Another Franklin Fund Nosedive

HoneyNut said:
Its a depressing time to be looking at our total balances but it is a good time to buy while prices are down. All the investments I made during the period Sept 30 - Oct 12 last year did great (grew 25+%). I had some standing ('good til cancelled') limit orders at what I considered attractive prices and two of the four I had achieved the lows and bought this past week or so.

But, I have moved some money from investments to rolling one month treasuries because it feels so good to be getting such high (compared to the past several years) bond interest.

Even though people are gloomy about the stock market, when I read the details of the articles, they are still expecting the market to continue to go up, just not as largely as in the recent past.

And when I compare bond rates to historical rates, it looks like they are a lot more normal now, like we were in a weird period recently with high market and low bond, and now we're becoming sort of average which I think is what the commonly recommended asset allocations were based on.
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You can also get those rolling payouts in CD's as well. I got a 7 CD ladder, 3,6,9,12,18 month ladder.
Different banks all protected by FDIC.
 

Funny you mention 'long term' investor.
Now that I'm closing in on 70, 'long term', 'lifetime guarantees', all take on a different meaning these days. There is still a finite number with 'long term', just don't know what it is.
 
Sippican said:
You can also get those rolling payouts in CD's as well. I got a 7 CD ladder, 3,6,9,12,18 month ladder.
Different banks all protected by FDIC.
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I need to learn more about CDs, my only experience in the past was with ones I'd buy at my brick and mortar bank and then the money would be locked up for years before it paid out. I've only this summer learned that some CDs pay regular interest payments and can be bought and sold on the secondary market (I guess?).

Also, I thought CD interest wasn't as attractive tax-wise, but I guess if held in my IRA it wouldn't make any difference (i.e., be considered income regardless).
 

HoneyNut said:
I need to learn more about CDs, my only experience in the past was with ones I'd buy at my brick and mortar bank and then the money would be locked up for years before it paid out. I've only this summer learned that some CDs pay regular interest payments and can be bought and sold on the secondary market (I guess?).

Also, I thought CD interest wasn't as attractive tax-wise, but I guess if held in my IRA it wouldn't make any difference (i.e., be considered income regardless).
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You may want to check out Fidelity laddered CD's.

CD Ladders Model CD Ladders - Fidelity
 
HoneyNut said:
I need to learn more about CDs, my only experience in the past was with ones I'd buy at my brick and mortar bank and then the money would be locked up for years before it paid out. I've only this summer learned that some CDs pay regular interest payments and can be bought and sold on the secondary market (I guess?).

Also, I thought CD interest wasn't as attractive tax-wise, but I guess if held in my IRA it wouldn't make any difference (i.e., be considered income regardless).
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You are right, held in an IRA its protected from tax, unless you take a draw from your IRA.
Ya, 'brick and motar' banks have low CD's.
I use Charles Schwab. They show you CD from across the country and th rates are much higher.
I will only buy CD's that pay monthly. Basically, the interest. You lose 1/2 of a percent with payments monthly, but I think its worth it.
If there is any indication that the rates are starting to turn, I reach out further for maturing CD's. Typically I have a CD maturing every 3 months, so I would put it into a higher term CD to lock in the rate, again, if the overall interest rate are showing that they are coming down.

I think we have one or two more rate hikes coming.
We are still in for some economy problems towards the end of this year. Some would say we are 'out of the woods' and get back into the markets. I don't buy that. There are no indicators that show a recovery on the horizon, plus, going into an election year, the markets will be very volatile.
 
Sippican said:
Funny you mention 'long term' investor.
Now that I'm closing in on 70, 'long term', 'lifetime guarantees', all take on a different meaning these days. There is still a finite number with 'long term', just don't know what it is.
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i am 71 but i still need to plan for either my wife or i to eat in as much as two decades out …that is still long term money.

i use a very conservative conservative portfolio of 40% equities and treasuries , short and long and gold .

i rebalance once a year ..no timing
 
debodun said:
I just checked the value of this fund and I've lost almost $15K since August.
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You are not alone! My investments are a sea of red today, the only thing that gained was the small cap index. It seems so wrong because the GDP went up and the trade deficit went down, and companies seem to be meeting their goals, so you'd think stock prices would go up.

Something I was listening to said that there is a lot of money (trillions I think they said) currently in short term investments that are waiting for more permanent investments. So I guess that is part of the reason, and I guess it is even true for me because I'd sold a fund a few months ago and have the money parked in short term waiting for higher long term bond yields.
 
debodun said:
The Franklin High Yield Tax-Free Income Fund
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I am not sure how to judge but the 30 day yield looks good to me, especially if mostly tax free. And it appears like it faithfully pays a decent monthly income, I wish I had it instead of my miserable retirement target-year fund.
 
that yield is because the share price has taken a hit .in fact the fund with interest lost 3% a ear on average the last 3 years.

so it has lost about 10% including all interest.

the 30 day yield only is what you are getting if you bought around the last month …for holders of the fund they have lost money over the past years.

a simple example of how yields work .

if hypothetically you buy a fund for ten dollars paying 5% and the fund has a duration of 5 years :

then if rates go to 6% the funds value falls to 9.50 but you get an extra 1% in interest for 5 years .

so in this case it offsets the 5% drop in value and you end up getting the original 5%
you had the day you bought . just like an individual bond

so the 30 day yield in this case may be 6% but all you got was 5% .


with this fund the duration is almost 9 years and rates didn’t go up just 1% the last few years .

so there is a pretty substantial fall here , plus there isn’t just interest rate risk .

this fund holds junk bonds as well as the most dangerous credit rating on bonds today BBB.

one slip in credit rating and those BBB are the last rung of investment grade .

they will have to be dumped by every insurance company , pension fund , institutional investor and fund that is restricted to investment grade bonds with few takers .

this is why it is so mportant to learn enough to understand what you are buying .

in a recession this fund will plunge while a treasury bond fund will soar
 
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That is interesting. I just checked where I was at Y/E 2022. and I am up 20%. All my investments are in equities.and I am a buy and hold investor.
 
debodun said:
Franklin has recovered somewhat. My fund is worth +$16K more than a month ago. That's about where it was in August.
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The entire market has recovered. October was a good month for the stock market and November was even better. The S&P 500 was up almost 9% just in November. We are nearing the record all time high that was set a few years ago. Of course, we could see some profit taking after such a good ride up. It I needed $10,000 from my stock investments for a down payment on a new car in early 2024, this would be a good time to withdraw the money. Keep in mind you may owe taxes on the withdrawal. Nothing is simple, it? :)

This is the way of the stock market. It’s a roller coaster ride. So if one gets in then buckle up and don‘t be panicked when it drops 25% at some future point. The general trend has been up over long periods. But, if a 10% drop is going to cause a person to worry, lose sleep and think you have been ‘ripped-off’ a person might be better in high quality bonds or CDs held to maturity. It’s all up the individual.
 
bowmore said:
That is interesting. I just checked where I was at Y/E 2022. and I am up 20%. All my investments are in equities.and I am a buy and hold investor.
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Nice Bowmore. 🤑 74% of my portfolio is in equities & that portion is only up 9% since Dec 31, 2022. I am also a buy and hold person..
 
Brookswood said:
The entire market has recovered.
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I don't think the Mid Cap index has totally recovered yet (unless my index fund is bad somehow). And I don't think bond funds have recovered. I'm not sure international funds have totally recovered, maybe they are simply poor performers. My retirement-target-year funds absolutely NOT recovered.

But, other things are definitely looking good, I'm cautiously happy.
 
bond funds are no different then buying an individual bond .

a bond fund does not have to go back to some past high to be considered recovered ..

every bond fund has a duration value which is the number of years you must hold it to see the interest rate you got when you bought .

so recovery means getting the deal you bought .

as an example if a bond fund has a duration of 5 years and you paid 10 bucks and it paid 5%—if rates go to 6% then your fund value will fall to 9.50 but you will get 6% not 5% .

the extra 1% you get for 5 years offsets the 5% drop in nav ..

you basically got the 5% you bought at..so unless you bought at that high your recovery point is different
 
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HoneyNut said:
I'm not sure international funds have totally recovered, maybe they are simply poor performers.
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I gave up on my international funds, except for one, after years. I sold off most of them earlier this year. They just don’t seem to do as well as a Total US Market Index fund or S&P500 fund.

That fact that I sold my international index funds earlier this year could be considered a good sign by contrarians.:rolleyes:
 
with international funds you need to be right twice .once on their markets and then again on the dollar .

a strong dollar can wipe away gains even though their markets were up .

which is why i prefer american markets and if i want a weak dollar play i will go gold
 

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