playbook: I'm right there with you Lili. You might remember from my previous posts that I'm in ASBAX in a big way as a platform to DCA into other American Funds. I've watched ASBAX drop almost 1% since I got in at the end of May. I think it's too late for me to get out whole and back into MMF at this point. I may have to stay in and hope that the fund's total returns beat or equal a MMF over the next year or so if I should sell with a NAV lower than cost.
Since the investment is a short term investment and you aren't living off the interest, I think it is best to think in terms of total return.
I was surprised to see ASBAX drop so far on jawboning about inflation by the Fed. I don't see the Fed raising interest rates before the election. The economy is too fragile right now and they don't want to be accused of interfering with the election by tightening the money supply. The Fed statement that will be out today at 2:15 will provide more guidance.
I think if I remember correctly, you got in ASBAX at 9.98. The NAV of ASBAX varied from mid- May until now in the range of 10-9.88. If there is any less to be learned here, it is to never put all your money in at once - even a short term bond fund. American Funds lets you sign a statement of intent and you have 13 months to put your $1M in to avoid the load. Some financial advisors try to pressure you to do it sooner (I know I was pressured) because a bird in the hand is worth 2 in the bush. You can switch during that 13 months to another broker and then they don't get their full $10k if you do. The new broker gets a cut. That is why they pressure you to just get it done.
playbook: If for some reason the fund should increase in the near term to a breakeven return compared to MM, I believe I would take two thirds out.
Why not shift it all to the MMF? You saw what happened to its NAV simply because the Fed talked tough. What will happen when the Fed actually raises interest raties?
playbook: If I remember correctly, you are in intermediate funds. Have you decided what you would do with the money from the intermediate fund if and when you get out?
Putting most, maybe all in CAIBX and taking the dividends in cash. I am going to use the cash divvys to build money to take advantage of what I perceive as bargains in the stock market.
playbook: By the way, on another post this morning I read that many who responded had YTD returns of minus 1% to minus 4%. I calculated a hypothetical return on my American Funds planned allocation and it came out to minus 3.4% YTD through 6/24. That is with an allocation of:
17.5% AMECX
17.5% CAIBX
65.0% ABNDX
Do you think the planned portfolio needs some rethinking?
Playbook
First I am not sure if people are including money spent from their portfolios in their YTD returns. So I will post that on that thread and see what people say. If a person in retirement started the year with $1M in assets taking all dividends in cash and living off them and then reported their YTD minus the dividends they spent, that is not a fair comparison to someone who is not in retirement and reinvests all dividends.
Lots of people, myself included, hold asset classes other than just open ended mutual funds. I have an annuity, CDs, preferred stocks, individual stocks and commercial real estate investments. Others have CEFs, REITs, MLPs and all kinds of other exotic investments that I don't even know what they are. So keep that in mind. You really can't compare a portfolio based solely on open ended equity and bond mutual funds to some of these complex, extremely diversified portfolios. Some of the people who are only down 1% right now may be only up 1/2 as much as someone who invests primarily in open ended mutual funds once the market rebounds.
The portfolio you posted above breaks down in instant xray to 75% bonds/cash and about 25% stocks. About 92% is high quality intermediate bonds. A yield of 5.21%. Ordinarily, one would say that is a pretty conservative allocation. But right now, I think if you shift that much into intermediate bonds while we are on the verge of interest rates rising and looking at commodity price inflation, I think it is actually quite a risky strategy. So yes, I think you need to rethink that allocation.
What tool did you use to calculate your hypothetical return? Did it take into account dividends or only NAV? And if it did take into account dividends, were they reinvested or taken as cash? The portfolio you posted has a 5.21% yield. Does the -3.4% YTD take that into account or does it only account for NAV changes?
