Bond fund choices in 401(k)

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Bond fund choices in 401(k)

Postby eengstro » Fri Jul 26, 2013 5:58 pm

My employer has recently moved our 401(k) to Vanguard. :happy I'm basically taking the lazy portfolio approach, with 65% in the classic three stock funds (Total Stock Idx, Total Intl Stock Idx, REIT Idx) and 35% in bond funds.

However, we don't have the full range of Vanguard bond funds available. We only have the following three bond funds:

BlackRock High Yield Bond (BRHYX, ER 0.58%)
  • Junk bonds, mostly B and below.

PIMCO Total Return Fund Instl (PTTRX, ER 0.46%)
  • Actively managed, seems to be well diversified.

Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX, ER 0.20%)
  • Vanguard TIPS fund.

How shall I divide up the bond portion of my 401(k)? My two thoughts are:
  1. 100% into Vanguard Inflation-Protected.
  2. Slice & Dice for diversification, weighted heavily to Vanguard Inflation-Protected. (Example: 20% BlackRock, 20% PIMCO, 60% Vanguard TIPS.)
  3. Slice & Dice, equal weighting. (33% BlackRock, 33% PIMCO, 34% Vanguard TIPS.)
  4. Slice & Dice, without junk bonds. (20-50% PIMCO, 80-50% Vanguard TIPS.)

Another relevant data point: I have one other IRA with American Funds from a previous employer. Its bond portion is 100% Bond Fund of America (ABNDX, ER 0.6%).

I suppose my other option would be to junk my entire lazy portfolio plan, and simply go with the Vanguard Balanced Index Fund Investor Shares (VBINX, ER 0.24%). However, there is no international exposure with that fund, so I'd at least have to add a slice of the Vanguard Total International Index fund. That would be perfectly acceptable if the bond portion of the Balanced Index Fund is significantly better than some combination of the three bond funds listed above.

Your feedback is appreciated.
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Re: Bond fund choices in 401(k)

Postby Johm221122 » Fri Jul 26, 2013 7:20 pm

Pimco is well regarded and you could use 100% or use 50/50(or any combination) with tips.Also you could use bonds in ira,savings bonds and municipal bonds.DO you have stable value fund ?
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Re: Bond fund choices in 401(k)

Postby eengstro » Sat Jul 27, 2013 3:14 pm

I have been kicking around the idea of opening a Roth IRA with Vanguard for some time. I could certainly hold a combination of Total Bond Market and Total International Bond Market there as the bond portion of my overall portfolio. (I could also roll over the American Funds account to Vanguard for the same purpose, but that's a separate post for another time.)

DO you have stable value fund ?


The plan has Vanguard Prime Money Market, Vanguard Retirement Savings Trust, and Wells Fargo Stable Value available.
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Re: Bond fund choices in 401(k)

Postby ruralavalon » Sat Jul 27, 2013 6:45 pm

eengstro wrote:How shall I divide up the bond portion of my 401(k)? My two thoughts are:

choice #5 Just the PIMCO fund.

PIMCO Total Return Fund Instl (PTTRX, ER 0.46%) is fine by itself for your entire bond portfolio. Its an excellent actively managed intermediate term bond fund, high credit quality, very well diversified, with a moderate expense ratio.

The largest mutual fund on the planet. And one of the two best bond funds on the planet, said in spite of the preference for index funds. nisiprius post, Bond Fund for Three-Fund Portfolio

I don't think I'd complicate it with any junk bonds, or add/use any percentage as high as you are indicating (34% - 100%) of the TIPS fund. But would rather just use PTTRX alone.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: Bond fund choices in 401(k)

Postby Johm221122 » Sat Jul 27, 2013 7:19 pm

If interest rate is close to 2%, I would recommend stable value fund.
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