/10 Stock/Long Treasury/cash is even better than 60/40 stock/IT? By the way, does LT means treasury bond that are 10 years or does it mean 30 years?
- What would happen if you drop the duration to short bond?
- Will you ever do anything with TIPS in a future analysis?
4. Other analyses not shown found a still shorter Treasury not to do any better than IT: too little return, no lower correlation.
...
STT vs ITT vs LTT is a rather meaningless comparison. Each provide different levels of exposure to interest rate risk which is (largely) the same type of risk for each of those. You have to compare the risk-adjusted versions of each, e.g. leveraged STT. See the mHFEA thread for more info.So, intermediate Treasuries look to be a better stock complement than BND in a rebalanced portfolio. And even during bond bear-markets, McQ finds no significant advantage for short-term over intermediate-term Treasuries. All good to know, especially for those with a long investment horizon.
For a retiree focused on the next 10 years and worried mainly about inflation, this article by Rekenthaler makes a case for the preferability of cash to intermediate Treasuries. The results presented don't take into account the lower correlation of intermediate Treasuries with stocks. But during an inflationary era, perhaps that wouldn't be a significant advantage for the Treasuries. Those wanting to rebalance during 2022 into their depressed stocks would have been glad to be doing so from cash rather than from also-depressed Treasuries.
https://www.morningstar.com/alternative ... -revisited
Statistics: Posted by comeinvest — Mon Jul 01, 2024 2:23 am — Replies 133 — Views 21574