What funds to use for my 401k bond investments?

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kaesler
Posts: 243
Joined: Mon Mar 12, 2007 4:53 pm
Location: Boston, MA

What funds to use for my 401k bond investments?

Post by kaesler »

Thanks to advice here I have almost finalized my asset allocation. Now it is time to specify my bond investments within my 401k.

There are a dizzying array of bond funds available to me from Fidelity, Vanguard and Pimco among others. Just narrowing down to Vanguard short and intermediate Admiral funds I have these available:

Intermediate Govt:
VAIPX (Vanguard Inflation Protected Adm)
VFIUX (Vanguard Intermediate Gov Adm)

Intermediate:
VBILX (Vanguard Int. Bond Idx Adm)
VFIDX (Vanguard Inv. Grade Adm)

Short Govt:
VSGDX (Vanguard Short Govt Adm)
VFIRX (Vanguard Short Treasury Adm)

Short:
VBIRX (Vanguard Short Bond Idx Adm)
VFSUX (Vanguard Short Inv Grd Adm)

Any recommendations about how to place my bond money? I have 12+ years to go before retiring so I won't be needing this money for actual income any time soon.
Laura
Posts: 7975
Joined: Mon Feb 19, 2007 6:40 pm

Bond choices

Post by Laura »

I would go with a 50/50 split of:

VAIPX (Vanguard Inflation Protected Adm)
VFIUX (Vanguard Intermediate Gov Adm)

Laura
The views presented are my own and not necessarily those of the Department of State or the U.S. Government.
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Taylor Larimore
Posts: 32842
Joined: Tue Feb 27, 2007 7:09 pm
Location: Miami FL

Bond funds?

Post by Taylor Larimore »

Hi Kaesler:
Laura wrote:
I would go with a 50/50 split of:

VAIPX (Vanguard Inflation Protected Adm)
VFIUX (Vanguard Intermediate Gov Adm)
I agree that Laura's suggested bond combo will be hard to beat. To get an idea of how these funds work together, let's look at prior returns beginning with the first full year of TIPS. I've also added Total Bond Market and CPI-U inflation data:

YEAR...VAIPX...VFIUX...TBM...INFLATION
200l......7.61%...7.6%....8.43%...2.8%
2002..16.61%..14.3%...8.26%...1.6%
2003....8.00%....2.5%...3.97%...2.3%
2004....8.27%....3.5%...4.24%...2.7%
2005....2.59%....2.5%...2.40%...3.4%
2006....1.79%....3.3%...4.90%...3.2%

I recommended a similar bond comb several years ago. Here is a link:

http://socialize.morningstar.com/NewSoc ... nvSeq=9792

Best wishes.
Taylor
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