# Made a rather large purchase of bonds last month, doubts



## larry81 (Nov 22, 2010)

Part of my asset allocation i purchased a rather large sum of bonds last month (PHN110). This is sitting in a non-registered account. I am DCA'ing my equities over the next year and was recommended to just purchase the fixed income right now without DCA'ing which i did.

However, since the bounds outlook currently look pretty bad, i am starting to doubt that it was the right thing to do...

As for now, since i just started to DCA, the allocation is 

30% bonds (phn110 and 10k xsb in my rrsp)
15% equities (vti,vea,vwo,xic)
55% cash (1.2% money market)

would it make sense to just sell this phn110 bonds ? I will have more room in my RRSP this year and could just purchase shorter term bonds in my RRSP instead of holding a large bonds position in a non-registered account.

Funds have gone up and down, if i sell this week i dont lose much, .02, 03 % total


----------



## davext (Apr 11, 2010)

This really depends on your profile. Mutual funds aren't for buying and selling like stocks although sometimes I'd like to sell some funds pretty soon after purchasing. If your allocation to bonds is too much, XSB has $10K for you to play with and that hasn't been doing much late. Since it holds only short term bonds, it would go down less as interest rates go up.


----------



## larry81 (Nov 22, 2010)

davext said:


> This really depends on your profile. Mutual funds aren't for buying and selling like stocks although sometimes I'd like to sell some funds pretty soon after purchasing. If your allocation to bonds is too much, XSB has $10K for you to play with and that hasn't been doing much late. Since it holds only short term bonds, it would go down less as interest rates go up.


There no DSC on PHN110, the question is not about asset allocation/profile, it's about timing.


----------



## slacker (Mar 8, 2010)

Just to make it clear, you're trying to modify your asset allocation of bonds from 30% to something lower because of interest rate risks?

In any case, bonds should stay in registered account if you can help it.


----------



## larry81 (Nov 22, 2010)

slacker said:


> Just to make it clear, you're trying to modify your asset allocation of bonds from 30% to something lower because of interest rate risks?
> 
> In any case, bonds should stay in registered account if you can help it.


i am not modifying my AA, just want to stuff more in my registered (will have more RRSP room available in 2011) and DCA the bonds allocation


----------



## MikeT (Feb 16, 2010)

Sort of vague, but I think I know what's going on.

Yes. You made a mistake. By putting in your bond money and holding back your stock money you inadvertently made your asset allocation that of someone in retirement rather than the 29 year old. 

You are also being too risk averse. Too many bonds and too much emphasis on "DCA" and worrying way too much about a tiny loss. Toughen up buttercup.

Get used to the fact that you might lose some money when you invest in the short term. Put your money to work and try not to check your balance every 5 minutes.

If you are really convinced you want 30% in bonds fine. But either put the rest of your money to work in stocks or sell your bonds. 

At your age and with this environment I'd be close to 100% stocks right now.

*I made alot of assumptions. Some of which are probably wrong. If so please ignore.


----------



## kcowan (Jul 1, 2010)

Why not make an in-kind RRSP contribution with a portion of the PHN?


----------



## larry81 (Nov 22, 2010)

kcowan said:


> Why not make an in-kind RRSP contribution with a portion of the PHN?


non-registered = holding company
rrsp = personal

doing in-kind mean a taking a tax haircut.


----------



## larry81 (Nov 22, 2010)

MikeT said:


> Sort of vague, but I think I know what's going on.
> 
> Yes. You made a mistake. By putting in your bond money and holding back your stock money you inadvertently made your asset allocation that of someone in retirement rather than the 29 year old.
> 
> ...


you pretty much nailed,

did another DCA this month, i am now 50/50 bonds/equities, will probably sell the PHN this week and will only purchase fixed income in RRSP/TFSA from now.


----------



## I'm Howard (Oct 13, 2010)

Investors should never buy a bond fund, the MER's consume too much of the interest earned.

I sold, completely, XSB I hold JNK and prefer to use XTR or XRE for income generation purposes.

I hold a portfolio of Bonds that I bought directly, less than 5 years, YTM was about 5.6 %.

MO, PFE, VSN are my preferances for Fixed Income as well as CZD.

Rates will go up, just not soon, B of C have their hands tied by strong looney.

RBC have best Bond selection.


----------



## Belguy (May 24, 2010)

My main bond holding is the PH&N Bond Fund D (PHN110) . I am 67 and retired. My target fixed income allocation is 40% bonds which currently needs rebalancing because I am underweight bonds due to my recent equity growth. I may consider moving some equity money to one of the new Pimco bond funds. I have all of my bond holdings in my RSP account. Aside from the PH&N Bond Fund D, these include: iShares DEX All Corporate Bond Index Fund ETF, iShares Real Return Bond Index Fund ETF, iShares iBoxx $ High Yield Corporate Bond Fund ETF, iShares U.S. IG Corporate Bond Index CAD ETF, Morgan Stanley Emerging Markets Domestic Debt Fund Inc., SPDR Series Trust Barclays High Yield Bond ETF.

If I were younger, I would likely have a greater weighting in equities--but no more than 70 percent of my portfolio.


----------



## larry81 (Nov 22, 2010)

I'm Howard said:


> Investors should never buy a bond fund, the MER's consume too much of the interest earned.
> 
> I sold, completely, XSB I hold JNK and prefer to use XTR or XRE for income generation purposes.
> 
> ...


FYI, PHN is part of RBC.


----------



## larry81 (Nov 22, 2010)

Belguy said:


> If I were younger, I would likely have a greater weighting in equities--but no more than 70 percent of my portfolio.


I feel the same.

However, i dont believe that it is currently is a good time to purschase bonds...


----------



## Belguy (May 24, 2010)

When you are an older investor, with a shorter time horizon, I believe that it is more important than ever to adhere to one's target asset allocation.

Can anyone make an argument to dispute the above statement even in times like this when interest rates have nowhere to go but up?


----------



## MikeT (Feb 16, 2010)

True, but bonds aren't the only possibility for that part of your portfolio.

REIT's, energy trusts, preferred shares, convertibles, etc..


----------



## larry81 (Nov 22, 2010)

MikeT said:


> True, but bonds aren't the only possibility for that part of your portfolio.
> 
> REIT's, energy trusts, preferred shares, convertibles, etc..


TFSA already filled with REIT,

I plan to add junks and real return bonds in the future.


----------



## larry81 (Nov 22, 2010)

Belguy said:


> When you are an older investor, with a shorter time horizon, I believe that it is more important than ever to adhere to one's target asset allocation.
> 
> Can anyone make an argument to dispute the above statement even in times like this when interest rates have nowhere to go but up?


i cant, i believe tactical asset allocation and have its place in the greater scheme of things. as you said, interests rates have nowhere to go but up... ill be ok with short terms bonds but dont see any point holding 100k PHN110 right now. I could purchase the same asset in 2-3 year for a much more attractive price.


----------



## I'm Howard (Oct 13, 2010)

Please, somebody explain to me, what the heck age has to do with the % allocation of assets??

Would a 30 year old with a several million dollar inheritance need to be 30% bonds or a 100% Bonds????

Asset Allocation needs to be determined by the need of the Investor, what is the most conservative way to achieve the desired financial target????

Risk is a four letter word, there is no such thing as High, low, or in between risk, there is just risk.

Most major changes in the value of a portfolio are created by unexpected circumstances. something that was not predicted, regardless of what you held, this crisis triggerd a change in your assets and was unplanned for.


----------



## kcowan (Jul 1, 2010)

Belguy said:


> When you are an older investor, with a shorter time horizon, I believe that it is more important than ever to adhere to one's target asset allocation.


I would just make sure that your cashflows needed for living are covered by pensions and other investments that cannot melt down at the time you need them. Everything else is discretionary and you can wait for it to earn its expected return.

Don't forget to draw down at least $2k from your RRIF to gain the tax break.


----------



## larry81 (Nov 22, 2010)

liquidated my phn110 position today

will buy short terms bonds in RRSP and probably put more on my mortgage when interest start rising.


----------

