6Lun·

Bonds

Question for the Getquin community.

I am considering adding a small portion of my portfolio to a bond etf in addition to an equity etf.

I would be interested to know if anyone has had any experience with such etfs.

For example $AGAC (+0 %)
$VAGE (+0 %)

Or would you only invest directly in bonds?

Just invest passively and for the long term as a retirement provision.

I would appreciate any answers.

Thanks in advance.

14 Comentarios

FullSelfDrivingLastenalpakaverleih@DoppelSchlechtMinus

6Lun

It depends on what you want to achieve with it.
If you want to secure the coupon for the next phase of low interest rates, individual bonds or target maturity ETFs are more likely.
If you want to counteract the overall volatility of the portfolio with a passive instrument, then a government bond ETF that specializes in long maturities is more likely. Stronger price fluctuations, but normally uncorrelated to the equity market to such an extent that it has a stabilizing effect.
The above-mentioned funds are somewhere in between. They bob along, don't fluctuate so much, stabilize a little.
I have all three building blocks in my portfolio with $VAGE, $IBGL and individual corporate bonds. But it's not a young growth portfolio or anything like that, it has to fit in with the objectives.

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investment_sage_1668@investment_sage_1668

6Lun

I would also be interested

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Friese84@Friese84

6Lun

Over the past few weeks, I have been looking more closely at bonds, especially government bonds.
My portfolio is intended for retirement and I would like to have stability accordingly. Also, my investment horizon is not super super long (25 years).
I have decided to add euro government bonds. These are lower-yielding than US Treasury bonds, but you are also not exposed to currency risk.

I will probably add these two to my portfolio.

$MTE and $MTA

My portfolio will then consist of

50% ETF shares
15% gold
5% Bitcoin
30% bonds

I once did a backtest on https://curvo.eu/backtest/de.

https://curvo.eu/backtest/de/portfolio/50-msci-acwi-20-gold-spot-price-15-bloomberg-euro-treasury-50bn-1015-y--NoIgrADABQpABAWQMoGECScCCKDqGDUcATNPAOID2ANgCZwDOADhQC5yMBOAlgMYCmcQgEYwsOACEqFCgFsARnw4BzOAFEArhwpwAKhz4BDepoCecSHIB2cIRAC0IuAE1DHCRUt1hpCVNkLlNU1tSgA3RUsZPks2cQ86ITsAZmdXQXMxcS4WHgouSxAAGmBQcR0UIogAOggwAF1ikAARVQg21RwyIgAZJoB2SqqRBtA0VohxJIA1HQQAKQBOIUHhxu6AVSEANkgAFgAOBaT9sBX6xrG28S2AJTAiIjAFwfq6uqA

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Niemand2@Niemand2

6Lun

@Friese84 May I ask how you divide the 30% between the short and long-dated bond ETFs in percentage terms and why?

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Friese84@Friese84

6Lun

@Niemand2 I split them 50/50. The reason is that I find a balance between yield and interest rate risk. The long-dated government bonds are generally more profitable and advantageous when interest rates fall, but react sensitively when interest rates rise (see 2022). Short-dated bonds are somewhat more flexible, but also lower-yielding. I use them to hedge against various economic scenarios. In the end, the idea comes from the Golden Butterfly portfolio. However, the proportion of bonds in the model portfolio was too high for me. I also wanted to include Bitcoin.

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FullSelfDrivingLastenalpakaverleih@DoppelSchlechtMinus

6Lun

@Friese84 I can basically understand your portfolio structure, but even 30% bonds would still be too much for me, and I no longer have a 25-year investment horizon. Furthermore, with the ACWI ETF you have also eliminated the small caps from the basic idea of the Golden Butterfly.
Another problem I see with your backtest is that it is based on a fictitious investment in the early days of Bitcoin with the standard selection of the time period. This is of course worlds away from the expected future return, and depending on the rebalancing interval set, even 5% can make an extremely large difference.

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Friese84@Friese84

6Lun

@DoppelSchlechtMinus That's all true, but I did the backtest without Bitcoin to get a better picture. I am well aware of the bias, but changes in the return usually also have a direct impact on the risk. I assume an overall return of around 6% with significantly lower risk.
What is the maximum amount you would invest in bonds?
I have deliberately eliminated small caps as I do not expect an excess return here, but I am considering adding an edge momentum here.

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FullSelfDrivingLastenalpakaverleih@DoppelSchlechtMinus

6Lun

@Friese84 Yes, if you calculate with 6% it fits of course, but if you just open your backtest link without adjusting anything, it easily says three times as much ;)
I wouldn't invest more in bonds than in the sum of BTC+gold these days. Even if gold soon starts to move sideways again for 1-2 decades, I see a better effect for portfolio volatility.
Within the equity market, by adding small caps or anything else that counteracts the high weighting of mega caps with related business models in the ACWI, you optimize not only return opportunities but also stability if there is another upheaval. With a momentum ETF, on the other hand, you would tend to reinforce this - I don't think it fits in with your stability objective.

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Friese84@Friese84

6Lun

@DoppelSchlechtMinus So far, the original reference is also to the domestic equity market. However, I think that the ACWI is already well diversified.

I had no intention of replicating a Golden Butterfly, but I found the approach with the short and long-dated bonds very exciting.

I agree with you about the momentum. I'll reconsider the bond component, I can understand your concerns.

In any case, thank you for your great input. It's very interesting and helpful.

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Epi@Epi

6Lun

When considering bonds as an addition to a B&H portfolio, please note that almost all statements on the sense and nonsense of bonds are based on data from the late 1970s onwards.
However, 1980-2020 was a bond bull market of steadily falling inflation and interest rates (globalization, peace, stability, demographics).
That time is over! There is currently a regime change towards inflation and interest rates that are no longer falling. This radically changes the assessment of bonds in relation to equities.
Of course, there is little literature and sources on this. But perhaps a look at the bond performance of the 40 years before the current regime: 1940-1980?

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gorehammer@gorehammer