how do you invest the bond portion of your portfolio

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bogleboyz
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how do you invest the bond portion of your portfolio

Post by bogleboyz » Mon May 29, 2017 10:00 pm

Hi Everyone
I was wondering how do you guys invest the bond portion of your portfolio
I am in late 30's
I have read that you should invest half of the bond portion in a bond index fund and the other half in TIPS.

so i was planning to invest half of the bond portion in Vanguard Total Bond Market Index Fund Institutional Shares VBTIX.
I was planning to invest the other half in Fidelity® Inflation-Protected Bond Index Fund - Premium Class FSIYX

is that a reasonable plan? Are these good choices?
I would appreciate any feedback and suggestions

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nedsaid
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Re: how do you invest the bond portion of your portfolio

Post by nedsaid » Mon May 29, 2017 10:49 pm

What you are wanting to do used to be a standard Boglehead recommendation for a bond portfolio: 50% Total Bond Market and 50% TIPS. I think this is A-OK.

In the last few years, enthusiasm for TIPS has waned and many Bogleheads wonder if there is a need for them at all. A big reason for this is that inflation has been very subdued here in the United States and many of us were actually concerned about deflation. Also, TIPS fell about 11% or so during the 2008-2009 financial crisis and this troubled many people. I think all of this is recency bias.

I myself hold two TIPS funds, one index fund and one active fund. TIPS as a percentage of my bond portfolio is much less than 50% but I hold them.
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NiceUnparticularMan
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Re: how do you invest the bond portion of your portfolio

Post by NiceUnparticularMan » Mon May 29, 2017 11:11 pm

Most of our fixed-income is in a cash-balance pension fund and a stable-value fund. We also have a small allocation to TIPS.

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Bogle_Feet
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Re: how do you invest the bond portion of your portfolio

Post by Bogle_Feet » Tue May 30, 2017 12:06 am

BND or AGG --- Barclays U.S. Aggregate bond index

123
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Re: how do you invest the bond portion of your portfolio

Post by 123 » Tue May 30, 2017 12:18 am

Some of us with concerns about bond fund price erosion due to increasing interest rates are using FDIC-insured CDs/CD ladders for some or all of our fixed-income allocation.
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dcabler
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Re: how do you invest the bond portion of your portfolio

Post by dcabler » Tue May 30, 2017 6:49 am

Intermediate Treasuries (2/3) and TIPs (1/3) roughly...

livesoft
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Re: how do you invest the bond portion of your portfolio

Post by livesoft » Tue May 30, 2017 6:59 am

bogleboyz wrote:is that a reasonable plan? Are these good choices?
I would appreciate any feedback and suggestions
I think the folks who own TIPS bought them when they were a good deal decades ago. I don't see much call to buy them now.

We have total US bond index fund, short-term corporate bond index fund, and TIAA traditional.

I think that when one is still accumulating and not retired that one's bond funds are meant to be used to rebalance into equities when equities drop quite a lot.
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BHUser27
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Re: how do you invest the bond portion of your portfolio

Post by BHUser27 » Tue May 30, 2017 7:08 am

Bond portion of my overall portfolio is invested as follows...

Taxable Account:
VWIUX Vanguard Intermediate Tax-Exempt Fund
Long-term CD Ladder yielding 2.25%

Tax-Advantaged Accounts are a mix of:
401k: SEGSX Government Securities Fund
401k: DPDFX Diversified Income Fund
401k: Stable Value Fund (SEC Yield 2.68%)
Roth: VWIAX Vanguard Wellesley Income Fund

carolinaman
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Re: how do you invest the bond portion of your portfolio

Post by carolinaman » Tue May 30, 2017 7:11 am

bogleboyz wrote:Hi Everyone
I was wondering how do you guys invest the bond portion of your portfolio
I am in late 30's
I have read that you should invest half of the bond portion in a bond index fund and the other half in TIPS.

so i was planning to invest half of the bond portion in Vanguard Total Bond Market Index Fund Institutional Shares VBTIX.
I was planning to invest the other half in Fidelity® Inflation-Protected Bond Index Fund - Premium Class FSIYX

is that a reasonable plan? Are these good choices?
I would appreciate any feedback and suggestions
The greatest inflation protection for someone your age is your work income, which usually tracks inflation pretty well. The case of TIPS is stronger for retirees and near retirees, but even there interest has diminished in recent years. Also, equities perform better against inflation over the long term, so you may want to consider a higher equity allocation.

I am retired and own low cost bond funds and CDs paying 3%. I do have a small amount of TIPs but no plans to add to them at today's prices.

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oldcomputerguy
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Re: how do you invest the bond portion of your portfolio

Post by oldcomputerguy » Tue May 30, 2017 7:23 am

Our bond holdings are in my tIRA and in DW's 401k. About 13% of our total bond holdings is in a short-term Treasury index fund set aside as "near-cash" to meet a projected need coming up in about three years (bridging DW's income gap between retirement and Social Security age); the rest is all in index funds tracking Barclay's Aggregate Index.
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Lou354
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Re: how do you invest the bond portion of your portfolio

Post by Lou354 » Tue May 30, 2017 7:27 am

I use total bond index and I-bonds, as much to expand tax-advantaged space as for the inflation protection. I agree with the other replies that said it's more of an issue as you get closer to retirement. But with I-bonds you have to start sooner because of the annual purchase limits.

peppers
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Re: how do you invest the bond portion of your portfolio

Post by peppers » Tue May 30, 2017 7:53 am

We use an investment grade bond fund that seeks to match the Barclays Capital US Government/Credit Bond Index and a capital preservation and income fund that invests in stable value contracts.
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birdog
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Re: how do you invest the bond portion of your portfolio

Post by birdog » Tue May 30, 2017 8:43 am

I'm 80/20. I decided to go with active management for half of my bond portfolio. I'm 10% FBND (Fidelity Total Bond Fund (it's an actively managed ETF), 7% VCIT (Vanguard Corporate Intermediate Index) and 3% VTEB (Vanguard Muni Index). FBND and VCIT fill up my SEP-IRA so the VTEB is simply bond spill-over in my taxable account to get to my desired allocation of 20% bonds. My marginal tax rate is 39.6% so I don't mind having the tax-free muni fund but as my SEP-IRA grows and allows me get to 20% in that account I'll phase out of VTEB in the taxable account. I went with the intermediate corporate bond fund (VCIT) over the short term fund in a reach for yield. Not sure if that's the best plan or not. Also, FBND just looked better to me than BND or AGG and while I index all of my equity funds (VTI and VEU) I believe a case can be made for active management in bonds. I'm still trying to figure this bond thing out as well so by no means do I think I have the answer. I generally agree with Livesoft's philosophy (see his previous post) on bonds.
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dratkinson
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Re: how do you invest the bond portion of your portfolio

Post by dratkinson » Tue May 30, 2017 1:19 pm

Then. Use to own all the right stuff: IT treasury and inflation-protected securities in tax-advantaged; CDs and savings bonds in taxable. Eventually learned (after ~5yrs) the safe low yields and additional management requirements bored me to tears.

Now. Only own munis in taxable: IT national, LT national, IT single-state. Much more content. Savings my tax-advantaged space for equities.



Suggest reading some of the recommended bond books (search Wiki for "books"). Give the recommended approaches (multiple authors in agreement) a fair shot; and tweak your holdings until satisfied. Expect it to require a few years to hit upon what works best for you.
Last edited by dratkinson on Wed May 31, 2017 6:13 pm, edited 1 time in total.
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Dave55
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Re: how do you invest the bond portion of your portfolio

Post by Dave55 » Tue May 30, 2017 1:29 pm

Taxable account: Vanguard Int Tax Exempt - VWIUX
IRA: Vanguard Total Bond VBTLX and Vanguard Intermediate Investment Grade VFIDX

Dave

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BolderBoy
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Re: how do you invest the bond portion of your portfolio

Post by BolderBoy » Tue May 30, 2017 1:32 pm

livesoft wrote:I think the folks who own TIPS bought them when they were a good deal decades ago. I don't see much call to buy them now.
I wonder what grok, CFA, thinks about TIPS now? Remember when he had his 11 (?) point manifesto that included owning TIPS?
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Tyler Aspect
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Re: how do you invest the bond portion of your portfolio

Post by Tyler Aspect » Tue May 30, 2017 2:03 pm

My current asset allocation is 56% stock / 41% bond / 3% cash.

Bond allocation is:
30% GNMA
10% short-term Treasury
25% long-term Treasury
25% CD
10% TIPS

I am roughly following the outline of the total bond market, but with safer substitutes in certain places.
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

honduranhurricane
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Re: how do you invest the bond portion of your portfolio

Post by honduranhurricane » Tue May 30, 2017 2:09 pm

I have allocations to Tips and cash (consider it part of my bond allocation) but the bulk of my bond allocation to a loan fund.

Grt2bOutdoors
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Re: how do you invest the bond portion of your portfolio

Post by Grt2bOutdoors » Tue May 30, 2017 2:10 pm

BolderBoy wrote:
livesoft wrote:I think the folks who own TIPS bought them when they were a good deal decades ago. I don't see much call to buy them now.
I wonder what grok, CFA, thinks about TIPS now? Remember when he had his 11 (?) point manifesto that included owning TIPS?
https://www.bogleheads.org/wiki/Grok%27s_tips Now up to 15 tips and a new addition on creating a Liability Matching Portfolio (LMP).

To answer OP's question - A mix of Total Bond Market, Intermediate/Limited Tax Exempt, I and EE bonds. Still mulling it over if it is worth it to hold LT Tips in taxable (buy at auction and hold to maturity). Not sure, I want to hold a 30 year bond.
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Phineas J. Whoopee
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Re: how do you invest the bond portion of your portfolio

Post by Phineas J. Whoopee » Tue May 30, 2017 5:50 pm

Here's how I answered your TIPS question in a different thread a couple of days ago.
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