Just hope that, that "meaningful percentage of fixed income in their asset allocation." is meaniful enough to weather the storm that came like your example,...

"For example, 50% decline, 50% income reduction, 2 year duration"

Then again, if focused too much on that example or if using that "worst case" scenario to set a portfolio allocation, will it scale down alot of the ROI generating potentials? (as the "good" roi years are more than that 2 yrs bad)

It does reduce maximum ROI potential. If everyone is disciplined enough to stay the course and lucky enough to have a full time job throughout the economic decline, then 100/0 provides the best investment outcome.

The whole idea of emergency fund and fixed income is to hedge against asset price decline (well, bond price can drop with equity asset class too but in less proportion) so that portfolio volatility is within the range of risk tolerance that one can stomach.

Also, you can't continue the game if you got wiped out in the process. Say everyone has a 30 years investment horizon, the key is to survive first, then thrive.

This post has been edited by alexkos: Feb 13 2022, 11:13 AM

Thanks.. good info there.

Found this article that explain more on difference of individual bond vs bond ETF:
https://www.etf.com/etf-education-center/et...its%20portfolio.

No idea how to buy individual bond.. have not tried. Really that difficult? Individual bond can ensure capital return.. as long wait for its maturity.

Found a thread on Reddit saying AGGU etf is better due to longer in the market:
https://www.reddit.com/r/eupersonalfinance/...utm_name=iossmf

This post has been edited by Davidtcf: Feb 13 2022, 11:33 AM

I'm on 80/20 equity/bond for my ETF basket:

up to 5% for punts
75-80% IWDA and recently switched to ISAC for equity
20% LQDA for bonds

For now end game is to glide and hit 30/70 equity/bond upon retirement age then glide back to 40/60 or 50/50 or 60/40 during tenure of retirement. Will have to see how low the market return is then to decide on risk to sustain withdrawal.


My other baskets:
1. EPF + ASNB + PRS (just plain accumulation and no rebalancing)
2. Stocks/active management play

Taking into consideration of ASNB fp, & epf and treating them to be FI portions of your cumulated investment portfolio,... What are the ratio now?

Way too much , about 70% of everything liquid converted to MYR market value from cash/cash like/bonds/EPF+ASNB FP like (no risk of capital drawdown). Cash portion inclusive of emergency fund and broker deposits.

If Malaysian and willing to invest in MYR + don't care about "government ponzi scheme", EPF and (if you're bumiputera) ASB are damn good substitutes for bond allocation by nature of being "stable", "no loss" schemes.

I don't think direct bond is easy to buy at low amounts, but I wouldn't know much about that regardless.

From a liquidity and longevity standpoint AGGU is pretty much widely accepted as the better option, as well as AGUG. VAGU is a pure personal preference since Vanguard reduces ongoing cost when possible on their own.

In general I do believe Bond ETFs are much more easier to work with, and easier to sell when you need the cash and doesn't miss out on coupons as much when done so.

Assuming a portfolio of 1mil, and 80% equities loss 50%, you are down to 600k, with 400k equities and 200k bond (bonds usually drop some too but we'll neglect that for this example)
Now if you are unemployed and needed money, if you sell equities you will be realizing the 50% loss on equities, and when the market recovers, you might significantly recover less if you had to sell quite an amount.

If you had 20% bond however, now you have 200k to survive on by liquidating only the bonds. And in the best case scenario, where you have enough emergency fund to survive this downturn, you can rebalance the bonds into equities to buy them at a huge discount.

That's the role of bond, so 20% surprisingly helps a lot.



In a planned portfolio with not too much margin for error (would be the case for an average earner), having your portfolio rollback by 6 years would severely delay your early retirement, or easily reduce your yearly withdrawal amount in your retirement - at a 50% equity drop, its entirely possible to go from "just comfortable enough" to having to move into a shared apartment and live on maggi for a few years until the market bounces back.

ASB and ASB loans are my biggest envy and the first time in my life I felt the difference as a non-bumi when I started investing... Malaysia offers plenty of no-loss scheme that most can easily earn 4%+ returns very very safely without having to worry that the money has been cut in half when you actually need it.

The problem remains whether it's actually sustainable... the question starts to pile up with no confident answer behind it... ASB is probably safe for now, but will EPF continue to deliver 0.5% less returns every year? Will SSPN continue to supply 4% a year? Is their vault actually empty and just propped up by the government delaying its implosion year after year as the people still deposit into it without knowing?

When will/how much people will come to the conclusion that "I've decided to trust US financial institution and regulators (which has a strong and long history of untrustworthy-ness and preying on retail investors and the general public) over the Malaysian government and SC"?

when one need to sell the balance of the 50% and to having to move into a shared apartment and to survive the on maggi....to tight over the 2~3 BAD years...
then he sure does not have enough for retirements...

for if the markets did not drops....it will just be enough to last him for another few years

on that,.." And in the best case scenario, where you have enough emergency fund to survive this downturn, you can rebalance the bonds into equities to buy them at a huge discount.

That's the role of bond, so 20% surprisingly helps a lot."

YES it helps,...but when one is at that situation,...one emotional and financial state of mind may be different....just like now,...miniature example....a number of well known ETFs had been down more that 50%,...and yet there are people still waiting.....while their overall port is still does not have -20% losses or are at retirement age.

btw,....the variance of value of a port with 20FI:80EQ of 1 mil, when ROI of FI is 4.5%, EQ is - 50% compared to a 100% EQ port with - 50% losses is RM 109k


This post has been edited by MUM: Feb 13 2022, 06:04 PM


Attached thumbnail(s)

I’ve bought a single local Malaysian corporate bond before from CIMB Bank (eww… I know) and can share some details here based on that very limited data point:

1. Most retail bonds have a min investment amount of RM250,000 with subsequent increments of RM50,000
2. Price fluctuations due to supply and demand aside, the bond NAV will actually go up between coupon ex-dates and then go back down after a coupon has been issued, so you won’t “miss out” on coupons if you bought or sold between ex-dates because it’s all priced in
3. Liquidity was a big concern for me, but when I redeemed it fully I was surprised it only took 3 days for the money to show up in my bank account from when I signed the redemption form

After that one-time experience I’ve decided to not dabble with local bonds anymore simply because I don’t have faith in it. I was misled by my bank relationship manager back in the days and bought a so-called “junk bond” with 6.85% p.a. coupon, which sounds attractive (3.85-4.85% real return after inflation) but it was an unrated bond. The China Evergrande crisis scared me and so I realized holding a single bond is a single point of failure, bond ETFs or bond funds are definitely the way to go for me personally in the future.

deleted, double posted, oops.

This post has been edited by Hoshiyuu: Feb 13 2022, 06:29 PM

He don't HAVE to, but if he doesn't do it, it would jeopardize his real retirement.

Okay, lets say someone has retired with 1mil and is withdrawing 4% a year (so about ~40k a year, ~3.3k a month) to live really modestly.

Market drops by 50%, his 100% equity portfolio is now worth 500k. His withdrawal of the year is now 20k, so he barely have 1.6k a month to spend.

Let say he's not willing to give up his living standards, he continue to draw 40k a year (8% withdrawal rate) - that's basically setting up his retirement portfolio for failure in far-to-mid future, i mean.

Depending of his stages of investment or life stages...
If at retirement n if his passive income is barely enough or just enough... Then a stable returns would be advised..

But iif his portfolio is at accumulation stages,... Any % pa of lesser ROI from his yearly returns will impact his accumulation of his retirement money...
More % in eq will have higher chances of getting more money for his retirement

Thanks will consider either bond etf once I research further.

Yea tried to search for individual bonds to buy some US gov bond could cost usd3k just for one bond. Also need to have willing buyer if wanna sell a bond. Some like SG bond need to wait gov to issue a bond after a few mths. Everything so complicated about them. I think to simplify things just leave it to a bond ETF.

Found some good videos today as this topic now pique my interest:





The first video more reliable. Second video Kelvin feels he don’t need bonds due to SG retirement fund, but shows an important part which is suggested bond ratio in one’s portfolio.. in Reddit someone else mention is your age -10 = how much percent of bonds one should have.



This couple instead forgo bonds completely due to some research they quote. The comments below the video are interesting to read. Many disagree and say bonds have a role to play.
So in the end depends what you’re comfortable with, and stick with the plan.

I’m thinking locally to substitute bond we could buy fixed deposit since those are guaranteed returns? If a FD is offering good rate would be wise to go ahead? But yea downside is we’re using MYR which any day might plunge lower.

Will look into SG to see if got any good dividend distributing type bond etf.. since SG don’t charge taxes on dividends.
Edit: best SG bond etf is - ABF SG bond etf. Performance is similar to AGGU etf so depends which u prefer or can just get both.

Found an article that mentioned that it is better to invest in short term bonds when interest rates are expected to rise:
https://www.im.natixis.com/us/portfolio-con...-term-bond-etfs

Found a good short term bond etf which is IBTU or IB01. One is accumulating another distributing. Reason for price difference of USD 5 vs USD 100 per etf: https://www.reddit.com/r/eupersonalfinance/...utm_name=iossmf

Other list of good short term bonds here (need to ownself search for UCITS Irish domiciled counterpart): https://seekingalpha.com/article/4379128-be...1hoCproQAvD_BwE

This post has been edited by Davidtcf: Feb 14 2022, 02:05 AM

Anything by Ben Felix has a strong recommendation from me. Some advices are Canadian exclusive for sure but most of the time he does explain the logic behind them that be applicable to everyone.

As suggested before, EPF/CPF puts most investor in MY/SG in a unique position where they have a mandatory fallback plan. However as they have a deposit/withdrawal limit which meant they could never truly behave as bonds until retirement age. So when accepting this substitute will have to keep a few characteristics in mind.

I believe FD has similar issues and even with rolling FD it's just way too much trouble for what it's worth, plus the return is generally weak even with insane lockup periods, and plus it's MYR, one bad year of inflation can easily erode away months to years of returns that seemed lucrative when you initially placed it. Strongly against it personally.

For those seeking 100% equities allocation, gocurrycracker, a blog by FIRE'd couple have a detailed write up on why they think it's the way to go, how it affects their planning, and what kind of acknowledged risk they are taking for the extra return, and how they deal with it.

It's a great read and lots of concrete numbers.
https://www.gocurrycracker.com/path-100-equities/

As for bond choices, I generally still prefer total bond indexes for their diversification and liquidity. The last thing I ever, ever want, is for my fallback plan to get defaulted exactly when I need it

This post has been edited by Hoshiyuu: Feb 14 2022, 06:01 AM

Yea true also if focus too much on US treasuries alone. Will have more risk if something bad happens to US debt (such as a default).

Will buy some AGGG. At least will get dividend semi annually even if ETF price goes down.