DSInvestor wrote:Those options have high expense ratios. Do you have any IRA accounts at Vanguard? Vanguard's bond funds have expense ratios of 0.10-0.20%. Vanguard has many short term bond funds to choose from.
feh wrote:Has anybody considered bank loan funds? Are such investments considered fixed income?
Jim180 wrote:feh wrote:Has anybody considered bank loan funds? Are such investments considered fixed income?
Floating Rate Loan funds are considered fixed-income. The loans are to companies that are below investment- grade (junk). These funds tend to do well when interest rates are rising but frequently give back those gains once rates stop rising, so they are not something to just buy and hold. They also get hit hard by a economic downturn. As an example the fund you mention was (-30.5%) in 2008. I suppose a person could hold a small position in one of these funds to offset the interest rate risk of traditional bond funds, but because of the credit risk I would not hold a large position.
feh wrote:My other option would be to reduce 401K contributions down to the match and use after-tax dollars to buy CDs or short-term bonds in my taxable account.
DSInvestor wrote:feh wrote:My other option would be to reduce 401K contributions down to the match and use after-tax dollars to buy CDs or short-term bonds in my taxable account.
Here's something to consider if you want to keep the bonds in the tax advantaged accounts: You can buy all the bonds in the IRA space.
In 401k - all new money buys stock funds.
In IRA: - all new money buys short term bond fund. Also exchange 17.5K stocks for short term bonds in IRA.
These actions combined will be equivalent to directing all new contributions (17.5K + 5.5K) to bonds but you will have a much lower expense ratio on your bond holdings. Fidelity has some spartan short term bond funds with low expense ratios (0.20%).
feh wrote:What do you think is the max percentage of a portfolio that should be used for such a fund?
feh wrote:I want to increase the percentage of fixed income in my portfolio (currently 25%). Ideally, I'd like to do this with future contributions, but the options in my 401K are fairly limited:
Allianz Gi High Yield Bond (.90)
Eaton Vance Floating Rate (1.02)
I don't want to buy any intermediate term bonds, as I may be selling these funds in a few years. Has anybody used a bank loan fund for fixed income purposes?
Taylor Larimore wrote:Morningstar is currently featuring this article:
Should You Consider Floating-Rate Bank Loans Today?
I hope it helps answer your question.