Bond Allocation

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Bond Allocation

Post by clayr361 » Fri Oct 03, 2014 10:45 am

Alright so I know there are plenty of past articles out there and I have read through many but have not come to a conclusion. I am allocating my IRA and have the equities portion under control. I have no idea where to invest the bond portion. I am 28, going for a retirement date around 2050 am allocating 90% equities, 10% bonds right now. I have been looking at Vanguards BND, is this a good way for me to go with all 10% of the bond allocation? Why does BND have low Morningstar ratings? Should I go longer term on a bond fund to get a higher return since I do have a lot of time on my side? I am open to any and all bond funds, does not have to be an ETF or Vanguard fund but I do want expenses to be low.

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Re: Bond Allocation

Post by asif408 » Fri Oct 03, 2014 11:02 am

BND would be fine. Ignore Morningstar ratings, they mean very little. Since you are 90% equities, you could consider longer bonds. As Larry Swedroe points out, historically at high equity allocations (80 percent or higher), the portfolio with long-term Treasuries produced the highest return and highest Sharpe ratio: ... aturities/. So something like VGLT would work.

If you are wanting a higher return why not just go 100% stocks? I'm of the belief that bonds are for safety, so I keep them short to intermediate and high quality. Others may disagree. Just my 2 cents.

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Re: Bond Allocation

Post by dbr » Fri Oct 03, 2014 11:20 am

There are so many choices in what a person in your position might choose in bonds and so little difference among those choices that neither you nor anyone else can ever resolve the issue. One conclusion to draw is to simply invest in BND and not look back.

A minor issue is that presumably you mention BND because your IRA is not at a broker where you could use a Vanguard Admiral class mutual fund?

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