Any other retirees moving money out of Vanguard?
Any other retirees moving money out of Vanguard?
I can't find a comfort "zone" within Vanguard's fixed-income offerings.
Retired a few years ago and being very risk averse settled on a 30/70 bond/equity allocation. Vanguard recommended the entire bond allocation go into the Total Bond Index Fund. I was never comfortable with the thought of having 70% of my assets in the Total Bond Fund.
I've been drifting ever since.
Based on what I've read here and in the recommended books, it seems like five years is about as far out on the yield curve as I want to go based on my own ability, willingness and need to take risk.
At five years, CD's look much more attractive in terms of risk/reward. However, that means moving most of the portfolio out of Vanguard.
It's all making me wonder if I'm being too conservative or if my reluctance about leaving Vanguard is costing me money.
Retired a few years ago and being very risk averse settled on a 30/70 bond/equity allocation. Vanguard recommended the entire bond allocation go into the Total Bond Index Fund. I was never comfortable with the thought of having 70% of my assets in the Total Bond Fund.
I've been drifting ever since.
Based on what I've read here and in the recommended books, it seems like five years is about as far out on the yield curve as I want to go based on my own ability, willingness and need to take risk.
At five years, CD's look much more attractive in terms of risk/reward. However, that means moving most of the portfolio out of Vanguard.
It's all making me wonder if I'm being too conservative or if my reluctance about leaving Vanguard is costing me money.
Re: Any other retirees moving money out of Vanguard?
If you are that uncomfortable after all this time, you should change something. CDs seem like a good idea but what about other bond funds offered at VG such as corporates and TIPS? You've probably given these things some thought so I'm curious why those don't interest you for some of your bond allocation.
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Re: Any other retirees moving money out of Vanguard?
If you are uncomfortable with such a large amount in Total Bond Fund and want to respect your asset allocation, I would suggest that you consider VG's Total International Bond Index fund (VTABX). It has an expense ratio of 0.20%. Good luck with your decision & your investments.
Re: Any other retirees moving money out of Vanguard?
Check VWEHX (avg duration 3.9) and VFSTX (avg duration 2.4).
My asset allocation is even more conservative than yours.
Happy "Investing" and have a great weekend all you BH'ers.
Don
My asset allocation is even more conservative than yours.
Happy "Investing" and have a great weekend all you BH'ers.
Don
Re: Any other retirees moving money out of Vanguard?
Although all of my bond funds are at VG I couldn't warm up to total bond and don't own it either. In taxable I have Limited Term Tax-Ex and IT Tax-Ex in roughly a 1:2 ratio. In my IRA I do the same with ST and IT IG, also in a similar ratio. I throw in some HY too. My weighted bond duration is 4.24 years. retired, age 66, roughly 45/53/2, equities/bonds/cash.
My thinking may be all wrong but there are components of TBM I just don't want to own at this point in time. Namely, MBS, short term government paper and bonds much longer than 5 years duration. My pension and SS are cola'd so TIPS doesn't need to be in my mix. While 5 bond funds flies in the face of simplicity it provides a mix I am satisfied with. I keep enough in LT Tax-Ex in taxable and ST IG in IRA that I could ride out any market shocks and recovery not needing to withdraw from IT or sell equities.
It's not perfect, but what is?
My thinking may be all wrong but there are components of TBM I just don't want to own at this point in time. Namely, MBS, short term government paper and bonds much longer than 5 years duration. My pension and SS are cola'd so TIPS doesn't need to be in my mix. While 5 bond funds flies in the face of simplicity it provides a mix I am satisfied with. I keep enough in LT Tax-Ex in taxable and ST IG in IRA that I could ride out any market shocks and recovery not needing to withdraw from IT or sell equities.
It's not perfect, but what is?
Re: Any other retirees moving money out of Vanguard?
You can look at using some other actively managed bond funds alongside the total bond fund with excellent history and very good management that are available at Vanguard like Dodge and Cox Income (DODIX) or Metropolitan West Total Return Bond fund (MWTRX).
"Reality always wins, your only job is to get in touch with it." Wilfred Bion
Re: Any other retirees moving money out of Vanguard?
Some the indecision comes from what experts like Swedroe and Bernstein advocate, i.e. keeping fixed income in short high quality bonds. Bernstein advises very short-term treasuries. Swedroe ventures a little farther out to 5-7 year maturities, but restricts that to AAA/AA ratings. They both advocate keeping risk on the equity side.retiredjg wrote:If you are that uncomfortable after all this time, you should change something. CDs seem like a good idea but what about other bond funds offered at VG such as corporates and TIPS? You've probably given these things some thought so I'm curious why those don't interest you for some of your bond allocation.
Where their advice becomes hazy for me is when bonds are 70% and equity is 30%, there's only so much risk you can pile over to the equity side. Do Swedroe or Bernstein modify their dogma when bond allocations reach 70% of portfolio value ?
midareff - I know you have been pleased with your fixed-income set-up, but doesn't the interest rate risk bother you ?midareff wrote:Although all of my bond funds are at VG I couldn't warm up to total bond and don't own it either. In taxable I have Limited Term Tax-Ex and IT Tax-Ex in roughly a 1:2 ratio. In my IRA I do the same with ST and IT IG, also in a similar ratio.
Re: Any other retirees moving money out of Vanguard?
I have all of my fixed income in five year CDs.
Re: Any other retirees moving money out of Vanguard?
It seems to me that a lot of the hate for TBM isn't very rational and many the the professed fears haven't shown up, even during the worst of it. As for any MBS concerns, that smacks of recency. I would imagine that MBS are a lot safer than they were 10 years ago with tightened home lending standards.
That said, I own more than one bond fund at Vanguard. I don't understand why their selection of funds would be insufficient, but they do sell CDs.
JT
That said, I own more than one bond fund at Vanguard. I don't understand why their selection of funds would be insufficient, but they do sell CDs.
JT
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Re: Any other retirees moving money out of Vanguard?
My fixed income is TIAA Traditional with the 3% guarantee. Vanguard is 100% equities. I've been taking my total RMDs exclusively from Vanguard and reinvesting in taxable for the past few years to keep the TIAA Traditional untouched as long as possible. I've got enough in my Vanguard tIRA to do this for one more year, but in 2016 I will need to begin withdrawing RMDs from the TIAA Traditional. I just hope CD rates increase significantly before that happens.
The surest way to know the future is when it becomes the past.
Re: Any other retirees moving money out of Vanguard?
midareff wrote:Although all of my bond funds are at VG I couldn't warm up to total bond and don't own it either. In taxable I have Limited Term Tax-Ex and IT Tax-Ex in roughly a 1:2 ratio. In my IRA I do the same with ST and IT IG, also in a similar ratio.
midareff - I know you have been pleased with your fixed-income set-up, but doesn't the interest rate risk bother you ?
It seems to me that the recovery rate from an interest rate increase is governed by the relationship between the yield and the duration. Just as an example.. lets say you have a 5 year bond paying 1.5% and another one paying 3.25%. Interest rates go up 1% and both bonds go down 5% for their duration X rate change. The first bond is now paying 2.5% but has lost 5%, so it takes 2 years to recover. The second bond lost 5% but now pays 4.25% and takes maybe 14 or 15 months to recover. The better the relationship between yield and duration the better resistance to interest rate risk the mix will have ... assuming all solid investment grade or government bonds.
Interest rate risk does bother me, but I have shortened my duration, and may continue to do so, to minimize potential impact. I'm fortunate to be able to pay more attention to keeping what I have rather than having to make more. Looking forward, If my bond return is even with or a couple of basis points ahead of the CPI-U and the environment can return to near normal rates, I will be well satisfied. For retired folks like us I think interest rate and inflation risk are the biggest risks.
midareff - I know you have been pleased with your fixed-income set-up, but doesn't the interest rate risk bother you ?
It seems to me that the recovery rate from an interest rate increase is governed by the relationship between the yield and the duration. Just as an example.. lets say you have a 5 year bond paying 1.5% and another one paying 3.25%. Interest rates go up 1% and both bonds go down 5% for their duration X rate change. The first bond is now paying 2.5% but has lost 5%, so it takes 2 years to recover. The second bond lost 5% but now pays 4.25% and takes maybe 14 or 15 months to recover. The better the relationship between yield and duration the better resistance to interest rate risk the mix will have ... assuming all solid investment grade or government bonds.
Interest rate risk does bother me, but I have shortened my duration, and may continue to do so, to minimize potential impact. I'm fortunate to be able to pay more attention to keeping what I have rather than having to make more. Looking forward, If my bond return is even with or a couple of basis points ahead of the CPI-U and the environment can return to near normal rates, I will be well satisfied. For retired folks like us I think interest rate and inflation risk are the biggest risks.
Re: Any other retirees moving money out of Vanguard?
bottlecap wrote:It seems to me that a lot of the hate for TBM isn't very rational and many the the professed fears haven't shown up, even during the worst of it. As for any MBS concerns, that smacks of recency. I would imagine that MBS are a lot safer than they were 10 years ago with tightened home lending standards.
That said, I own more than one bond fund at Vanguard. I don't understand why their selection of funds would be insufficient, but they do sell CDs.
JT
At a risk of misunderstanding... I don't hate TBM, I just choose to "roll my own" mix with the ingredients of my choosing. Once you analyze TBM and recognize it does not hold the total bond market, lacking TIPS, High Yield, International, EM and being significantly underweight in corporates, we can go from there. It is what it is and I choose to make my own mix, including what I want to own, not what the existing mix of TBM gives me in my situation at my point in life. As far as MBS goes.. I think government backed MBS are a sound investment, obviously so does VG. I just choose, at this point in time, to not own a bond fund with a significant mix of MBS since as interest rates go up their effective duration goes up. I believe Larry Swedroe feels the same way and doesn't recommend TBM.
Other than that ... for people who want simplicity in their bond portfolio, or are not willing to S&D to "roll their own", TBM is a diversified recommended way to go. No hate at all.
Re: Any other retirees moving money out of Vanguard?
Five year CD's may be a mistake with how low interest rates are right now. Is the 1.6% (taxable) really worth it? You could likely get that from a short term bond fund.
Re: Any other retirees moving money out of Vanguard?
Although all my equity portfolio (25%) is in passive ETFs, I have opted to go active on bonds. I feel that we are going through transition times which may command some active intervention, and with the other 75% I have built a fixed income portfolio of about 15% in ultra short bonds (which along with pension and SS) should give me living expenses for 5+ years until hopefully things settle, and the rest equally invested in Pimco Income (PIMIX) and Metropolitan Total Return (MWTRX). Only time will tell if I am right!
Erwin
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Re: Any other retirees moving money out of Vanguard?
I will leave the bond musings to the experts. I am in TBM and TIBM, but also am >30 years from retirement.Bustoff wrote: It's all making me wonder if I'm being too conservative or if my reluctance about leaving Vanguard is costing me money.
My only comment is that you are leaving more money on the table (potentially) by being 30% stocks than most bond/CD choices you will make.
I know nothing!
Re: Any other retirees moving money out of Vanguard?
I'm in early retirement at age 64 right now. I'm delaying my SS until 70, after which I don't expect to be drawing much from savings. I think 30/70 or 40/60 are perfectly ok for early retirement where safety is important.
What I try to do is match my bond duration to expected spending. So BND is too long for a good part of my fixed income. This is what drives my investment into shorter term funds.
Vanguard offers a very wide spectrum of low cost bond funds. Personally I'm 40/60 right now, and have a mix of fixed income funds including some BND, and shorter term stuff including some TIPS. Just looking at the components of BND I could understand the concern, however the performance seems to belie that concern. I would not leave Vanguard except MAYBE for short term investment in CDs for money that I will need short term. It also seems to me that's maybe more work than I need to do - so it hasn't actually happened yet.
What I try to do is match my bond duration to expected spending. So BND is too long for a good part of my fixed income. This is what drives my investment into shorter term funds.
Vanguard offers a very wide spectrum of low cost bond funds. Personally I'm 40/60 right now, and have a mix of fixed income funds including some BND, and shorter term stuff including some TIPS. Just looking at the components of BND I could understand the concern, however the performance seems to belie that concern. I would not leave Vanguard except MAYBE for short term investment in CDs for money that I will need short term. It also seems to me that's maybe more work than I need to do - so it hasn't actually happened yet.
Re: Any other retirees moving money out of Vanguard?
The Vanguard Target Retirement Income Fund is 30/70 but it has only 39.2% of assets in the Total Bond Fund:Bustoff wrote:Retired a few years ago and being very risk averse settled on a 30/70 bond/equity allocation. Vanguard recommended the entire bond allocation go into the Total Bond Index Fund. I was never comfortable with the thought of having 70% of my assets in the Total Bond Fund.
I've been drifting ever since.
https://personal.vanguard.com/us/funds/ ... IntExt=INT
Re: Any other retirees moving money out of Vanguard?
If I recall correctly, the fees on active bond funds are around 30% of the historical real returns of 2%.mpt follower wrote:Although all my equity portfolio (25%) is in passive ETFs, I have opted to go active on bonds. I feel that we are going through transition times which may command some active intervention, and with the other 75% I have built a fixed income portfolio of about 15% in ultra short bonds (which along with pension and SS) should give me living expenses for 5+ years until hopefully things settle, and the rest equally invested in Pimco Income (PIMIX) and Metropolitan Total Return (MWTRX). Only time will tell if I am right!
The fees on those two funds you mention are 0.45% and 0.62%.
Takes a lot of faith think the active managers are going to make an additional 15% to 25% above average bond fund return just to cover the excess fees and make the decision to go active pan out or break even.
Last edited by tadamsmar on Fri Jun 20, 2014 10:57 am, edited 1 time in total.
Re: Any other retirees moving money out of Vanguard?
I only pull out the RMDs.
Chaz |
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Re: Any other retirees moving money out of Vanguard?
I mean "hate" in the sense that it gets a bad rap - I wasn't suggesting you had an undisclosed hatred for it! You mention good reasons to diversify and I know that not all professionals are big fans of the TBM. I hold TIPS and shorter duration bond funds as well, but my point is that I'm still just not sure it's necessary. When you look at the history of TBM fund, it provides stability to a portfolio like it should, despite all of our fears about its flaws. Perhaps my tune will change when interest rates start rising faster and the effects of inflation are finally felt.midareff wrote:No hate at all.
JT
Re: Any other retirees moving money out of Vanguard?
Not sure why, but I never spent much time considering an all-in-one-fund. I suspect the illusion of control has played a role there. But now you have me thinking about this from another perspective. Something like Target Retirement just might stop the wheel in my head from spinning. Maybe it's time to kill the hamster.tadamsmar wrote: The Vanguard Target Retirement Income Fund is 30/70 but it has only 39.2% of assets in the Total Bond Fund:
https://personal.vanguard.com/us/funds/ ... IntExt=INT
Re: Any other retirees moving money out of Vanguard?
Bustoff wrote:Not sure why, but I never spent much time considering an all-in-one-fund. I suspect the illusion of control has played a role there. But now you have me thinking about this from another perspective. Something like Target Retirement just might stop the wheel in my head from spinning. Maybe it's time to kill the hamster.tadamsmar wrote: The Vanguard Target Retirement Income Fund is 30/70 but it has only 39.2% of assets in the Total Bond Fund:
https://personal.vanguard.com/us/funds/ ... IntExt=INT
Keep an eye on the potential tax bill from liquidating.
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Re: Any other retirees moving money out of Vanguard?
Bustoff -
I've been pondering your OP for a while. Maybe you do have too much (70%) in one fund, and that's always a source of risk. Total Bond is great for those who want a dollop of bonds. Once you are up to 70% bonds, you might feel you need more than one fund. Mathematically you probably don't need more, but emotionally you do. This is one of those behavioral economics issues that we all deal with. How to have the illusion of control, or something like that.
I have not taken money out of Vanguard during retirement. But I have essentially taken money out of bonds. I let my equity allocation increase from 35% to 46% by not rebalancing. Half of my money is in Balanced Index and Wellesley, where the rebalancing is done for me. But I also have three stock funds and one individual stock, and these have grown a lot in the past 5 years. Maybe that growth will be enough to cover the coming bond debacle that's been predicted for the same 5 years.
This suits me. CD's are last on my list of possible investments. Well, maybe one notch above rental property. Do what you must, but know that Total Bond is probably fine for up to 50% of your portfolio.
I've been pondering your OP for a while. Maybe you do have too much (70%) in one fund, and that's always a source of risk. Total Bond is great for those who want a dollop of bonds. Once you are up to 70% bonds, you might feel you need more than one fund. Mathematically you probably don't need more, but emotionally you do. This is one of those behavioral economics issues that we all deal with. How to have the illusion of control, or something like that.
I have not taken money out of Vanguard during retirement. But I have essentially taken money out of bonds. I let my equity allocation increase from 35% to 46% by not rebalancing. Half of my money is in Balanced Index and Wellesley, where the rebalancing is done for me. But I also have three stock funds and one individual stock, and these have grown a lot in the past 5 years. Maybe that growth will be enough to cover the coming bond debacle that's been predicted for the same 5 years.
This suits me. CD's are last on my list of possible investments. Well, maybe one notch above rental property. Do what you must, but know that Total Bond is probably fine for up to 50% of your portfolio.
16% cash 49% stock 35% bond. Retired, w/d rate 2.5%
- FelixTheCat
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Re: Any other retirees moving money out of Vanguard?
I recently had my portfolio reviewed by a Vanguard CFP. His suggestion for the bond portfolio was
- Vanguard Short-Term Investment-Grade
Vanguard Intermediate-Term Investment-Grade
Vanguard Total Bond Market Index
Vanguard Total International Bond Index
Felix is a wonderful, wonderful cat.
Re: Any other retirees moving money out of Vanguard?
It seems to me that the main shortcoming at Vanguard for fixed income, which I think is shared by all brokerages, is that the brokered CD rates are well below the rates you can get for CDs directly from banks. This shortcoming seems to range from around 0.5% to 0.2%, depending on duration.
I have been fretting about this because my IRA money is stuck at Vanguard and I don't like to invest in too much fixed income in my taxable accounts for tax reasons. But I have much more flexibility about where I can invest taxable funds.
I have been fretting about this because my IRA money is stuck at Vanguard and I don't like to invest in too much fixed income in my taxable accounts for tax reasons. But I have much more flexibility about where I can invest taxable funds.
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Re: Any other retirees moving money out of Vanguard?
I'm retired with a 60% equity/40% bond portfolio. 55% of my bonds are in Total Bond, the rest in Intermediate Tax Exempt and Inflation Protected Securities.
I just moved a chunk into Total Bond to reduce my equity exposure down a few points in line with my desired equity/bond target.
Given the pros and cons, that's where I felt I want to be.
But I wouldn't want all of my bonds there.
I just moved a chunk into Total Bond to reduce my equity exposure down a few points in line with my desired equity/bond target.
Given the pros and cons, that's where I felt I want to be.
But I wouldn't want all of my bonds there.
Re: Any other retirees moving money out of Vanguard?
I don't have any money at Vanguard, so, no, I am not moving money out.
Re: Any other retirees moving money out of Vanguard?
You right; however, their records have been outstanding. I know that one should not base investment decisions on historical performance, but the difference is too significant to ignore it.tadamsmar wrote:If I recall correctly, the fees on active bond funds are around 30% of the historical real returns of 2%.mpt follower wrote:Although all my equity portfolio (25%) is in passive ETFs, I have opted to go active on bonds. I feel that we are going through transition times which may command some active intervention, and with the other 75% I have built a fixed income portfolio of about 15% in ultra short bonds (which along with pension and SS) should give me living expenses for 5+ years until hopefully things settle, and the rest equally invested in Pimco Income (PIMIX) and Metropolitan Total Return (MWTRX). Only time will tell if I am right!
The fees on those two funds you mention are 0.45% and 0.62%.
Takes a lot of faith think the active managers are going to make an additional 15% to 25% above average bond fund return just to cover the excess fees and make the decision to go active pan out or break even.
Erwin
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Re: Any other retirees moving money out of Vanguard?
I'm not at Vanguard either nor do I hold any fixed income outside of my 401k currently and I would expect that to be the case to a large degree in retirement as that provides a stable value fund and the bond index fund is cheaper even than Vanguard Admiral but I might explore some TIPS in one form or another in retirement which would require rolling some assets out of the 401k.
Re: Any other retirees moving money out of Vanguard?
For tax-exempt return you want to look at the Vanguard Intermediate Term T/E bond fund. It is acknowledged as one of the best by the industry, and it will limit your timeframe to the ~5 year window you are looking for.
Re: Any other retirees moving money out of Vanguard?
A financial adviser that I spoke to at a networking event recommends that all of his clients keep 10-20% (depending on total portfolio size) in cash positions. He usually tells folks to shop the local banks. That way, even if things go bad for a while, they have a portion of their money in cash. Of course, he gets nothing for the money they have in cash, but he thinks it serves his clients better. What about getting CD's for a chunk of your funds, and then divide the bond and stock funds into buckets that make you comfortable?
As time passes, use the cash. Replace it with funds from your portfolio. Over time, a greater percentage of the fund becomes cash, because you always keep the same amount in cash after the first change. Then, you stay in the market for much of your money, but have security of cash for the rest? As time goes on, your security stays the same because you have the same amount of cash. Or, your security increases as you have a greater percentage. (Depending on your outlook). Because of the effect inflation can have on cash, you may get a TIPS fund as an additional security.
Even if you do not use this method or some combination of it, hopefully it is food for thought.
As time passes, use the cash. Replace it with funds from your portfolio. Over time, a greater percentage of the fund becomes cash, because you always keep the same amount in cash after the first change. Then, you stay in the market for much of your money, but have security of cash for the rest? As time goes on, your security stays the same because you have the same amount of cash. Or, your security increases as you have a greater percentage. (Depending on your outlook). Because of the effect inflation can have on cash, you may get a TIPS fund as an additional security.
Even if you do not use this method or some combination of it, hopefully it is food for thought.
I'm not a financial professional. Post is info only & not legal advice. No attorney-client relationship exists with reader. Scrutinize my ideas as if you spoke with a guy at a bar. I may be wrong.
Re: Any other retirees moving money out of Vanguard?
I think that putting all FI in one basket (TBM) would be a psychological (vs financial) issue for me. I am near retirement with 60 percent in FI, almost all on Vanguard platform, but have divided into 4 tranches, about one fourth TIPS (combination Vanguard funds and ladder) in tax deferred account, one fourth short term bond funds (mainly Vanguard Limited Term TE Muni) and money market in taxable account, one fourth investment grade individual muni bond ladder in taxable account (that makes me an outlier on this site) and balance in combo of TBM and the bond component of Wellesley (my only active fund but one of my favorites). I may not be getting better total return but the diversification helps me sleep at night.
Last edited by jdb on Fri Jun 20, 2014 8:23 pm, edited 2 times in total.
Re: Any other retirees moving money out of Vanguard?
What % breakdown did they recommend? I'm a bit surprised no inflation protected allocation.imgritz wrote:I recently had my portfolio reviewed by a Vanguard CFP. His suggestion for the bond portfolio was
Hope this helps.
- Vanguard Short-Term Investment-Grade
Vanguard Intermediate-Term Investment-Grade
Vanguard Total Bond Market Index
Vanguard Total International Bond Index
Re: Any other retirees moving money out of Vanguard?
In my case, money that was in VG MMF's is now in Online Bank Savings and CD accounts.
All the Best, |
Joe
Re: Any other retirees moving money out of Vanguard?
Retirees with IRA bond funds at Vanguard (or anywhere, for that matter) should consider building an IRA CD ladder with at least some of their bond funds. I might suggest a five-year ladder of 5-yr IRA CDs, built gradually (over five years). It's not hard to find 5-yr IRA retail CDs yielding 2%+, without the interest-rate risk of bond funds.
At least two financial institutions with competitive rates offer partial withdrawals from IRA CDs with no EWP for those over 59 1/2 (Synchrony and StateFarmBank). PenFed also allows such partial withdrawals, but its rates are no longer competitive.
At least two financial institutions with competitive rates offer partial withdrawals from IRA CDs with no EWP for those over 59 1/2 (Synchrony and StateFarmBank). PenFed also allows such partial withdrawals, but its rates are no longer competitive.
Re: Any other retirees moving money out of Vanguard?
I haven't liked Total Bond Market since they under-performed the Intermediate Term index due to overexposure to Mortgage-backed bonds some time back.
And it looks like that underperformance has continued
https://personal.vanguard.com/us/funds/ ... =INT#tab=1
When stocks tank - the economy tends to follow - then unemployment rises - then Mortgage backed securities are in trouble too.
Because I am 80-20 I really need my bonds to zig when stocks zag so I much prefer Vanguard Intermediate-Term Bond Index (VBILX).
That said the interest rate risk is rising so I've shortened up my duration (by selling some equities to stay at 80-20) so my bonds are now
40% Intermediate-Term Bond Index
60% Short-Term Investment Grade
I think going to CDs longer than 2 years right now is asking to be locked into an underperforming financial instrument.
Best,
-Frank
And it looks like that underperformance has continued
https://personal.vanguard.com/us/funds/ ... =INT#tab=1
When stocks tank - the economy tends to follow - then unemployment rises - then Mortgage backed securities are in trouble too.
Because I am 80-20 I really need my bonds to zig when stocks zag so I much prefer Vanguard Intermediate-Term Bond Index (VBILX).
That said the interest rate risk is rising so I've shortened up my duration (by selling some equities to stay at 80-20) so my bonds are now
40% Intermediate-Term Bond Index
60% Short-Term Investment Grade
I think going to CDs longer than 2 years right now is asking to be locked into an underperforming financial instrument.
Best,
-Frank
Re: Any other retirees moving money out of Vanguard?
Appreciate all the replies.
There is currently another thread discussing CD's being used as fixed-income alternatives outside of Vanguard.
[Morningstar article] the best fixed income investment
There is currently another thread discussing CD's being used as fixed-income alternatives outside of Vanguard.
[Morningstar article] the best fixed income investment
Re: Any other retirees moving money out of Vanguard?
I would be interested to know the reasoning behind the disparity between brokered CD rates and credit union CDs. A few years ago, I had brokered 5 year CDs from Vanguard, because the rates were higher than the rates from credit unions. As they expired, I bought CDs from credit unions, because then the cus had higher rates.kramer wrote:It seems to me that the main shortcoming at Vanguard for fixed income, which I think is shared by all brokerages, is that the brokered CD rates are well below the rates you can get for CDs directly from banks.
In general, when I look at my several local cus, that is still the case, their rates are higher than the ones I see at Vanguard.
Another perplexing item is that from time to time a cu's rates will jump up for a fairly short period of time, and then sink down again. I suppose they are adjusting for the funds they need or something.
Re: Any other retirees moving money out of Vanguard?
lulu, I, for one, gave up trying to figure out the "why" long ago. Suffice it to say, from time-to-time, certain financial institutions offer "better" deals on CDs. Historically-speaking, I've found retail CDs better than brokered CDs, and credit union CDs better than those on offer from banks. But as with all generalizations, exceptions do occur. One of the better resources for rate-shopping is Ken Tumin's blog, at www.depositaccounts.com/blog. When visiting the site, make sure to check the blog posts as well as the weekly rate summary, since specials sometimes don't get reflected in the summary.
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Any other retirees moving money out of Vanguard?
For many years most of my bond allocation was in laddered Treasury STRIPS, originally in my 401k, but now held in a rollover IRA with a brokerage feature at Vanguard.Bustoff wrote:I can't find a comfort "zone" within Vanguard's fixed-income offerings.
Retired a few years ago and being very risk averse settled on a 30/70 bond/equity allocation. Vanguard recommended the entire bond allocation go into the Total Bond Index Fund. I was never comfortable with the thought of having 70% of my assets in the Total Bond Fund.
I've been drifting ever since.
Based on what I've read here and in the recommended books, it seems like five years is about as far out on the yield curve as I want to go based on my own ability, willingness and need to take risk.
At five years, CD's look much more attractive in terms of risk/reward. However, that means moving most of the portfolio out of Vanguard.
It's all making me wonder if I'm being too conservative or if my reluctance about leaving Vanguard is costing me money.
Even today about 40% of our bonds are in laddered Treasury STRIPS (0 - 5 years), and about 60% in Vanguard Intermediate-Term Investment-Grade Fund Admiral Shares (VFIDX) (average duration 5.2 yrs). Both are in my rollover IRA at Vanguard.
So you can create your own bond mix, and not abandon Vanguard.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Any other retirees moving money out of Vanguard?
I have most of my assets with VG. Hold some taxable CDs outside of VG. I have a decent allocation to VG brokerage CDs in my IRA. Current 5yr CD is 2.05% (reasonably competitive) 7yr is 2.7% and 10yr 3.35%.(VG shorter term CDs are not competitive)
A few years back I decided to diversify by fixed income - still have a lot in Total Bond and TIPS but added some short and intermediate Tips, corporate and muni's. I try to have about 1/3 in intermediate duration, 1/3 in short duration and 1/3 in "safe" e.g. CDs, bank savings, etc.
I'm not looking at fixed income for growth but for stability. I'm hoping that this allocation will provide that during any interest rate increase cycle. Since brokerage CDs pay out interest - I periodically have the option of buying more CDs or adding to existing bond funds.
On the taxable side I have most divs and cap gains paid to Prime. I periodically move money from Prime an online bank for better yield. (something vs nothing)
A few years back I decided to diversify by fixed income - still have a lot in Total Bond and TIPS but added some short and intermediate Tips, corporate and muni's. I try to have about 1/3 in intermediate duration, 1/3 in short duration and 1/3 in "safe" e.g. CDs, bank savings, etc.
I'm not looking at fixed income for growth but for stability. I'm hoping that this allocation will provide that during any interest rate increase cycle. Since brokerage CDs pay out interest - I periodically have the option of buying more CDs or adding to existing bond funds.
On the taxable side I have most divs and cap gains paid to Prime. I periodically move money from Prime an online bank for better yield. (something vs nothing)
Re: Any other retirees moving money out of Vanguard?
A lot of Bogleheads use Vanguard Intermediate-Term Investment-Grade Fund and/or the Short-Term Investment-Grade Fund.ruralavalon wrote: ... 60% in Vanguard Intermediate-Term Investment-Grade Fund Admiral Shares (VFIDX) (average duration 5.2 yrs).
But what about experts like Swedroe and Bernstein who advocate keeping fixed income in short high quality bonds. Bernstein advises very short-term treasuries. Swedroe advises holding only AAA/AA bonds.
I've been hesitant to get into the investment grade funds based on the warnings of Bernstein and Swedroe.
- Christine_NM
- Posts: 2796
- Joined: Tue Feb 20, 2007 12:13 am
- Location: New Mexico
Re: Any other retirees moving money out of Vanguard?
Bustoff -
You mean like AAA mortgage backed securities? No, I know you don't mean that. But bond ratings do not represent absolute truth. You can't tell what a bond will do in the future any more than a stock.
Intermediate Investment-Grade is Vanguard's classiest bond fund. How's that for a rating? I'm serious. If you can't see that this is a good fund then maybe you are not ready for bonds.
You mean like AAA mortgage backed securities? No, I know you don't mean that. But bond ratings do not represent absolute truth. You can't tell what a bond will do in the future any more than a stock.
Intermediate Investment-Grade is Vanguard's classiest bond fund. How's that for a rating? I'm serious. If you can't see that this is a good fund then maybe you are not ready for bonds.
16% cash 49% stock 35% bond. Retired, w/d rate 2.5%
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Any other retirees moving money out of Vanguard?
I guess OP didn't notice our short term Treasuries -- "40% laddered Treasury STRIPS (0 - 5 years)". Can't get any more guaranteed than that . And as Christine_NM says, the VG IT Inv Gr bond fund is quite classy all by itself.Bustoff wrote:A lot of Bogleheads use Vanguard Intermediate-Term Investment-Grade Fund and/or the Short-Term Investment-Grade Fund.ruralavalon wrote: ... 60% in Vanguard Intermediate-Term Investment-Grade Fund Admiral Shares (VFIDX) (average duration 5.2 yrs).
But what about experts like Swedroe and Bernstein who advocate keeping fixed income in short high quality bonds. Bernstein advises very short-term treasuries. Swedroe advises holding only AAA/AA bonds.
I've been hesitant to get into the investment grade funds based on the warnings of Bernstein and Swedroe.
And my point was -- "you can create your own bond mix, and not abandon Vanguard."
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Any other retirees moving money out of Vanguard?
Christine -Christine_NM wrote: But bond ratings do not represent absolute truth. You can't tell what a bond will do in the future any more than a stock.
Intermediate Investment-Grade is Vanguard's classiest bond fund. How's that for a rating? I'm serious. If you can't see that this is a good fund then maybe you are not ready for bonds.
Couple things.
First, my point wasn't what I thought of the fund, but rather what Swedroe and Bernstein advocate and trying to reconcile the views.
I'm sure it is a good fund. So, again, it's not whether I can see that it's a good fund but what Swedroe and Bernstein advocate.
They are the experts not me.
Second, you said, "bond ratings do not represent absolute truth". Other than looking at the portfolio composition and distribution by credit quality (which are the bond ratings), how would you recommend someone like me go about determining the quality of a bond fund?
Re: Any other retirees moving money out of Vanguard?
I did notice the short term Treasuries. Those are the bonds that Bernstein and Swedroe advocate holding. Re-read my post above. My point concerned the investment grade bond fund.ruralavalon wrote:I guess OP didn't notice our short term Treasuries -- "40% laddered Treasury STRIPS (0 - 5 years)". Can't get any more guaranteed than that . And as Christine_NM says, the VG IT Inv Gr bond fund is quite classy all by itself.Bustoff wrote:A lot of Bogleheads use Vanguard Intermediate-Term Investment-Grade Fund and/or the Short-Term Investment-Grade Fund.ruralavalon wrote: ... 60% in Vanguard Intermediate-Term Investment-Grade Fund Admiral Shares (VFIDX) (average duration 5.2 yrs).
But what about experts like Swedroe and Bernstein who advocate keeping fixed income in short high quality bonds. Bernstein advises very short-term treasuries. Swedroe advises holding only AAA/AA bonds.
I've been hesitant to get into the investment grade funds based on the warnings of Bernstein and Swedroe.
And my point was -- "you can create your own bond mix, and not abandon Vanguard."
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Any other retirees moving money out of Vanguard?
And my point was -- "you can create your own bond mix, and not abandon Vanguard." I don't claim that my way is the only or best way, just that Vanguard has such a wide selection of good inexpensive bond funds, plus anything you want to buy thru VBS (Vanguard Brokerage Services), that you don't need to go elsewhere.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Any other retirees moving money out of Vanguard?
Is this a well know fact, that for MBS as interest rates go up their effective duration goes up?I just choose, at this point in time, to not own a bond fund with a significant mix of MBS since as interest rates go up their effective duration goes up.
If so, is that built into the price?
Is aversion to MBS an example of thinking I know something that the market doesn't know?
. |
The most important thing you should know about me is that I am not an expert.
Re: Any other retirees moving money out of Vanguard?
Thanks ruralavalon. I need to learn more about STRIPS. But are they as classy as Interm-Term Invst-Graderuralavalon wrote:And my point was -- "you can create your own bond mix, and not abandon Vanguard." I don't claim that my way is the only or best way, just that Vanguard has such a wide selection of good inexpensive bond funds, plus anything you want to buy thru VBS (Vanguard Brokerage Services), that you don't need to go elsewhere.
Re: Any other retirees moving money out of Vanguard?
me toochaz wrote:I only pull out the RMDs.
only outside holding are I Bonds; prefer them to TIPS and slowly transitioning out of TIPS maintaining a 50/50 equity to fixed allocation
Don't it always seem to go * That you don't know what you've got * Till it's gone