Bond allocation for 70/20/10

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AZK
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Bond allocation for 70/20/10

Post by AZK »

Portofolio goal is 70/20/10 equity/bonds/gold

I've done a lot of reading of past threads on here and a lot of reading on swedroe's blog...

IIRC, the general consensus is that intermediate treasuries (IEI) > TBM and for portfolios with 60-80% equity, 5 year duration seemed to be most efficient. I'm wondering if my situation is different but probably not...so here goes:

1) My equity portion is all in taxable.
2) My bond portion is all in 403b/IRA, I have a self-directed 403b, so I can purchase anything
3) It's unlikely I will ever rebalance between the two in the next few years as the size of my portfolio and my contributions allow me to rebalance with new money - both in taxable and deferred.

So all that being said, do intermediate treasuries make the most sense for me? A lot of times on here, people are talking about the need to rebalance from bonds to equity or vice versa, but I am planning on rebalancing only with new money for the next 2-3 years...Once my portfolio grows to the point where I can't keep my bond portion high enough with just 403b/IRA contributions then I'll start looking into taxable options...
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fredflinstone
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Post by fredflinstone »

The inflation-adjusted yield on 30-year TIPS bonds is currently 2.25%. Assuming you are not old or retired, I recommend you split your fixed income holdings 50-50 between long-duration TIPS bonds and an intermediate treasuries fund.
fishdrzig
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Post by fishdrzig »

fredflinstone wrote:The inflation-adjusted yield on 30-year TIPS bonds is currently 2.25%. Assuming you are not old or retired, I recommend you split your fixed income holdings 50-50 between long-duration TIPS bonds and an intermediate treasuries fund.
I was wondering the same would VIPSX(50%) and VBIIX(50%) be a good mix for the poster?

Question of my own
Is it possible to move money from a SIMPLE IRA to a Rollover IRA and vice versa?
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abuss368
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Post by abuss368 »

I like the following funds:

1) Total Bond Market
2) TIPS
3) Intermediate Term Tax Exempt Fund.

TIPS are not paying much of anything right now but provide inflation protection.

Consider your gold investment. Gold is pure speculation with no internal rate of return (i.e. a regular business enterprise). I would consider alternative equities, bonds, or REITS.
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grap0013
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Post by grap0013 »

I vote 20% all in intermed treasuries. What are 10% TIPS gonna do for you? They did poor in 2008 when you wanted safe assets to do well, they've never been really tested in a high inflation environment as they are still fairly new, and investors did just fine the decades before they were invented.

Intermediate treasuries will do ok in prolonged inflation/deflation, rising/falling interest rates or whatever. In flights to quality sometimes they lose to long treasuries and sometimes they lose to short treasuries. Stay in the middle and keep it simple.
There are no guarantees, only probabilities.
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AZK
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Post by AZK »

Yeah. That was my plan.

I could see having a large % of TIPS if I was close to retirement... but if I'm in the early accumulation phase...I think I'm going to do all intermediate term treasuries...
jimkinny
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Post by jimkinny »

I do not think there is one answer now that is going to prove to be true 10 years that we can know to be true now. Inflation protected securities are a hedge against unexpected inflation. If there is not going to be unexpected inflation, then TIPS will not not be a good asset to hold. But who knows the future?

Jim
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abuss368
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Post by abuss368 »

Total Bond Market holds nominals which will do fine with deflation.

TIPS will protect a portfolio if there is unexpected inflation.

Using both would provide additional diversification.
Jacobkg
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Post by Jacobkg »

100% interm. treasuries sounds just fine to me.
phositadc
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Post by phositadc »

Jacobkg wrote:100% interm. treasuries sounds just fine to me.
I agree. To the extent that the original poster is trying to hedge against inflation, I assume that is the purpose of his allocation to gold (a la Harry Brown Permanent Portfolio). For the bond allocation to be 100% intermediate treasuries seems fine to me. In fact, on the basis of his 10% gold allocation, I probably prefer 100% int-term treasuries over splitting with TIPS, but over the course of decades the OP will probably be fine either way.
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