Bought into Vanguard Global Bond Index Fund December 2020 - now what!?

dllive

Hi guys

I bought into some Vanguard's Global Bond Index Fund back in December 2020. Its obviously nose dive since then.

What should I do? Not look at the fund's performance until the world economy looks healthier? Or should I buy more bonds now the prices are depressed?

Thanks

Albermarle

Without knowing what the rest of your investments portfolio looks like and what % this fund is, or how much cash you have, or what your objectives are, it is difficult to give a sensible answer.

ColdIron

One of the reasons that people include bonds in a portfolio is to control risk or volatility. Even though they have dropped in value they are still doing that job

You could sell them and crystalise the loss but then what? Buy bonds again? Buy equities or another asset class?

Do you maintain a fixed allocation of asset classes, e.g. 60/40 equities/bonds, that has drifted to, say, 64/36? If so restoring the balance with cheaper bonds could make sense but without knowing more about your circumstances, objectives etc it's hard to say

Linton

The performance of bonds is not based on the health of the world economy.  This is one reason for buying them as they can be used to diversify to avoid total reliance on the world economy. 

The recent major falls in bonds can be seen as the unwinding of an unsustainable boom in bond prices.  Essentially people overpaid for bonds in the 12 or so years since the Great Crash.  That overpayment has now been lost.  Bond owners are starting again from a new base.

What you do now depends on why you bought the bonds.  If for example you are aiming for a fixed equity/bond ratio and you now have insufficient bonds it would make sense to buy more to correct the mismatch.    If you bought bonds because you noticed they had performed very well for a decade or more you will have learnt an expensive but valuable lesson but may not want to continue.  In that case perhaps you should sell.

dunstonh

How does the global bonds fund fit with your wider portfolio?    You are asking us to comment on an ingredient and not the cake.

Type_45

ColdIron said:

One of the reasons that people include bonds in a portfolio is to control risk or volatility. Even though they have dropped in value they are still doing that job

*Scratches head. 

Linton

Type_45 said:

ColdIron said:

One of the reasons that people include bonds in a portfolio is to control risk or volatility. Even though they have dropped in value they are still doing that job

*Scratches head. 

It is very simple.  Before the rise in interest rates holding bonds would reduce short term fluctuations.  The rapid rise in interest rates and correspondiong fall in bond values was a one-off event.  Subsequently holding bonds will continue to reduce short term fluctuations.

ColdIron

Sorry, I missed that, but I have an active ignore list

n15h

dunstonh said:

How does the global bonds fund fit with your wider portfolio?    You are asking us to comment on an ingredient and not the cake.

My comment doesn't add any value to the OP's question, however I just felt that @dunstonh 's comment is a great simile for visualising an investment portfolio!

Albermarle

n15h said:

dunstonh said:

How does the global bonds fund fit with your wider portfolio?    You are asking us to comment on an ingredient and not the cake.

My comment doesn't add any value to the OP's question, however I just felt that @dunstonh 's comment is a great simile for visualising an investment portfolio!

Even better if you can have your cake and eat it !

Audaxer

I've still got multi asset funds, which include bonds, and a couple of active bond funds for the income they produce. I personally am not inclined to add to my bonds, but I'm not panicking and selling them either. I'm hoping that they will still have a part to play in the coming years in reducing the volatility of my portfolio.