bond funds

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jsbmoney
Posts: 18
Joined: Tue Jul 10, 2012 11:24 pm

bond funds

Post by jsbmoney »

Hello. I'm hoping to move an IRA and I'm struggling to understand the best way to allocate the bonds portion. I'm concerned about rising interest rates and inflation, so I think maybe 50% VBISX (Vanguard Short Term Index Bond Fund) and 50% VCIFX (Vanguard Intermediate Term Investment Grade Fund). What would the risk/reward potential of this be? Thanks.
DaveS
Posts: 1308
Joined: Fri Jun 15, 2007 9:42 am
Location: Reno, NV

Re: bond funds

Post by DaveS »

That would give you an average duration of about 3.5 which is conservative but perhaps appropriate given your outlook. By comparison total bond is about 5.6. The yield is going to be low, around 3% or less. But yields are pathetic everywhere and trying to do better yield wise means taking on more risk than the funds you have selected and is not wise in this market. So I would say do it. You might consider the Short Term Investment Grade fund, but if you get that your concentrating nearly all your bond money in corporates albeit investment grade ones which are low risk. Dave
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