Three-Fund Portfolio - VBTLX vs. VBILX

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whodatheads
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Joined: Thu Apr 18, 2013 10:09 am

Three-Fund Portfolio - VBTLX vs. VBILX

Post by whodatheads »

Hi, I'm a recent retiree and decided to adapt the Bogleheads' three-fund portfolio asset allocation strategy. After a number of shufflings of my investment, I made a biggest trade of my portfolio:moving my IRA money (rolled over from my 401k), representing ~20% of my total asset, to a bond fund(I'm now ~10% cash/44% stocks/46% bonds).

However, I made a mistake buying VBILX, instead of VBTLX (see comparison below, During trade, as I typed in VB, VBILX popped up as the first choice). I could correct the mistake by selling and re-buying, but then I thought do I really need to? Why not, VBILX? Two funds are not that dissimilar. My impression is that the long bonds are not that good an asset class to own now. Would it be prudent to let VBILX to ride for a while and make the necessary change later when the long bonds look a little more attractive. Your thought? (trading cost is a non-issue as I can trade free)


VBILV (Vanguard Intermediate Bond Index Admiral): 2.98% yield, 0.1% expenses, 14.8B assets, -2.89% YTD
VBTLX (Vanguard Total Bond Market Index Admiral): 2.46% yield, 0.1% expenses, 109B assets, -1.95% YTD
burma7734
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by burma7734 »

The fund names might cause you to think incorrectly about thier holdings. If you look a the average duration of each, you will see that VBTLX is at 5.5 years while VBILX is at 6.5 years. While Total Bond has a mix of long, medium, and short term bonds, on average it has a lower duration (i.e. less interest rate risk) than Intermediate Bond.

I would not let a trading mistake alter my strategy. As you said, the cost to trade into the one you intended is zero.
Calm Man
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by Calm Man »

OP, I do not know where you got the yields from, but you the numbers you give are much too high. Much. They are about 1/2% lower. I frankly would use Vanguard Intermediate term investment grade which yields about 1/2% more than the intermediate index and about a % more than total bond index.
Topic Author
whodatheads
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by whodatheads »

Calm Man wrote:OP, I do not know where you got the yields from, but you the numbers you give are much too high. Much. They are about 1/2% lower. I frankly would use Vanguard Intermediate term investment grade which yields about 1/2% more than the intermediate index and about a % more than total bond index.
I got the yield numbers from morningstar.com. Do you have the symbols for the "investment grade" funds? Thanks,
Topic Author
whodatheads
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by whodatheads »

burma7734 wrote:The fund names might cause you to think incorrectly about thier holdings. If you look a the average duration of each, you will see that VBTLX is at 5.5 years while VBILX is at 6.5 years. While Total Bond has a mix of long, medium, and short term bonds, on average it has a lower duration (i.e. less interest rate risk) than Intermediate Bond.

I would not let a trading mistake alter my strategy. As you said, the cost to trade into the one you intended is zero.
Yeah, that makes sense as VBILX appears to be a tad higher yields but more volatiles.
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Taylor Larimore
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by Taylor Larimore »

whodatheads wrote:Hi, I'm a recent retiree and decided to adapt the Bogleheads' three-fund portfolio asset allocation strategy. After a number of shufflings of my investment, I made a biggest trade of my portfolio:moving my IRA money (rolled over from my 401k), representing ~20% of my total asset, to a bond fund(I'm now ~10% cash/44% stocks/46% bonds).

However, I made a mistake buying VBILX, instead of VBTLX (see comparison below, During trade, as I typed in VB, VBILX popped up as the first choice). I could correct the mistake by selling and re-buying, but then I thought do I really need to? Why not, VBILX? Two funds are not that dissimilar. My impression is that the long bonds are not that good an asset class to own now. Would it be prudent to let VBILX to ride for a while and make the necessary change later when the long bonds look a little more attractive. Your thought? (trading cost is a non-issue as I can trade free)


VBILV (Vanguard Intermediate Bond Index Admiral): 2.98% yield, 0.1% expenses, 14.8B assets, -2.89% YTD
VBTLX (Vanguard Total Bond Market Index Admiral): 2.46% yield, 0.1% expenses, 109B assets, -1.95% YTD
Whodatheads:

In my opinion, either of these two Vanguard bond funds will provide safety and income in the bond portion of your Three Fund Portfolio. I slightly prefer Total Bond Market for its better diversification (lower risk).

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
taegirain3
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by taegirain3 »

Both funds are very good, with similar durations. VBTLX is preferred by some, since it has a slightly shorter duration and more government bonds/higher credit ratings. VBILX is preferred by others since it does not hold any mortgage-backed securities.
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Archie Sinclair
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by Archie Sinclair »

whodatheads wrote:
Calm Man wrote:OP, I do not know where you got the yields from, but you the numbers you give are much too high. Much. They are about 1/2% lower. I frankly would use Vanguard Intermediate term investment grade which yields about 1/2% more than the intermediate index and about a % more than total bond index.
I got the yield numbers from morningstar.com. Do you have the symbols for the "investment grade" funds? Thanks,
You should use the SEC yield quoted every day at Vanguard.com, not Morningstar's numbers. Morningstar may not be updated frequently, and sometimes gives only trailing twelve-month yield, which is next to useless.
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Sunny Sarkar
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by Sunny Sarkar »

whodatheads wrote:I made a mistake buying VBILX, instead of VBTLX
In the 2012 Bogleheads reunion, Jack Bogle said that a half & half blend of high quality corporates & treasuries would be a very good bond portfolio. Guess which fund has that mix.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
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1210sda
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by 1210sda »

Taylor Larimore wrote: In my opinion, either of these two Vanguard bond funds will provide safety and income in the bond portion of your Three Fund Portfolio. I slightly prefer Total Bond Market for its better diversification (lower risk).
Best wishes.
Taylor
There's your answer from a truly wise man. Don't agonize over it......

1210
Calm Man
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by Calm Man »

whodatheads wrote:
Calm Man wrote:OP, I do not know where you got the yields from, but you the numbers you give are much too high. Much. They are about 1/2% lower. I frankly would use Vanguard Intermediate term investment grade which yields about 1/2% more than the intermediate index and about a % more than total bond index.
I got the yield numbers from morningstar.com. Do you have the symbols for the "investment grade" funds? Thanks,

I see. Well morningstar differs from Vanguard. Go to the Vanguard site and you can see every fund they have. I don't use symbols as they confuse me !!!!
Don46
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Re: Three-Fund Portfolio - VBTLX vs. VBILX

Post by Don46 »

Morningstar also rates VBILX as having HIGH historic risk, and shows it in the high interest rate sensitivity category. I'm looking at the Schwab summary page on each fund.
VBTLX in contrast is in the AVERAGE historic risk. Just glancing at the 10 year graphs for the two funds both appear to follow quite similar tracks.
But this "high risk" warning scares me off of VBILX. I'm about to redeploy about .6 million in my IRA and I want to find that sweet spot of low cost, low risk, and some reliable return on investment. I suppose I'll go with the lower risk, lower return option.
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