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PIMCO Total Return Instl Message Board

  • ny_poster ny_poster Dec 13, 2012 11:58 AM Flag

    DR POSTMORTEM

    Hello, so there is so much controversey around owning bonds. Billy says, expect only 1-2%. Bogle says hold it. I read in an article, if your holding period is longer than maturity, don't worry about capital decline, re-invesments & higher yields will compensate for it.

    So should PTTRX be a fund forever since its actively managed intermediate duration fund or is it fine to jump into S&P500 say, IF & when it goes to 10 or 11 K ? This is assuming I don't need the funds for some decades & the worst decline may be S&P 666 (generational lows). Should one be greedy or as Bogle says, dont sell bonds and maintain an allocation (preferably equal to age....47% for me).

    Sentiment: Buy

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    • Doctor is a bit over the top for my identity. The answer your question is difficult as one can divide the universe of potential PTTRX individual investors into 3 basic groups:

      1. Those who are working for a living, hold PTTRX in a retirement account and do not have sufficient holdings to rely on PTTRX dividends to retire upon. Also, are probably not in the highest tax bracket. This group better plan ahead with an aggressive investment strategy because things are more likely to become more difficult for investors in the long term. PTTRX may not be the best place for any of this groups investment strategy. But if you look at the trend line for PTTRX there has only been one down year in over 30. Moreover, you would be ahead of the market if you had invested since year one of the fund. This is a very long term strategy. If you are over 50 and have insufficient monies to retire at age 65 I would say you either need to be more aggressive or plan to live a lot more simply now and during retirement. If you are just entering the job market PTTRX may not be a bad place to be if you don't play the market too often with your retirement account.

      2. Those who hold PTTRX and are retired who currently receive enough income from PTTRX without eating into the principal perhaps with a net worth of up to 10M. They rely on the amount of SHARES they own as the number of share ownership directly impacts the amount of their monthly dividend which they cash out at month's end without touching the principal. They cannot too easily afford either a reduction in NAV or in the dividend, If conditions get bad enough they will need to cash out some of their principal to meet their monthly obligations, They may or may not completely own their own home and probably buy a new car when the old one gets towards 5 years old or so. This group could find themselves working part time at some point in the future competing with 20 year olds for the same job. The other component in this group are those who planned far in advance and only take a portion of the monthly dividend and increase their monthly (quarterly) cash out until the balance is inherited - good planning.

      3. Those who hold PTTRX, are retired or independently wealthy 100 M+ and have more than enough income to not worry about any decline in the stock market or bond market. Everything is paid off and can afford to buy a new Rolls every year racing to the dealership to be first in line to have the first Rolls, Ferrari, Maybeck (defunct) or whatever in the states. These are individuals who are self perpetuating galaxies of wealth, whose life style is not affected by market conditions and for the most part fairly unconcerned about regularly bottom lining their portfolio. Don't worry be happy, all is good.

      I hope this answers your question.

      Sentiment: Hold

 
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