Stable Value/Bonds/TIPS Proportions?

[JW Nearly Retired]

What are Bogleheads using for a fixed income mix? I have most of our fixed income allocation in equal parts of Stable Value fund/Intermediate bond fund/TIPS in my 401k. I had no good reason for picking the equal portions when I added TIPS to the mix after it became available several years ago. Was just thinking some of each and defaulted to equal parts. Can anyone suggest something different?

Fund average durations are SV= 2.1 yrs, Bonds = 4.3 yrs, TIPS= 8.6 yrs. Fund expenses are very low. The latest 3-month SV fund yield was 0.3% (1.2%/yr). TIPS have shown significantly more return than the other two and I think I need to rebalance between the 3 funds ..... but to what ratios?
thanks,
JW

[cheese_breath]

What interest rate does your stable value fund pay? I have all my fixed income in TIAA Traditional (similar to stable value) paying 3%. It's not fancy, but in today's economy I've come to be satisfied with a 3% guaranteed return.

[Peter Foley]

JW
I use the 3 asset classes in combination but am a little heavier in stable value than I would like to be. Part of this is due to the options available in some retirement accounts and part of this is due to long term concerns about Total Bond Market - the one option that is generally available.

Stable value = 60%, Total Bond = 15%, and TIPs + I-bonds = 25%. Ideally I would like to be 1/3 in each. With more than half the stable value paying 4% and the rest paying about 3.5%, I'm reluctant to make any changes at this point in time. I admit that if I had rebalanced to 1/3 each a couple years ago I would be money ahead . . . but hindsight is always clearer than the future.

At this point in time I cannot see much in terms of future gains for Total bond. Rates can't go much lower so one is likely to get only the yield as total return. I don't think the Vanguard TIPs fund is a good buy right now because the yield is negative. I confess I do not understand bonds as well as I should, so if I am looking at this incorrectly I would be grateful to someone who could educate me.

[scone]

I have mostly Stable Value, Total Bond, Pimco Total Return, and Intermediate Treasuries. Each fund has a particular role to play in our 401k/Roth portfolio-- at least, that's the idea! When I first reorganized my funds, away from high expense investments, I sort of walked down the bond fund buffet line, and put a little bit of everything on my plate. But at my last reorganization this year, I asked myself to justify each fund, and not everything made the cut. Here's my reasoning:

The Stable Value does not fluctuate, and helps with the sleep at night factor. I used to hate it-- I was more or less forced to own it because that's the way the 401k is structured, and it does not pay very well. But I have grown to appreciate it's lack of drama. No matter how crazy Mr. Market feels, I get that periodic $18.41 in SV. Not much, but it's reliable and slowly growing.

Total Bond gives decent diversification, obviously. PTTRX gives even more diversification, and includes several categories of bonds that TB does not have. I think they work well together, and I'm certain Bill Gross is acutely aware of Total Bond. I'm a little concerned with the use of derivatives in PTTRX, but yet not so concerned that I'm willing to get out, because it does do well, with a remarkably low SD for a riskier bond fund. I use PTTRX to raise the return on the FI side, to lose a little less to inflation.

The pure Treasury fund is crash protection, a flight-to-quality "insurance policy." People are dissing Treasuries right now, because they don't pay a good income, but I won't be looking for income until we retire. Despite that, I see the Treasury fund working for me on bad days in the stock market-- it doesn't make money, it keeps me from losing money. That's something I got from reading Charlie Ellis and watching Ichiro Suzuki, the baseball player. For me investing is not about trying to hit one out of the park, I work on (metaphorically) good defense, fewer errors, and (hopefully) lots of singles.

[letsgobobby]

My stable value fund is down to 2.05%, and it is 50% of fixed income so 20% of total portfolio.

I haven't owned TIPS in about 2 years.

I'm buying up I bonds but it takes a while for those to amount to much.

but owning 20% of my portfolio in a 2.05% return asset while I'm paying 2.875% on my mortgage doesn't make a ton of sense.

[JW Nearly Retired]

What interest rate does your stable value fund pay? I have all my fixed income in TIAA Traditional (similar to stable value) paying 3%. It's not fancy, but in today's economy I've come to be satisfied with a 3% guaranteed return.

It has dropped to where it only pays 1.2% now. Stable but not much value.
JW

[cheese_breath]

What interest rate does your stable value fund pay? I have all my fixed income in TIAA Traditional (similar to stable value) paying 3%. It's not fancy, but in today's economy I've come to be satisfied with a 3% guaranteed return.

It has dropped to where it only pays 1.2% now. Stable but not much value.
JW

I see your problem. Given 1.2% I don't have any better suggestions than hose already given by the previous posters.

[JW Nearly Retired]

No very solid reasons for it but I'm rebalancing our fixed income from equal parts to SV/Bond/TIPS = 50/25/25. Just a notion that bonds/TIPS have had a good run and it's over.
JW

[Aptenodytes]

I'm roughly equal proportions, a little light in bonds.

[telemark]

I don't use stable value because it's long term money and the funds available to me don't even keep up with inflation. If I could get 3% I would have to think harder about that decision.

[TheEternalVortex]

I have 100% in TIPS.

[Padlin]

I do thirds, my SV is only 2%. I also try pretty hard to buy and hold and ignore the chatter, even in fixed.

[detifoss]

I had tried hard not to modify my IPS stated 50% intermediate treasuries and 50% TIPS for fixed income (I'm about 65% equities, 35% FI - cnsistent with 100-age).
But I just couldn't do it. So I dumped about a quarter of my TIPS in my taxable account and bought I-bonds to make up for that amount over 2011-2013. I haven't bought TIPS since late 2009 early 2010. I bought as much as I could afford then. Glad I did. Now the breakeven I-bonds vs TIPS is like 22+ years - my TIPS were all maturing in about 12-15 years, where I-bonds beat them basically no matter what.

The tougher pill for me to swallow was dumping nearly half of my intermediate treasuries over the past 6 months and buying an equal amount of the stable value fund in my wife's 457 plan (paying between 2.5%-3.25% quarterly - currently 2.55%).

I could certainly be wrong, but I just don't see a credit event breaking this very well rated SVF, so the yield difference was just too much to ignore (I hold the fidelity advantage spartan intermediate bond fund).

So despite my desire for simplicity and absolutely no credit risk, I now have complexity and a teeny tiny bit of credit risk in my FI.

At last check I'm at very nearly 50% nominal 50% inflation protected FI.
of the 50% nominal, nearly 60% is now in an SVF, 40% is still in the intermediate treasury fund, but all new FI contributions to nominals are going to the SVF.
of the 50% inflation protected, about 40% is in TIPS (2026 maturity), and 60% is in I-bonds (about 1/3 1.2% Fixed rate from years ago, 2/3 0% fixed rate).
I have a 529 plan loaded up with 10 and 12 yr (now 7 and 9 years to maturity) 5% CDs, but that's a different bucket.

the search for yield broke my IPS, but I will never drop my holdings of actual TIPS or actual treasuries below 33% of FI as this keeps my flight to quality protection and rebalancing ability in place.

long post, first in a long time!