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F Fund Confusion
- Thread starter Rod
- Start date
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Theefficient market hypothesis would assert that the bond market incorporated the news regarding the first rate hike long before the actual hike took place. Also, there were no surprises from Greenspan regarding accelerated future rate hikes. Both of the above may help to explain the short-term performance of the F fund.
Theefficient market hypothesis would assert that the bond market incorporated the news regarding the first rate hike long before the actual hike took place. Also, there were no surprises from Greenspan regarding accelerated future rate hikes. Both of the above may help to explain the short-term performance of the F fund.
G
Guest
Guest
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Exactly right Pete. As I stated in another forum, the futures markey is paying for next year at an anticipated feds rate of 3.04%. I'm looking for more increases soon after the elections. Could see another small one before also. Buy your house now!
Exactly right Pete. As I stated in another forum, the futures markey is paying for next year at an anticipated feds rate of 3.04%. I'm looking for more increases soon after the elections. Could see another small one before also. Buy your house now!
G
Guest
Guest
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Unless of course you have cash. Then wait till the housing prices drop because of the rate hikes! :^
Unless of course you have cash. Then wait till the housing prices drop because of the rate hikes! :^
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Interestingly, 30 fixed mortgage rates dropped after the rate hike. Seems like bankers stroked those looking to refi or buy prior to the hike. I agree that now would probably be a good time to look but there may be further drops in the 30 year fixed rate based on the jobs data.
Interestingly, 30 fixed mortgage rates dropped after the rate hike. Seems like bankers stroked those looking to refi or buy prior to the hike. I agree that now would probably be a good time to look but there may be further drops in the 30 year fixed rate based on the jobs data.
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It is tough to know when to lock in a rate.Rates trended up prior to the hike but have dropped a small amount and seem fairly steady right now. The best advice that I can give is to shop around for the best rate available when you do decide to buy your house and also, try calling a couple of mortgage brokers to see if they can provide any useful input regarding the short-term.
It is tough to know when to lock in a rate.Rates trended up prior to the hike but have dropped a small amount and seem fairly steady right now. The best advice that I can give is to shop around for the best rate available when you do decide to buy your house and also, try calling a couple of mortgage brokers to see if they can provide any useful input regarding the short-term.
G
Guest
Guest
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Pete1 wrote:
Pete1 wrote:
Isn't that like asking a surgeon if you need surgery or not?
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The F fund has been the worst of the 5 TSP funds this year, as the not-dropping, and rising interest rate would have suggested. In contrast, the F fund did great the past 2-3 years with falling interest rates. The only reason the return is even positive so far this year is because the interest (so far) exceeded the drop in principle, and its only barely positive. A near 0 or, worse, negative return for a debt instrunment is a sign that its not the place to be at the moment.
The MPT/efficient market areprimarily stockmarket concepts, and much less, if at all, applicable to bonds. When interest rates rise 1%, bonds fall ~ 10%. A couple of the posters above are indirectly suggesting that because of MPT/efficient market, you can either 1. ignore interest rates because they are already factored in.... or worse, 2. its a positive contrarian thing because people rushed to take advantage of interest rates before they started climbing.
Also, if you look at a historic chart of interest rate changes, the rates tend to more often change in the same direction that they did the previous change, so even with just one last rate increase, rates are more likely to rise again next time as opposed to fall back down. Even more so, considering how low interest rates are compared historically.
I say keep it simple with respect to timing; if rates are showing a pattern of climbling (established by just one rise), then avoid bonds, or minimize them.
Azanon
The F fund has been the worst of the 5 TSP funds this year, as the not-dropping, and rising interest rate would have suggested. In contrast, the F fund did great the past 2-3 years with falling interest rates. The only reason the return is even positive so far this year is because the interest (so far) exceeded the drop in principle, and its only barely positive. A near 0 or, worse, negative return for a debt instrunment is a sign that its not the place to be at the moment.
The MPT/efficient market areprimarily stockmarket concepts, and much less, if at all, applicable to bonds. When interest rates rise 1%, bonds fall ~ 10%. A couple of the posters above are indirectly suggesting that because of MPT/efficient market, you can either 1. ignore interest rates because they are already factored in.... or worse, 2. its a positive contrarian thing because people rushed to take advantage of interest rates before they started climbing.
Also, if you look at a historic chart of interest rate changes, the rates tend to more often change in the same direction that they did the previous change, so even with just one last rate increase, rates are more likely to rise again next time as opposed to fall back down. Even more so, considering how low interest rates are compared historically.
I say keep it simple with respect to timing; if rates are showing a pattern of climbling (established by just one rise), then avoid bonds, or minimize them.
Azanon
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Anazon,
I'm confused. Why doesn't efficient market theory apply to bonds? They're a market whose prices are determined by willing buyers and sellers interpreting all available information, e.g. interest rates. Are you stating that bonds are frequently mispriced, i.e. the bond market is inefficient? Are you also stating that you can't use bonds as an asset class in a MPT portfolio optimizer?Can you cite anybooks or articles to support your position?
Finally, I think it's interesting that the much malignedF Fund only trails the C Fund by .04% for the year. In fact, according to the statistics on TSPmoney.com, it has provided the best returnin recent weeks.
Anazon,
I'm confused. Why doesn't efficient market theory apply to bonds? They're a market whose prices are determined by willing buyers and sellers interpreting all available information, e.g. interest rates. Are you stating that bonds are frequently mispriced, i.e. the bond market is inefficient? Are you also stating that you can't use bonds as an asset class in a MPT portfolio optimizer?Can you cite anybooks or articles to support your position?
Finally, I think it's interesting that the much malignedF Fund only trails the C Fund by .04% for the year. In fact, according to the statistics on TSPmoney.com, it has provided the best returnin recent weeks.
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rokid wrote:
Interest rate hikes may have reflected in bond fund's prices since they are inevitible and obvious.
To say that the F fund is leading over the past few weeks is not very sound.
rokid wrote:
Holy crap! I'm about to side with Az!
Interest rate hikes may have reflected in bond fund's prices since they are inevitible and obvious.
To say that the F fund is leading over the past few weeks is not very sound.
- Stocks are consolidating right now, so their returns will be about flat; this is normal and temporary
- Bond's low performance will last quite a while, much longer than the market's consolidation
- You can sway a bond vs. stock comparison any way you want to depending on the day that you choose (from a low-to-high point, or high-to-low point)
- I would say the F fund carries much greater risk than the stock funds due to interest rates having only one way to go. Additionally, your returns on the F fund will be meager at best, so the risk/reward ratio is unfavourable; this is contrary to the idea and purpose of bonds being lower risk
lovegardening
Rising Member
- Reaction score
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at least the market changed a little today.......a few pennies in some of our pockets.....
at least the market changed a little today.......a few pennies in some of our pockets.....imported post
Rolo,
No argument - stocks have historically out performed bonds. In addition, I expect (and hope) they continue to out perform them in the future.
The F Fund stunk last year and it continues to stink this year - although the C Fund stinks almost as bad.
Since I'm not a market timer,holding a portion of my assets in the F Fund will (hopefully!) lower my portfolio volatility/risk. In other words,if stocks take a dive, I won't lose so much!
However, for market timers, it appears that some money could have been made in the F Fund over thepast few weeks.
Rolo,
No argument - stocks have historically out performed bonds. In addition, I expect (and hope) they continue to out perform them in the future.
The F Fund stunk last year and it continues to stink this year - although the C Fund stinks almost as bad.
Since I'm not a market timer,holding a portion of my assets in the F Fund will (hopefully!) lower my portfolio volatility/risk. In other words,if stocks take a dive, I won't lose so much!
However, for market timers, it appears that some money could have been made in the F Fund over thepast few weeks.
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rokid wrote:
Let us think about this. "Volatility" is a short-term term. Proponents of bonds (F fund) right now are long-term investors, "allocators". Why would a long-term investor be concerned aboutshort-term fluctuations? Why not stick with the proven long-term winner?
Barring an unusual bond bull market (such as the early '80's) and unusual bear market in stocks ('00-'02), bonds are guaranteed to water down your gains.
Be you an active trader or long-term allocator, if stocks (or bonds) "take a dive", then have enough sense to get out of the rain.
rokid wrote:
Let us think about this. "Volatility" is a short-term term. Proponents of bonds (F fund) right now are long-term investors, "allocators". Why would a long-term investor be concerned aboutshort-term fluctuations? Why not stick with the proven long-term winner?
Barring an unusual bond bull market (such as the early '80's) and unusual bear market in stocks ('00-'02), bonds are guaranteed to water down your gains.
Be you an active trader or long-term allocator, if stocks (or bonds) "take a dive", then have enough sense to get out of the rain.
