VG Short & Intermediate Corp Bond Fund

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Duffydog1
Posts: 66
Joined: Sat Dec 03, 2016 1:42 pm

VG Short & Intermediate Corp Bond Fund

Post by Duffydog1 » Fri Jul 27, 2018 7:29 am

Iam a fixed income investor and would appreciate any comments on either of VG short or intermediate term bond funds . I realize interest rates are going and the funds are losing value but we are older and looking for income. Our asset allocation is 35 equities, 5% cash and the remainder in bonds. By bonds I mean CD's and corporate bond funds.

livesoft
Posts: 69598
Joined: Thu Mar 01, 2007 8:00 pm

Re: VG Short & Intermediate Corp Bond Fund

Post by livesoft » Fri Jul 27, 2018 7:45 am

We own lots of short-term corporate bond index fund in the form of VCSH and SPSB. I like them because of behavioral finance issues. When compared to Total US Bond Index (see chart below) one is trading credit risk with duration risk. There is no free lunch.

So while I have some of each I rebalance between the short-term corporate and total US Bond based on the chart. That is I sell short-term corporate bond high when it is up more than total bond and buy total bond. When total bond is up high, then I sell it and buy some short-term corporate bond.

Image

I find it relatively important to use ETFs because the intraday trading is worth about 0.5% to 1% extra return every year. Otherwise, total US bond index and short-term corporate bond index perform about the same over time as shown in this 3-year chart:

Image

And even if you get this market timing wrong, you won't hurt yourself by more than 0.5% to 1% a year of assets devoted to this scheme.

Finally, I don't invest for income. I invest for total return. If I need money to pay expenses, then I sell shares if I don't have enough monthly/quarterly income showing up.
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OffGridder
Posts: 51
Joined: Thu Jul 23, 2015 8:03 am
Location: Eastern WA.

Re: VG Short & Intermediate Corp Bond Fund

Post by OffGridder » Fri Jul 27, 2018 9:50 am

livesoft wrote:
Fri Jul 27, 2018 7:45 am
We own lots of short-term corporate bond index fund in the form of VCSH and SPSB. I like them because of behavioral finance issues. When compared to Total US Bond Index (see chart below) one is trading credit risk with duration risk. There is no free lunch.

So while I have some of each I rebalance between the short-term corporate and total US Bond based on the chart. That is I sell short-term corporate bond high when it is up more than total bond and buy total bond. When total bond is up high, then I sell it and buy some short-term corporate bond.

Image

I find it relatively important to use ETFs because the intraday trading is worth about 0.5% to 1% extra return every year. Otherwise, total US bond index and short-term corporate bond index perform about the same over time as shown in this 3-year chart:

Image

And even if you get this market timing wrong, you won't hurt yourself by more than 0.5% to 1% a year of assets devoted to this scheme.

Finally, I don't invest for income. I invest for total return. If I need money to pay expenses, then I sell shares if I don't have enough monthly/quarterly income showing up.
Livesoft,
I have seen your posts on your bond timing scheme. Do you move 100% of your bond allocation between TBM and ST Corp based on the chart, or just increase/decrease your allocation percentage? Just curious. I am 70/30 TBM/ST Corp for my bond allocation.
Thanks
"Goodness is the only investment that never fails." | H.D. Thoreau

livesoft
Posts: 69598
Joined: Thu Mar 01, 2007 8:00 pm

Re: VG Short & Intermediate Corp Bond Fund

Post by livesoft » Fri Jul 27, 2018 10:11 am

OffGridder wrote:
Fri Jul 27, 2018 9:50 am
I have seen your posts on your bond timing scheme. Do you move 100% of your bond allocation between TBM and ST Corp based on the chart, or just increase/decrease your allocation percentage? Just curious. I am 70/30 TBM/ST Corp for my bond allocation.
Thanks
I do not move 100%. One has to move significant amount though or it is not worth the effort. Significant is probably at least a 6-figure amount which could be say 10% of fixed income portion of the portfolio.

So with your split, what do YOU do?
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OffGridder
Posts: 51
Joined: Thu Jul 23, 2015 8:03 am
Location: Eastern WA.

Re: VG Short & Intermediate Corp Bond Fund

Post by OffGridder » Fri Jul 27, 2018 11:34 am

livesoft wrote:
Fri Jul 27, 2018 10:11 am
OffGridder wrote:
Fri Jul 27, 2018 9:50 am
I have seen your posts on your bond timing scheme. Do you move 100% of your bond allocation between TBM and ST Corp based on the chart, or just increase/decrease your allocation percentage? Just curious. I am 70/30 TBM/ST Corp for my bond allocation.
Thanks
I do not move 100%. One has to move significant amount though or it is not worth the effort. Significant is probably at least a 6-figure amount which could be say 10% of fixed income portion of the portfolio.

So with your split, what do YOU do?
Around 10%. I just play at the edges. I probably miss out on half the signals, because I spend so much time in the mountains off grid.
"Goodness is the only investment that never fails." | H.D. Thoreau

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