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Defensive portfolio my derrière
March 23, 2020
6:42 am
Norman1
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AltaRed said
The OP has a legitimate beef with corporate bonds. Been a lot of discussion on Financial Wisdom Forum the last week or two about bond ETFs and more specifically corporate bonds. The corporate bond market literally froze over the past two weeks with virtually nothing in the Bid column. IOW, there were no buyers to even establish liquidity or FMV. …

I don't think so. It just shows lack of knowledge of how the markets works.

Just who does one think is on the buy side when one wants to sell or the selling side when one wants to buy? Some mysterious always-present entity that is always ready to buy or sell? No. The other size of the trade is just another person.

Did it never occur to anyone that maybe when everyone wants to sell, there isn't anyone interested in buying?

I also think it really precarious to have a one-month time horizon when dealing with 10+ year bonds.

I think one really needs to give their head a good shake if one thinks that one can have long term vision by "accumulating short term vision." One has long-term vision by thinking long term and ignoring short term noise. In the world of business, those who think short term actually have no vision.

March 23, 2020
9:01 am
AltaRed
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Well, of course one cannot have a short term view holding bond ETFs shorter than the duration of the fund. A short term bond ETF with a 2 7 year duration should be held st least 2.7 years. But beyond that, the volatility of a bond ETF and size of disconnect with NAV in troubled times will depend on quality and maturity of the underlying assets.

The market maker is supposed to have ETF units on both the Bid and Ask sides to keep spreads narrow and close to NAV but that cannot happen if the underlying bonds cannot be
bought or sold, or priced by the market maker.

Bottom line is corporate bonds can act more like equities in troubling times and it is hard to make a case for them being fixed income. Investors generally don't understand the complexity of these vehicles and really need to stay away.

Even the likes of VAB or VSB have somewhere in the range of 10% BBB corporate bonds in them and that 10% goes to hell in troubled markets. If one wants a bond ETF that is more stable, pick one with only government bonds in it.

March 23, 2020
9:11 am
picassocat
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Norman1 said

I also think it really precarious to have a one-month time horizon when dealing with 10+ year bonds.

I think one really needs to give their head a good shake if one thinks that one can have long term vision by "accumulating short term vision." One has long-term vision by thinking long term and ignoring short term noise. In the world of business, those who think short term actually have no vision.  

Long term (the future) is an accumulation of the present. In fact, the future does not exist until you are there. Two people buy in at 200$, call them A & B
Person A sells at 150$ before the stock reaches 50$, buys it back at the new price (50) and it goes back up to 200 profit = 100$
Person B does not sell and has made nothing (except a dividend, if any) when the price reaches 200 again. Both still own the same stock but your short term vision guy has made money.
It doesn’t matter if it’s a 10 year bond (ETF), a 20 year bond or a two minute bond, the short term vision guy will make much more money if you can time it right and 10 years from now, both may still hold the same stock, but one is richer.

March 23, 2020
9:44 pm
Joe
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Norman1 said

AltaRed said
The OP has a legitimate beef with corporate bonds. Been a lot of discussion on Financial Wisdom Forum the last week or two about bond ETFs and more specifically corporate bonds. The corporate bond market literally froze over the past two weeks with virtually nothing in the Bid column. IOW, there were no buyers to even establish liquidity or FMV. …

I don't think so. It just shows lack of knowledge of how the markets works.

Just who does one think is on the buy side when one wants to sell or the selling side when one wants to buy? Some mysterious always-present entity that is always ready to buy or sell? No. The other size of the trade is just another person.

Did it never occur to anyone that maybe when everyone wants to sell, there isn't anyone interested in buying?

I also think it really precarious to have a one-month time horizon when dealing with 10+ year bonds.

I think one really needs to give their head a good shake if one thinks that one can have long term vision by "accumulating short term vision." One has long-term vision by thinking long term and ignoring short term noise. In the world of business, those who think short term actually have no vision.  

3809838_d41ebe3c5301f6d62668a863aad4ebf5.png

Tangerine....Canada's best bank. LBC.............Canada's 2nd best bank.
Hubert.....worst bank in Canada.

March 24, 2020
9:46 am
Bill
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I agree, Norman1's post articulates the well-established principle re long-term investing in an ever-growing global economy (is that going to contunue in the future?), it's the only way to go for those who want to follow "the rules" of investing success. FWIW, during my investing years I followed those principles with most of my portfolio but also had a shorter-term, "gambling" portfolio where I invested based on my own personal concepts of what I'd like to buy regardless of what conventional wisdom said. I was quite happy with the results of that latter portfolio. So just an idea, if you have confidence in your own abilities. It's my observation that the best returns, and highest losses, go to those who venture out from the herd.

March 24, 2020
12:30 pm
picassocat
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Bill said
It's my observation that the best returns, and highest losses, go to those who venture out from the herd.  

That phrase is wisdom.

I have many well-to-do friends, some invest thru a bank/financial analyst, some autonomously thru a brokerage firm and they all lost greatly in the last month. The catchy phase I hear from financial analysts is «if you sell now, you will be crystallising your losses». That is almost equivalent to saying: «you have a deep cut in your leg and bleeding profusely, wait till you stop bleeding and you will be fine». I prefer to patch-up the wound and recuperate with gusto.

Therefore, my friends are now stuck with great losses and no liquidity to buy sale priced stocks. I myself ejected from the stock market at the start of the crisis, I still register a profit and have ample liquidity to buy-in at rock bottom prices. I’m not a day trader, I prefer to invest and «let it ride», but these are trouble times and I took what I believe to be the appropriate measures. Like Doris Day would say: «Que sera sera»

October 25, 2020
10:10 pm
picassocat
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Seven months later and we are still in uncertain times: covid is in the 2nd wave, no stimulus bill on the horizon, US election is in a few weeks, we are in the 3rd quarter of earnings report and there will be unrest if Trump loses. I switched my portfolio to an all dividend holdings: some stocks, some ETFs, mutual funds and bonds that all have a high dividend yield. If the market falls again, dividends become my insurance policy (if they keep paying dividends). I do not reinvest, I take the cash and place it in a low risk bond fund. So far, it’s my strategy, it’s either that or move out of the market altogether.

October 26, 2020
7:16 am
Bruford
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picassocat said
I wonder now if there is such a thing as a defensive portfolio?  

Yes its called Gold Bullion

October 26, 2020
7:59 am
Bill
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picassocat, good to know there'll be no unrest if Trump wins (which seems unlikely any way)!

October 26, 2020
7:45 pm
picassocat
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Bruford said

Yes its called Gold Bullion  

Gold can go down and it doesn't pay much dividends.

October 26, 2020
10:09 pm
topgun
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picassocat said

Gold can go down and it doesn't pay much dividends.  

Gold WILL go down. It has NEVER paid a dividend.

Have a Great Day

October 27, 2020
12:38 am
picassocat
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topgun said

Gold WILL go down. It has NEVER paid a dividend.  

I was being polite.

October 28, 2020
6:39 pm
Bruford
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Have your laugh now, while you still can. But when this whole pile of cards comes tumbling down, gold will be left standing. Ignore the obvious warning signs at your own peril.

October 28, 2020
8:33 pm
topgun
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Bruford said
Have your laugh now, while you still can. But when this whole pile of cards comes tumbling down, gold will be left standing. Ignore the obvious warning signs at your own peril.  

I have lost so much in metal I am sure I am correct.

Have a Great Day

October 29, 2020
4:32 am
Bruford
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topgun said

Gold WILL go down. It has NEVER paid a dividend.  

Dividends are worthless when the underlying fiat currency is being devalued at a faster rate. That is only the illusion of gain. Other asset classes WILL go down as well. One only has to look to Europe to see negative bond yields. That is coming here soon enough.

October 29, 2020
2:01 pm
picassocat
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Presently some stocks/bonds in ETFs/mutual funds, pay 10% or more in dividend yield. Of course, it can tumble if they lower/stop paying dividends, but if not, the long run should win. Most of my high dividends are in three sectors: oil/energy, REITs and financial sector (and many preferred shares, like Bombardier and Enbridge)

I will keep this dividend portfolio until the covid crisis has ended.

I've had gold before: the real McCoy and CGL (iShares Gold Bullion ETF, the easiest and cheapest way to buy and hold gold, my opinion). Did not make much money there, but I wasn't patient enough.

To utilize gold, one must exchange it for currency and if your dollar is severely devalued, you will lose anyways.

October 29, 2020
2:38 pm
Save2Retire@55
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I am switching everything to QuestWealth and WealthSimple RoboAdvisor with a Growth Portfolio. I still have 18 years to hit my retirement goal at 55 so the market and its stupidity should give me some money back. Currently 30% in Roboadvisors (RESP, RRSP, TFSA), 40% GICs (All GREAT Rates from 2.75% - 3.75% from pre-Covid era) and 30% in cash in Tangerine earning 2% now.

I am liking the dividend payment though.

October 29, 2020
3:55 pm
topgun
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Save2Retire@55 said
I am switching everything to QuestWealth and WealthSimple RoboAdvisor with a Growth Portfolio. I still have 18 years to hit my retirement goal at 55 so the market and its stupidity should give me some money back. Currently 30% in Roboadvisors (RESP, RRSP, TFSA), 40% GICs (All GREAT Rates from 2.75% - 3.75% from pre-Covid era) and 30% in cash in Tangerine earning 2% now.

I am liking the dividend payment though.  

Good for you.
I switched to 100% dividend stocks from 5 year GIC's in my early 40's. I cannot complain. Only suggestion. If someone offers you a package "Take it" even if it seems inadequate.

Have a Great Day

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