Bond Fund for Three-Fund Portfolio
Bond Fund for Three-Fund Portfolio
I've decided on a three-fund portfolio and began researching bond funds. The entire bond component will be held within my 401k. I have a few options available in my employer plan and was wondering what some of the pros/cons were to the choices. Seems everyone always references TBM as the go-to fund, but PTTRX seems like a viable option as well.
Loomis Sayles Global Bond Instl (LSGBX) (.66%)
PIMCO Total Return Instl (PTTRX) (.46%)
Vanguard Total Bond Mkt Index Inst (VBTIX) (.07%)
Your thoughts? Thanks in advance from a first-timer.
Loomis Sayles Global Bond Instl (LSGBX) (.66%)
PIMCO Total Return Instl (PTTRX) (.46%)
Vanguard Total Bond Mkt Index Inst (VBTIX) (.07%)
Your thoughts? Thanks in advance from a first-timer.
Re: Bond Fund for Three-Fund Portfolio
VBTIX represents the US bond market. PTTRX tries to beat the market, albeit at a higher cost. Beating the bond market when starting 40 basis points behind each and every year is tough, but PIMCO could do it. Both funds are good.
Sometimes, in this situation, buying some of both (50/50, 70/30, etc.) could be reasonable.
Sometimes, in this situation, buying some of both (50/50, 70/30, etc.) could be reasonable.
- FrugalInvestor
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Re: Bond Fund for Three-Fund Portfolio
Yes, the nice thing about going 50/50 is no matter which does better you can say that you own it! That said, if it were me, I'd go with TBM. Adding 'value' typically involves increasing risk and I don't care to do that, particularly on the bond side of my portfolio.kenner wrote: Sometimes, in this situation, buying some of both (50/50, 70/30, etc.) could be reasonable.
Have a plan, stay the course and simplify. Then ignore the noise!
Re: Bond Fund for Three-Fund Portfolio
Are all 3 of these available for your 401k? If so, just look at the expense ratio and choose TBM. It may not seem like much, but research shows that expenses matter a lot. I wouldn't go near any of those 2 non-vanguard funds.noid wrote:I've decided on a three-fund portfolio and began researching bond funds. The entire bond component will be held within my 401k. I have a few options available in my employer plan and was wondering what some of the pros/cons were to the choices. Seems everyone always references TBM as the go-to fund, but PTTRX seems like a viable option as well.
Loomis Sayles Global Bond Instl (LSGBX) (.66%)
PIMCO Total Return Instl (PTTRX) (.46%)
Vanguard Total Bond Mkt Index Inst (VBTIX) (.07%)
Your thoughts? Thanks in advance from a first-timer.
Check out http://investingroadmap.wordpress.com/2 ... -big-deal/
Here's a snippet:
A 401(k) of low-fee funds will grow faster than a 401(k) with higher fees. Nest Egg at 65 -
Expenses Nest Egg
High - 1.5% $663,600
Moderate- 1.o% $732,400
Low – 0.5% $809.700
Ultra-low -0.25% $851,800
Note: Assumes a 30-year-old earns $40,000 a year and gets a 3% annual raise.
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)
Re: Bond Fund for Three-Fund Portfolio
Absolutely, investing against a .4%-.6% headwind is nuts.Jerilynn wrote:Are all 3 of these available for your 401k? If so, just look at the expense ratio and choose TBM. It may not seem like much, but research shows that expenses matter a lot. I wouldn't go near any of those 2 non-vanguard funds.noid wrote:I've decided on a three-fund portfolio and began researching bond funds. The entire bond component will be held within my 401k. I have a few options available in my employer plan and was wondering what some of the pros/cons were to the choices. Seems everyone always references TBM as the go-to fund, but PTTRX seems like a viable option as well.
Loomis Sayles Global Bond Instl (LSGBX) (.66%)
PIMCO Total Return Instl (PTTRX) (.46%)
Vanguard Total Bond Mkt Index Inst (VBTIX) (.07%)
Your thoughts? Thanks in advance from a first-timer.
Check out http://investingroadmap.wordpress.com/2 ... -big-deal/
Here's a snippet:
A 401(k) of low-fee funds will grow faster than a 401(k) with higher fees. Nest Egg at 65 -
Expenses Nest Egg
High - 1.5% $663,600
Moderate- 1.o% $732,400
Low – 0.5% $809.700
Ultra-low -0.25% $851,800
Note: Assumes a 30-year-old earns $40,000 a year and gets a 3% annual raise.
Re: Bond Fund for Three-Fund Portfolio
You have Institutional VBTIX (0.07%) and are questioning which Bond option?noid wrote:I've decided on a three-fund portfolio and began researching bond funds. The entire bond component will be held within my 401k. I have a few options available in my employer plan and was wondering what some of the pros/cons were to the choices. Seems everyone always references TBM as the go-to fund, but PTTRX seems like a viable option as well.
Loomis Sayles Global Bond Instl (LSGBX) (.66%)
PIMCO Total Return Instl (PTTRX) (.46%)
Vanguard Total Bond Mkt Index Inst (VBTIX) (.07%)
Your thoughts? Thanks in advance from a first-timer.
Most (all?) 401K plan participants wished they were so fortunate.
Landy |
Be yourself, everyone else is already taken -- Oscar Wilde
- ObliviousInvestor
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Re: Bond Fund for Three-Fund Portfolio
Ditto this. My suggestion would be to happily grab that low-cost, diversified bond fund, and move on with life.YDNAL wrote:You have Institutional VBTIX (0.07%) and are questioning which Bond option? Most (all?) 401K plan participants wished they were so fortunate.
Mike Piper |
Roth is a name, not an acronym. If you type ROTH, you're just yelling about retirement accounts.
Re: Bond Fund for Three-Fund Portfolio
Thanks everyone for the replies, appreciate your opinions.
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Re: Bond Fund for Three-Fund Portfolio
I wouldn't be too doctrinaire about PIMCO Total Return (PTTRX) versus Vanguard Total Bond (VBMFX) My opinion would be that your plan includes what might be the two best bond funds on the planet--and PTTRX is, I think, the biggest mutual fund on the planet, period--and that it's not obvious which is better. Being an indexer, I'd go with Total Bond, but make the decision any way you can, then stick to it and move on.
I'd ignore the Loomis Sayles Global Bond Fund or at least would not consider it be part of my bond portfolio, because, for whatever reasons, it does not behave the way a domestic investment-grade bond fund behaves. In a 1992-present growth chart together with the other two funds, you can see how that fund, the green line, wanders up and down. It is in a completely different category of behavior than the PIMCO and Vanguard funds.
Most tellingly, look at 2008-2009. This was just the time when you wanted your bond funds to be a safe haven, and as you can see the other funds pretty much sailed straight through, while Loomis Sayles Global Bond dropped 17%. Ouch!
As for PIMCO Total Return versus Vanguard Total Bond, that's a tough one. They act generally the same, they both show the steady upward lift on a growth chart that comes from reinvested dividends, there are no funny places where one does something wildly different than the other, and the size of the fluctuations in PIMCO Total Return are not visible larger than in Vanguard Total Bond. In the chart above, both funds go up and down together, but PIMCO just keeps steadily widening the lead. PIMCO Total Return definitely made more money.
So really you are on the horns of the active/passive dilemma here.
The easy part is that these are obviously both very suitable funds as the core bond holdings in a three-fund portfolio.
You have to balance your greed against your belief in indexing. I've never had the opportunity to buy PTTRX institutional with an 0.43% ER. I'm a pretty diehard indexer, but I admit I might be tempted if I could get PTTRX Institutional. If you look at the PTTCX retail fund, with its 1.65% (!) ER, it is virtually in a dead heat with VBMFX--VBMFX by a nose--and it's interesting to make that comparison because when you look at those two lines I think I see evidence that VBMFX is straighter and steadier.
But, PTTRX has been beating VBMFX, and by enough to care about. How much of that is because Bill Gross has the mojo? How much is that he's taking more risk? If he is taking more risk, is it just fluctuation/volatility/variability risk--because a sane person could certainly decide to take a bit more, in what has still been a very smooth ride? Or is some of it the kind of risk that could show up suddenly, a la Schwab Total Bond? Or the catastrophe that was Oppenheimer Core Bond I don't know. But as far as catastrophic, black-swan-type risk goes, it seems to me that PTTRX was stress-tested in 2008-2009 and passed.
I'd ignore the Loomis Sayles Global Bond Fund or at least would not consider it be part of my bond portfolio, because, for whatever reasons, it does not behave the way a domestic investment-grade bond fund behaves. In a 1992-present growth chart together with the other two funds, you can see how that fund, the green line, wanders up and down. It is in a completely different category of behavior than the PIMCO and Vanguard funds.
Most tellingly, look at 2008-2009. This was just the time when you wanted your bond funds to be a safe haven, and as you can see the other funds pretty much sailed straight through, while Loomis Sayles Global Bond dropped 17%. Ouch!
As for PIMCO Total Return versus Vanguard Total Bond, that's a tough one. They act generally the same, they both show the steady upward lift on a growth chart that comes from reinvested dividends, there are no funny places where one does something wildly different than the other, and the size of the fluctuations in PIMCO Total Return are not visible larger than in Vanguard Total Bond. In the chart above, both funds go up and down together, but PIMCO just keeps steadily widening the lead. PIMCO Total Return definitely made more money.
So really you are on the horns of the active/passive dilemma here.
The easy part is that these are obviously both very suitable funds as the core bond holdings in a three-fund portfolio.
You have to balance your greed against your belief in indexing. I've never had the opportunity to buy PTTRX institutional with an 0.43% ER. I'm a pretty diehard indexer, but I admit I might be tempted if I could get PTTRX Institutional. If you look at the PTTCX retail fund, with its 1.65% (!) ER, it is virtually in a dead heat with VBMFX--VBMFX by a nose--and it's interesting to make that comparison because when you look at those two lines I think I see evidence that VBMFX is straighter and steadier.
But, PTTRX has been beating VBMFX, and by enough to care about. How much of that is because Bill Gross has the mojo? How much is that he's taking more risk? If he is taking more risk, is it just fluctuation/volatility/variability risk--because a sane person could certainly decide to take a bit more, in what has still been a very smooth ride? Or is some of it the kind of risk that could show up suddenly, a la Schwab Total Bond? Or the catastrophe that was Oppenheimer Core Bond I don't know. But as far as catastrophic, black-swan-type risk goes, it seems to me that PTTRX was stress-tested in 2008-2009 and passed.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
Re: Bond Fund for Three-Fund Portfolio
Me three.ObliviousInvestor wrote:Ditto this. My suggestion would be to happily grab that low-cost, diversified bond fund, and move on with life.YDNAL wrote:You have Institutional VBTIX (0.07%) and are questioning which Bond option? Most (all?) 401K plan participants wished they were so fortunate.
Jim
Re: Bond Fund for Three-Fund Portfolio
PIMCO Total Return (PTTRX) may have done well in the past, but I think it's foolish to buy it now given the difference in expense ratio between it and the Vanguard fund.
Cordially, Jeri . . . 100% all natural asset allocation. (no supernatural methods used)
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Re: Bond Fund for Three-Fund Portfolio
Looks like you're using TBM Investor Shares (0.22% ER) rather than Institutional Shares (0.07%).nisiprius wrote:
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Re: Bond Fund for Three-Fund Portfolio
If you are going to stick with the 3 fund allocation of total market strategies, you are not going to want to stray from the total bond index. You'll always find funds with hindsight that have beaten an index.