RR

Рет қаралды 6,414

Күн бұрын

Even among rational investors with diversified portfolios, there seems to be less known about the inner workings of the bond portion of their investments. Here on the show today to help us get a better understanding of fixed income investments is none other than Dave Plecha, Global Head of Fixed Income at Dimensional Fund Advisors. Dave is one of the authorities on the subject of bonds and is amazing at articulating the concepts at play in this arena. This conversation goes in-depth, but is also a great starting point for investors to begin thinking about this part of a portfolio, and deepen an understanding of something that is so often misunderstood or misused. As you will hear, Dave has a real passion for this subject and has been presenting and speaking on precisely this work for the last twenty years. We cover a lot of ground with Dave, talking about why his approach might be confused with a certain type of market timing, the impacts of inflation, the current low interest rates and if these affect bond investments, an explanation of forward rates, and so much more that you will not want to miss. We even find time for a quick story about Dave's early days working with Eugene Fama, so make sure to stay tuned in for that.
Timestamps:
0:00 Intro
2:42 The role of bonds in a portfolio
4:20 Premium on top of the risk-free rate
5:40 Interest rates
10:22 Inflation wiping out expected bond returns
17:05 Long bonds are better diversifying assets?
19:35 Stock market vs Bond Market
24:38 Trading a bond
26:55 Liquidity in the bond market drying up?
29:51 Volatile movement around ETFs
32:21 Dimensional's approach to trading bonds
34:52 Factors in expected returns and fixed income
41:23 Forward rates and strategy
48:30 Expected premium is the same as saying what the maturity premium is?
51:12 Is this market timing?
57:50 Being globally diversified in your fixed income allocation
1:00:21 If someone just owns a universe bond fund are they still getting access to the premiums?
1:05:41 Trace in the bond market
1:12:32 Variable maturity and a variable credit approach to fixed income
1:15:29 Argument for having some allocation to fixed income
1:16:40 Quarterly rebalancing closer to being better?
1:17:40 Gene Fama stories
1:19:11 How do you define success in your life?
Links From Today’s Episode:
Rational Reminder on iTunes - itunes.apple.com/ca/podcast/t....
Rational Reminder Website - rationalreminder.ca/
Shop Merch - shop.rationalreminder.ca/
Join the Community - community.rationalreminder.ca/
Follow us on Twitter - / rationalremind
Follow us on Instagram - @rationalreminder
Benjamin on Twitter - / benjaminwfelix
Cameron on Twitter - / cameronpassmore
Dave Plecha - us.dimensional.com/about-us/m...
Dimensional - us.dimensional.com/
David Booth - www.dimensional.com/us-en/ins...

Пікірлер: 11

@jonasleonas173 2 жыл бұрын

I think you can already drop the line "for canadians" :D Lovely podcasts! I enjoy it a lot!

@nemuritai 2 жыл бұрын

Excellent episode. So interesting that forward rates are about discount rates (including risk premia) and have no forecasting information about future rates. Fama's paper also mentions tge forward premium puzzle:sudden increase

@a.j.4644 2 жыл бұрын

I'm grateful for the expertise here as 2021 has made me realize not only do I not understand bonds well, but I actually held many wrong ideas about them. If there is any way to distill some of the different points into 10-15 minute, digestible explainers, I would be much obliged.

@jylu3497 2 жыл бұрын

I never comment but I have to say, loved this guy! Learned so much and that last answer...so wise!

@windowpane1000 2 жыл бұрын

Love your question about active management Cameron 😂

@GhettoFabulousLorch 2 жыл бұрын

I'm probably too late but I have a few questions. 1) There is a common argument that individual bonds are superior to bond funds because bond funds do not mature but rather change price with interest rates every day. Is this a good argument or is there a deeper logic that disproves it? 2) I am considering a bond allocation strategy of buying 5 × the 10 yr US Treasury Rate every time I buy bonds. I rebalance every year. The theory is that the Federal Reserve is ultimately the dog that wags the tail. Would this strategy work? How can I further research this strategy if it's a "maybe?"

@paulzirngibl944 2 жыл бұрын

Great podcast!

@slovokia Жыл бұрын

The fundamental question is to what degree do governments and central banks determine the returns fixed income investors get? The returns equity investors get seem less determined by government policy. Heavily indebted governments seem likely to keep real interest rates as low as possible (financial repression).

@ajrobbins368 2 жыл бұрын

Thanks, I learned a lot.

@slovokia Жыл бұрын

If interest rates depend on the supply of money and the supply of debt what controls the supply of money used to bid on debt? Banks (including central banks) turn debt into money so it would seem that the rate at which they generate money must have some effect on interest rates. When the Fed engaged in massive purchases of Treasuries that sent interest rates falling all across the yield curve.