Bond allocation

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dawg
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Joined: Mon Jan 19, 2015 1:34 pm

Bond allocation

Post by dawg »

I am 81 yrs old with 25% stock, 30% bond, 45% Cash( I Bond 62K, CD 83K, Money Market 56K, Savings 30K)
Thinking I should increase bond allocation with Vanguard. Recommend Bond Mutual Index Fund or Bond ETF, all in taxable account
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vineviz
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Re: Bond allocation

Post by vineviz »

dawg wrote: Fri May 14, 2021 10:19 am I am 81 yrs old with 25% stock, 30% bond, 45% Cash( I Bond 62K, CD 83K, Money Market 56K, Savings 30K)
Thinking I should increase bond allocation with Vanguard. Recommend Bond Mutual Index Fund or Bond ETF, all in taxable account
What is the 30% bonds currently invested in?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
dawg
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Re: Bond allocation

Post by dawg »

Life Income VASIX and Life Conservative VSCGX
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vineviz
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Re: Bond allocation

Post by vineviz »

dawg wrote: Fri May 14, 2021 10:51 am Life Income VASIX and Life Conservative VSCGX
There's no combination of those two funds which will produce the 25% stocks and 30% bond allocation you mentioned for your overall portfolio.

However, my advice would be simply reduce the cash allocation and increase the VASIX allocation. At 80% in bonds, Vanguard LifeStrategy Income (VASIX) is already a very low risk fund.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Topic Author
dawg
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Re: Bond allocation

Post by dawg »

Forgot I do have some VFSTX short term bond. Thanks for the reply
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nisiprius
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Re: Bond allocation

Post by nisiprius »

You are already at low risk, but if the goal is to a) reduce risk by b) adding a bond fund to what you have now, the default starting point, the usual suggestion for where to begin, is the Vanguard Total Bond Market Index Fund. It is available as a mutual fund (VBTLX) and an ETF (BND). Virtually identical funds and ETFs are available from other providers as well; look for references to "the Bloomberg-Barclay's US Aggregate Bond index" or "Aggregate" or "AGG."

I would say this is the fund to use if you can't give some good reason for using something else.

Now I'm going to mention an idea, but that's all it is, an idea. I am retired, very conservatively invested, and bond-heavy. I am just telling you what I use, not recommending it. In addition to the Total Bond Market Index Fund I also use the Vanguard Inflation-Protected Securities fund, VAIPX, which invests in TIPS (Treasury bonds that incorporate an inflation adjustment). The inflation-protected fund is in the nature of a personal preference or flavor choice. It incorporates inflation protection but there are some tradeoffs involved. Because TIPS are not as liquid as regular Treasury bonds, they have experienced some odd fluctuations--nowhere near the fluctuations we have seen get in stocks, but more than we have seen in Total Bond. If inflation never takes off, then I have not have been rewarded for taking that small amount of extra risk. So it's not something you should do blindly.

Just to make this particular point clear, here's a comparison of how Vanguard Inflation-protected Securities (VAIPX, blue) behaved around the time of the global financial crisis, compared to the "regular" bond fund, Total Bond (VBTLX), and to Total Stock (VTSAX). I'm talking about that downward jog in the blue line at the same time when stocks plunged. Generally, the orange line (regular Total Bond) has been smoother than the blue line (Inflation-Protected Securities).

Source

Image
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Topic Author
dawg
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Joined: Mon Jan 19, 2015 1:34 pm

Re: Bond allocation

Post by dawg »

Thanks for the reply. Good food for thought.
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