Asset Class: Bond (Short Term / 1-3 Year Treasuries)
Original Investment Thesis (6/2018): I’m holding a bond position in lieu of stocks right now for a variety of reasons. The biggest reason I’m allocating to bonds versus just parking the money in the VT ETF is because I’m doing what you are not ever supposed to do…trying to time the market. I believe stocks are overvalued right now. I think they can go higher but that upside is limited while downside is large. I’m not afraid to go 100% stocks at all…promise. I’d rather be 100% stocks…promise. There are way too many indicators flashing warning signs for me to justify a full-fledged exposure to equities right now. So, my bond position will be my war chest for when/if blood starts flowing in the streets. I started backing off a full allocation to equities around February 2018. If/when I find stocks I like, I’ll close this bond position out. Until then, I want limited/no duration risks (little/no exposure on interest rate moves). Yield is secondary but I’ll take it (whatever it is). I was holding short duration corporates since June 2018 via Invesco Bulletshares 2019 (BSCJ) & 2020 (BSCK). I recently switched to short-duration Treasuries (in August 2019) to eliminate any credit risks (and I say this with my tongue lodged firmly in my cheek). The investment thesis remains the same…short duration bonds. In the past I’ve also owned Schwab US Aggregate Bond ETF (SCHZ) which is a fine way to allocate to bonds. The duration is longer in that ETF, however, and not what I’m looking for right now.
Update (11/2/2019): Short term holding. No one knows what rates are going to do but my “guess” is short term rates are headed lower (since the yield curve is telling us that short term rates are too high relative to long term rates). This should provide this investment with a little tailwind. I am looking hard for stock investments to whittle down (and maybe even close out) this position. With some recent portfolio reshuffling (and market moves) my allocation here has gotten too high and I want it to be lower. My time horizon is long and I don’t want to hold a bond position long-term as it will provide me with no inflation protection at all. As long as I have a bond position in my portfolio, I will be hunting hard for a stock to invest in instead. During the month of October 2019 I began scaling down this position and moving more into stocks (from 23% down to 17%). I want to get down to around 15%.