The bond fund investments were 75% split between VCIT (Vanguard I-T Corp Bond ETF) & SCHI (Schwab 5-10 Yr Corp Bond ETF), and 25% SCHP (Schwab US TIPS ETF). I plan to hold whatever I settle on for 10+ years.You didn't say what specific bond fund you moved to, but most intermediate-term bond funds have average durations in the vicinity of 6 years.
For example, the Vanguard Inflation-protected Securities Fund, VAIPX, has an average duration of 6.7 years, while the Vanguard Intermediate-Term Corporate Bond Index Fund, VICSX, has an average duration of 6.1 years.
Vanguard puts both of these fund in its rough-and-ready "Risk Category 2" and says "In general, such funds may be appropriate for investors with medium-term investment horizons (4 to 10 years)." The rule-of-thumb is that you should be prepared to hold a bond fund for about its duration. But it's not a precise thing, and it's better to think in terms like "4 to 10 years" than "6.1 years."
If you are not seriously prepared to hold an intermediate-term bond fund for about that period of time, you shouldn't buy it in the first place.
It sounds as if moving from cash to intermediate-term bond funds was much too big a step for you. I don't have any very great answer on what to do. Whatever you do next, it should be something you can stick to, understanding that "stuff happens" with any investment.
This is an idea, it's only an idea, you are responsible for your investments and you know, or should know, your own risk tolerance. One of my personal rules, which I really do follow, is "no big sudden changes in asset allocation, not never, not nohow." I will allow myself to make steady incremental changes with the idea of moving to a new asset allocation over the course of several years. In your case, maybe you should consider gradually exchanging your intermediate-term bond funds for short-term bond funds, a little at a time... and staying there.
My thinking was similar to when you have a large sum of cash to put into the stock market. That around 2/3 of the time you're better off just doing it in a lump sum. I may not have been thinking about that correctly in this case. I guess I wasn't mentally ready to lose well into five figures right away.
Statistics: Posted by nassau34 — Wed Oct 30, 2024 2:22 am