New 401k, looking for a bond fund -- use Vanguard Target Retirement?

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WL2034
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New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by WL2034 » Mon Jul 17, 2017 11:45 am

Hi all, my spouse is starting a new job with a 401k administrated by Ascensus. We are looking for a bond fund to use and these are the options:

PIMCO Total Return Fund Institutional Class PTTRX - 0.46%
Prudential High-Yield Fund Class Q PHYQX - 0.46%
Templeton Global Bond Fund Advisor Class TGBAX - 0.64%
Vanguard Inflation-Protected Securities Fund Investor Shares VIPSX - 0.20%

-or-

Vanguard Target Retirement Income Fund Investor Shares VTINX - 0.14%, which is [37.3% Total Bond Market II Index Fund, 18.0% TSM, 16.8% Short-term Inflation-protected securities index fund, 15.9% Total international bond index fund, 12.0% Total international stock index] so 70% bond.

Between the VIPSX and VTINX, is one a clear cut favorite to use as a bond fund (assuming the higher expense funds don't offer any major advantages)?

Chuck
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by Chuck » Mon Jul 17, 2017 11:53 am

The TIPS fund and the Target Retirement income fund are both good. You might consider going 50/50.

I have columns on my asset allocation spreadsheet where I can put the % bond, % stock of a fund so that my overall asset allocation comes out correct. So the 30% of the target fund in stocks just causes me to reduce the amount of stock somewhere else in the portfolio.

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flamesabers
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by flamesabers » Mon Jul 17, 2017 11:54 am

I think it really depends on what your preferences are. Using VTINX may complicate your overall asset allocation. On the other hand, if you use VIPSX, you won't have a diversity of bonds like you would with VTINX.

mega317
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by mega317 » Mon Jul 17, 2017 12:20 pm

I think the answer depends a lot on the context. What fraction of your overall portfolio will this be? Do you have enough space and options for bonds elsewhere that it doesn't matter? Are you close to retirement?

Unless you want all of your bonds in TIPS for a specific reason, I would use the target fund and adjust stock percentages elsewhere, assuming you have enough space to do so. I am not a bond expert; my gestalt is that stocks and wages are generally sufficient inflation protection while working.

WL2034
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by WL2034 » Mon Jul 17, 2017 12:36 pm

mega317 wrote:I think the answer depends a lot on the context. What fraction of your overall portfolio will this be? Do you have enough space and options for bonds elsewhere that it doesn't matter? Are you close to retirement?

Unless you want all of your bonds in TIPS for a specific reason, I would use the target fund and adjust stock percentages elsewhere, assuming you have enough space to do so. I am not a bond expert; my gestalt is that stocks and wages are generally sufficient inflation protection while working.
This will be a small portion of the portfolio for now, but we may rollover her previous 401k (rather than to IRA -- to allow backdoor Roth), in which case it would be about 25% of total portfolio currently. The issue is that taxable investments are becoming a larger portion of our portfolio, and those are totally in Vanguard Total Stock and Total International. So we need to increase the amount of bonds in tax-deferred accounts.

rkhusky
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by rkhusky » Mon Jul 17, 2017 1:38 pm

I would go with the TR fund, if you don't need a pure bond fund.

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ruralavalon
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by ruralavalon » Mon Jul 17, 2017 1:56 pm

In my opinion PIMCO Total Return (PTTRX) offered in her 401k is a good choice for a bond fund. Although actively managed it is a well diversified intermediate-term bond fund with a moderate expense ratio. Nisiprius post in forum discussion "Bond Fund for Three-Fund Portfolio", Total Bond Market vs PTTRX?.

In my opinion a TIPS fund is not a good choice unless you are retired or very close to retirement age.
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mega317
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by mega317 » Mon Jul 17, 2017 2:30 pm

What are the bond options in her old 401k? Can you leave that money and not roll it over?

And yes, PIMCO is good too. I wouldn't hesitate to use that despite my slight preference for the target fund in this situation.

WL2034
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Re: New 401k, looking for a bond fund -- use Vanguard Target Retirement?

Post by WL2034 » Mon Jul 17, 2017 2:51 pm

Interesting, I read that the PIMCO Total return fund invests in derivatives. I don't know much about it other than it seems riskier. Thanks for the info, I will do some research about that fund.

It would be possible to leave the funds in her old 401k but the bond options are not as good as the Target retirement fund.

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