Fixed income

[Anonymous]

Say interest rates remain high for a long time, economy goes down, etc. and long term int. rates (30 year) hits 6%. If you are late 50s-early 60s, would you liquidate your stock holdings (a substantial portion) and just invest in 30 year treasuries? If only some, what %? If not, why not?

[Anonymous]

The 30-year treasury is not going to hit 6%. But if it did, I would commit money to it. How much? A typical allocation model for someone entering retirement is 50/50, stocks/bonds. I’d do that. If you lock-in such rates and interest rates eventually fall, your bonds will make a lot of money (if you sell instead of hold for the interest).

[Anonymous]

I'd be worried about inflation in that scenario and that 6% would not outpace inflation, particularly in my growing areas of need with age such as health care and other services (e.g. auto repair, home repair/renovation). I think I might tilt my asset allocation more towards bonds though (e.g., 50/50 stocks bonds) and instead of buying bond funds just buy mainly 30 yr treasuries.

[Anonymous]

Would the two PPs above do it now (invest 50% of their assets in 30 year bonds)? 30 year is at 3.8%.

[Anonymous]

Anonymous wrote:Would the two PPs above do it now (invest 50% of their assets in 30 year bonds)? 30 year is at 3.8%.

Nope, that's too low and there's too much risk of further interest rate rise.