interest rates going up

[lantus2000]

Advertisement - Members don't see this ad

as the whole country already knows this, that the fed is likely to raise interest rates in the near future
I have just started placing in vangaurd index stock after paying off my student loan.
is anybody taking money out of stocks in their 401k/roth and placing in bonds until the dust settles or staying the course.
i think that the boglehead answer would be: stay the course.
just seeing what other people are doing.
would be interested to hear what whitecoatinvestor thinks (thanks for great book, I have encouraged many others to read)

 

[Smart Money MD]

I would assume that most of our audience here has at least 25 years of work until retirement. Assuming that our readers are also in the medical profession who don't have a side job trading stocks, most would do little differently.

 

[mgdsh]

Market could easily continue to rise especially after we continue to see signs of growth despite rising interest rates. Fed is likely to go about it in a very gentle/easy way as evidenced by their hesitation to even raise rates thus far.

 

[Plastikos]

Agree with the above, but would stay out of any rate sensitve sectors like REITs, etc unless you know what you're doing....Also, bonds are rate sensitive and any increase in yield will come with a concomitant loss in face value of the bond so I wouldnt touch those with a ten foot pole. Bonds will likely be volatile for a bit and may even show strong correlation with stocks for some time before normalization occurs. Bonds are not the place to park money for safety in the immediate short term.

I would just stay your course as you are young and have a long way to go, and no one knows when exactly and how much damage any rate increase will do. Plus as mgdsh says, a secular bull might be on its early footing and could keep things chugging along. If we're lucky any mini bubbles and high multiple stocks will collapse, and maybe if we're really lucky some excellent businesses will be taken down a bit for the ride. One can hope.

 

[ThoracicGuy]

as the whole country already knows this, that the fed is likely to raise interest rates in the near future
I have just started placing in vangaurd index stock after paying off my student loan.
is anybody taking money out of stocks in their 401k/roth and placing in bonds until the dust settles or staying the course.
i think that the boglehead answer would be: stay the course.
just seeing what other people are doing.
would be interested to hear what whitecoatinvestor thinks (thanks for great book, I have encouraged many others to read)

What you are talking about doing is trying to time the market. If you knew when stocks would tank and bonds would go up, of course you'd switch to them. When you knew bonds were going down and stocks way up, of course you'd switch back. I don't think anyone has been able to do time travel yet, so you won't know when that will ever happen.

So. Stay the course.

 

[sazerac]

The premise of the OP makes no sense.

If interest rates go up, the price of existing bonds will go down. Why would I buy your crummy low interest bond when I could get a better rate on a brand new one?

 

[lantus2000]

The premise of the OP makes no sense.

If interest rates go up, the price of existing bonds will go down. Why would I buy your crummy low interest bond when I could get a better rate on a brand new one?

Sorry if it didn't make sense.
I was under impression that stocks may be more volatile and may go down much further than bond prices may go.
Obviously nobody has a crystal ball to predict, but I thought bonds would have less impact.
I have one more year of fellowship and just started to invest in index funds and felt that it would be a major letdown to enter the market with some uncertainty and my initial investments take a hit. But I have to start somewhere.
I am not a finance expert, but I am willing to continue to learn.

 

[sazerac]

If you have money to invest for the long term, then invest it now and don't look back. You lose far more by waiting for the perfect time to get into the market than you lose by buying right before the market goes down.

I know it seems a little counterintuitive, but you have no idea if a market will be up or down tomorrow. But you can look at overall trends, and if they are up you will want to join them sooner rather than later.

 

[calvnandhobbs68]

Sorry if it didn't make sense.
I was under impression that stocks may be more volatile and may go down much further than bond prices may go.
Obviously nobody has a crystal ball to predict, but I thought bonds would have less impact.
I have one more year of fellowship and just started to invest in index funds and felt that it would be a major letdown to enter the market with some uncertainty and my initial investments take a hit. But I have to start somewhere.
I am not a finance expert, but I am willing to continue to learn.

Your problem is that you're concerned about your psychological loss rather than your realized loss. Thinking like this is what causes people to lose their money during a crash bc they can'twatch their account lose value anymore and bail out. Don't be the kind of guy who watches his account value every day unless your day job is trading. Fire and forget.

 

[The White Coat Investor]

as the whole country already knows this, that the fed is likely to raise interest rates in the near future
I have just started placing in vangaurd index stock after paying off my student loan.
is anybody taking money out of stocks in their 401k/roth and placing in bonds until the dust settles or staying the course.
i think that the boglehead answer would be: stay the course.
just seeing what other people are doing.
would be interested to hear what whitecoatinvestor thinks (thanks for great book, I have encouraged many others to read)

Interest rates have been about to rise dramatically for at least 6 years. Those who did something to try to anticipate it have generally regretted the move. I have no idea what the future brings, but staying the course has certainly worked well in the past with regards to questions like these.

Keep in mind that for someone at the beginning of their career, a stock market crash, assuming it eventually gets to the same place in 30 or 50 years, is a good thing, a buying opportunity. Get down on your knees and pray for it. Also, now that you're out of the debtor stage and into the investor stage, higher interest rates are a good thing. I'm sick and tired of getting less than 1% on a savings account when inflation is running at 2%.