Postmon wrote:I'm 60/40 equities/FI and looking for a conservative short-term investment grade bond fund to complete my bond allocation. I fall in the camp of taking risks on the equity side but want some diversification within FI. I initially thought about the Vanguard Short Term Index (BSV) but want a bit more duration with Treasuries and a bit less with Corporates. So, here's what I came up with:
35% 3 - 7 year Treasuries (iShares IEI, duration 4.43, exp 0.15)
20% TIPS (Fidelity Spartan TIPS - FSIYX, duration 5.3, exp. 0.10)
20% ST Inv Grade (?????)
Taxable (Tax deferred space is full)
25% Munis (Baird Muni BMBIX, duration 4.92, exp. 0.30)
I'm with Fidelity so it seems like the only two options are the Vanguard Short-Term Corporate Bond ETF VCSH (exp 0.12) or iShares 1-3 Year Credit Bond ETF CSJ (exp 0.20). It seems to me that CSJ is less risky than VCSH. But I haven't found much on these boards about CSJ. I'm wondering what your opinions are of these two ETFs and if there are any others worth considering (I don't have access to DFA)?
These are the differences that stood out to me:
1. CSJ has less term risk than VCSH: Duration 1.84 vs 2.8
2. CSJ seems to have a higher rated bond mix:
Rating VCSH - CSJ
Aaa 0.7% - 16%
Aa 12.2% - 16%
A 51.2% - 44%
Baa 35.9% - 22%
other 0- 2%
3. CSJ holds 11% Supranational, 3% Sovereign, 3% Local Authority and VCSH doesn't. I'm not sure how this additional diversity impacts risk.
Look forward to your input. Thanks!
Valuethinker wrote:The problem is most corporate bonds don't trade much-- illiquid.
Postmon wrote:Valuethinker wrote:The problem is most corporate bonds don't trade much-- illiquid.
But is this a problem with CSJ and VCSH?
CSJ: assets: $9.7 Billion, avg vol 660K shares/day or approx $660 million/day
VCSH: assets: $5 billion, avg vol 500K shares/day or approx $400 million/day
I'd prefer a mutual fund as well having read about the pricing issues vs. NAV of corporate ETFs in stressful periods. However, the only one I was able to find is the Vanguard STIG fund, VFSTX. I'm with Fidelity so each purchase would cost $75 which is why I was looking at the ETFs. Since I'll probably only make one or two purchases a year, do you think it's worth going with VFSTX over an ETF given the $75 transaction cost?
Also, any concerns about going with IEI, the iShares Treasury ETF? The other option I was considering was to use both the short and intermediate Fidelity Treasury Funds to get to the 4.4 duration. But, I'd prefer to use just one fund or ETF, if possible.
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