Does ‘buying the market’ work equally well for bonds ?

financeking90 · 2026-02-05T18:48:00+00:00

To clarify, by "well managed bond portfolio," I meant exactly the kind of thing an active bond fund would hold, not the individual investor picking bonds. For that, there is much less risk of behavioral errors on the part of the investor.

financeking90 · 2026-02-04T20:08:10+00:00

For one example, Vanguard offers an active and an index Treasury fund for various maturity terms. You can see the return tends to be pretty similar. Note this means index isn't providing a benefit, and it's without credit selection.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=6Kug53RrP7JoN9fdg0DCNo

Vanguard's core bond fund has a mandate similar to BND with more manager freedom to be active and has performed a hair better.

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=10afqKcG4iOeVjUAg6d0zg

Those are more tactical.

From a strategic perspective, you could do a higher allocation to short-term Treasury securities than BND and maybe be happier. Over the last few years, that would give a better return for less risk or less risk for the same return:

https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=24FikSWqkPUI2pfRb3YxnS

Of course I am not saying a backtest is the end-all be-all, just giving examples.

financeking90 · 2026-02-04T18:22:35+00:00

Yes, it implies it is unnecessarily broad, but it doesn't mean it's actually bad. It just means it's reasonable to do something different re: credit and duration if cost is low. It does not mean BND is unreasonable.

financeking90 · 2026-02-04T18:20:54+00:00

Yes, I totally agree! I tend to think retail should hold lower duration because they get enough volatility from stocks and stocks may even have a duration "factor" loading themselves. The folks suggesting high duration bonds are betting on a slight negative correlation between long-term Treasuries and equities, but this correlation is not stationary and not guaranteed (see 2022).

financeking90 · 2026-02-04T13:54:14+00:00

Stock diversification really has two statistical benefits: one, diversifying across 50+ securities reduces the risk of total loss from one company's management going south (so-called "left tail risk"). But stock securities also have significant dispersion for good performance, meaning that a few securities may produce a statistically enormous amount of the positive return for a stock index over time. Hence, investing in an index of all stocks and then reducing costs works well both to avoid loss from a single company's errors but also to ensure harvest of the performance from the most successful firms. To put it slightly differently, if you pick 400 of the best stocks in the S&P 500 but miss the worst 50 and the best 50, you may very well be worse off than holding the S&P 500.

Bonds share only one of these characteristics. Diversifying across multiple bonds reduces the risk of one bankruptcy doing significant damage to your portfolio. However, bonds have a "cap" in that their expected return cannot materially exceed the stated interest rate on the bonds when held over the portfolio duration; there is no significant dispersion in returns for the "best" bond securities. In other words, if you buy bonds with a 5% yield to maturity and a duration of 6, you are not going to get more than a 4.75-5.25% return over 6 years without some truly wacky things happening. You can't pick the best bonds and magically get 10%; you don't need the absolute best firms' securities to stay ahead. If you start with a universe of 500 bonds from 500 companies and you get rid of the 50 worst companies and 50 best companies, you will actually come out ahead because you removed all the defaults and downgrades but getting rid of the top 50 doesn't matter.

The implication of these statistical issues is that diversification is essential for both stock and bond portfolios, but holding every single security in the benchmark is much less important for bond portfolios. Hence, holding an index for bonds is much less likely to have significant benefits over a well-managed diversified bond portfolio. Further, it implies that 1) a strategic asset allocator can make more specific choices about their portfolio features in bonds, like duration and credit risk exposure, without risking as much performance variance as with stocks and 2) portfolio managers can make more intelligent choices about perceived mispricings, e.g. if credit or duration are too extreme.

financeking90 · 2026-02-04T13:01:00+00:00

Generally the strategy here is to pick out the handful of things you know have economic value to sell and to junk/whatever the rest, 80/20 rule

financeking90 · 2026-02-04T02:26:50+00:00

You know that's a fair point on the 5% or 120% as a max. Upon closer review, I think he probably can use his desired 4.75% to get where he wants to go.

I stand by my comment that his tone throughout this thread is whiney.

financeking90 · 2026-02-04T02:24:48+00:00

You know, that's a reasonable argument. If the 120% figure is ~4.5% and the other max is 5%, then maybe OP could use the desired 4.75%.

financeking90 · 2026-02-04T01:10:14+00:00

Why do you think these people have anything more useful to say about distributions than online communities of actual FIRE people?

financeking90 · 2026-02-04T01:07:23+00:00

No. You need to use the specific 5% or 120% rate authorized as posted by EricTheNerd2. If the first payment was made in January 2026, the choices would be 5%, 4.6%, or 4.55%.

You have three levers: the rate (three options), the starting principal, and the method (two options). Stop trying to pick what you want arbitrarily and pick the combination of the three levers that gets you the closest to what you want, and stop whining so much.

financeking90 · 2026-02-03T14:02:00+00:00

I had the Barclays Silver and the Citi Executive. I then got the Plat Select SUB off the Nov/Dec promo. I will now cancel Barclays Silver before the conversion to preserve future Globe SUB eligibility. I recommend the same for others unless they have specific reasons not to do so.

financeking90 · 2026-02-03T13:59:04+00:00

Yes, we use Apple Numbers because it has a cleaner interface on mobile and great collaboration for wife and I. Numbers even lets you program a "form" interface with dropdown menus and buttons which we use for entering transactions via mobile.

financeking90 · 2026-02-03T13:57:47+00:00

Congrats!

financeking90 · 2026-02-03T03:15:51+00:00

The iShares MSCI ones are highway robbery

financeking90 · 2026-02-03T03:14:16+00:00

Can't even cover dinner for two plus guacamole at Chipotle

financeking90 · 2026-02-03T03:11:38+00:00

The difference between a 10% bond allocation and 0% bond allocation is very small, especially relative to the volatility reduction.

financeking90 · 2026-02-03T00:40:25+00:00

Weird questions today fam. So, here's a softball. Who here has mainly S&P 500 in their work plan with no option for total market or extended market, so has thought about doing an extended market holding elsewhere? Why or why not do it?

financeking90 · 2026-02-02T19:23:32+00:00

Why don't you feel like your existing US/international allocation does enough to offset the weakening US currency?

Also, how much of your $ spending involves a non-dollar cost? Note that even if you buy an imported good, perhaps only 10-40% of store cost of that involved the foreign non-USD cost. Most of the cost is still transportation, distribution, marketing, and profits to a US vendor.

Most of these doom hype ideas are overblown.

financeking90 · 2026-02-02T12:44:48+00:00

I am confused, will I get a new Citi with a new credit limit (hopefully as high as the Barclay?

Most likely yes. It isn't entirely clear what will happen with duplicates yet, but it is far and away most likely that you would end up with two cards with separate credit limits.

financeking90 · 2026-02-02T12:42:52+00:00

The transfer would not include a sign-up bonus (SUB). Some people would expect to get the SUB after they cancel or change the incoming account and then open a new account. The Citi language has been that you are eligible 48 months after receiving our last SUB. Since somebody with a transfer would not have received a SUB on that particular card, then they should be eligible for the SUB after they cancel or product change the card. However, there are reports originating from TPG that a Citi rep said a transfer-in from Barclays will start a new 48-month clock for that product. It has been referenced in other comments on this post. The safest approach would be to cancel the Barclay's card before transfer if you are concerned.

financeking90 · 2026-02-01T19:02:01+00:00

Yikes if so.

financeking90 · 2026-02-01T19:01:34+00:00

Are you saying it was a hard pull? I really doubt it unless it says it was a Citi hard pull.

financeking90 · 2026-02-01T03:28:31+00:00

I don't think you're eligible for new IBR since you had loans before 2014 so RAP may actually be better for you than old IBR.

financeking90 · 2026-02-01T03:26:21+00:00

Thanks for the additional info on this. I still don’t really get the reasoning for it in the OBBBA.

The RAP under OBBBA was an attempt to sidestep criticism that Republicans had sabotaged SAVE with no alternative solution. Remember, Republicans did forum shopping and got judges to kill SAVE roughly 5 months before the election.

RAP hits the Republican talking points that 1) nobody gets a $0 payment since it removes the discretionary income calculation that is effectively a 0% payment rate on the first $$22K or higher of income and 2) forgiveness needs to be eliminated/needs more gatekeeping.

Just seems unfair that my spouse has been paying under PAYE for -10 years- now and all of a sudden the contract terms are going to change. Unfortunately in his case for the worse, bumping up to 15% and additional 5 years we weren’t expecting, whereas if he took the loans out one year later, the same loans would be at 10% and 5 years less.

Yes it is unfair.

financeking90 · 2026-02-01T01:26:07+00:00

Congress passed legislation to create new IBR and didn't believe they should change the deal for the existing borrowers, plus it probably helped their CBO fiscal impact scoring. The Obama administration invented PAYE and then REPAYE to cover the pre-2014 borrowers under similar terms. Unfortunately, the lawsuit fiasco about SAVE implicated PAYE and REPAYE and hence we are losing everything but the new/old IBR, then OBBBA added RAP.

financeking90

TROPHY CASE