To be clear, I was liquidating my bonds to buy equities (as my balance bands were being triggered). My frustration was that I was getting ripped off vs mutual fund holders of the same bonds.Thanks for posting that. It appears, however, that this spread disappeared rapidly (within a week) and that the values were identical otherwise. I would also assume that there are periods where the spread is positive. I think that that was a true black swan event and even in that case the spread closed rather rapidly. Also, I believe that in black swan events you can see uncorrelated events such as these due to massive selling. I have to confess that I was guilty of the same ie: I sold a lot of my equity during this time and moved the money to bonds. This turned out to be a terrible move as equity has done very well since then and bonds have languished. It was the first time in 20 years that I had deviated from a disciplined Boglehead's philosophy of investment but I truly felt that "this time it's different". I held onto a greater position of bonds in my portfolio than I really wanted and kept waiting for the equity markets to plummet so that I could rebalance back into equity. As stocks kept soaring I kept waiting for the entry point which never really came. This is the double whammy of reacting to market noise.TLDR: You couldn’t pay me enough to own bonds as an ETF.
Be mindful of how bond ETFs behaved vs MFs during the pandemic. The exact same bonds (VTEF vs VWITX) were priced lower for ETFs than MFs on the exact same day (specifically March 19th, 2020 — a full 800 basis point spread between the two).
I lost tens of thousands of dollars rebalancing due to this “fair” pricing. I’ll be long dead before I recover that with lower trading fees.
Perhaps the ETF was reflecting true value, but given the option to sell at a higher “fake value”, I’ll take the fake one all day long.
The dislocation was very material (cost me a ton of money), and the fact it closed later didn’t matter. I took solace in the fact that equities had fallen even more, and I would thus be made whole again (eventually), but it heavily degraded the impact of my rebalancing.
I own not a dime of bond ETFs anymore.
Statistics: Posted by mrspock — Thu Jan 23, 2025 6:02 pm