Adding some bonds

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JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

Adding some bonds

Post by JasonA1987 »

I’m hoping this is a simple question! I have an employer provided retirement account, my wife has the same, then we have an Roth IRA with Vanguard. Up till now, I we have 100% in stocks - All low ER vanguard funds that match the stock market as best we can. The IRA has a small amount of VGTSX and nothing else.

With two toddlers at home and a small amount of debt, we are a while from being able to max out either the employers plans or the Roth IRA. We currently only add $50/mo to the Roth and about 17% to the employer accounts.

My question: Would one of these bond funds be a reasonable option to start adding bonds?

https://docs.retirementpartner.com/ioag ... 2_IOAG.pdf

Or should I plan on using the Roth to buy VBTLX once I can get over the $3,000 min?
bloom2708
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Location: Fargo, ND

Re: Adding some bonds

Post by bloom2708 »

I would put your bond allocation in your work retirement plan.

What are the bond options and the expense ratios? If your plan has Total US Bond and the expense ratio is reasonable, that is all you need.

You don't state your ages, but 10%, 15% or 20% would all be fine starting points for your bond allocation.

Leave Roth for stock index funds and Taxable for tax efficient stock index funds.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
Topic Author
JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

Re: Adding some bonds

Post by JasonA1987 »

The employer info sheet is the link up there with the bond options and ER.

I’m 30 and my wife is 26. I know it’s arbitrary, but we are about to break $100,000 in retirement and a net worth of almost $350K (Great housing market luck.)
bloom2708
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Re: Adding some bonds

Post by bloom2708 »

I would use that top CCOERA Income Fund (Mostly bonds) or the Metropolitan West Bond fund (Likely the best option)

Not the lowest expense ratios, but well within reasonable. I think you could ride 20% bonds (of your total portfolio) until it feels like you need more bonds.

I like to stay in the Age-10 to Age-15 range. The amount of bonds you hold is very personal. Take as much risk as you need to take at every step in the journey.
Last edited by bloom2708 on Tue Jul 02, 2019 7:44 pm, edited 1 time in total.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
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ruralavalon
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Location: Illinois

Re: Adding some bonds

Post by ruralavalon »

JasonA1987 wrote: Tue Jul 02, 2019 11:25 am I’m hoping this is a simple question! I have an employer provided retirement account, my wife has the same, then we have an Roth IRA with Vanguard. Up till now, I we have 100% in stocks - All low ER vanguard funds that match the stock market as best we can. The IRA has a small amount of VGTSX and nothing else.

With two toddlers at home and a small amount of debt, we are a while from being able to max out either the employers plans or the Roth IRA. We currently only add $50/mo to the Roth and about 17% to the employer accounts.

My question: Would one of these bond funds be a reasonable option to start adding bonds?

https://docs.retirementpartner.com/ioag ... 2_IOAG.pdf

Or should I plan on using the Roth to buy VBTLX once I can get over the $3,000 min?
Metropolitan West Total Return Institutional (MWTIX) ER 0.45% is a good choice in your 401k. Although actively managed, it is a reasonable option to start adding bonds.

According to Morningstar Metropolitan West Total Return Institutional (MWTIX) is an intermediate-term (average effective duration = 5.91 years), investment-grade (average credit quality = BBB) bond fund, is diversified (26% in government bonds, 24% in corporate bonds, and 42% in securitized instruments), and has a below average expense ratio.

The CCOERA Income Fund is not a bond fund, it is a balanced fund including both bonds and stocks.

At ages 26 and 30 I suggest about 20% In bonds. This is expected to substantially reduce portfolio volatility (risk), with only a relatively modest decrease in portfolio return. Graph, "An Efficient Frontier: the power of diversification". Please see:
1) Wiki article Bogleheads® investment philosophy, part 3 "Never bear too much or too little risk"; and
2) Wiki article, "Asset allocation".

Asset allocation is a very personal decision. You must decide on an allocation that is comfortable for you based on your own ability, willingness and need to take risk.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
ericcohen
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Joined: Wed Dec 26, 2018 9:34 pm

Re: Adding some bonds

Post by ericcohen »

Your 30 and your wife is 26? I don't see any reason for you to be in bonds, especially as they are at historically high prices. :sharebeer
Topic Author
JasonA1987
Posts: 25
Joined: Tue Dec 06, 2016 5:56 pm

Re: Adding some bonds

Post by JasonA1987 »

Thank you all! I appreciate your time. I have been lurking and reading for a long time and felt like I’m missing something not adding bonds in. Ericcohen, I’m not going to do anything crazy; just maybe set 10-20% of future contributions at the moment and let it slowly work it’s way up. :D
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ruralavalon
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Re: Adding some bonds

Post by ruralavalon »

ericcohen wrote: Tue Jul 02, 2019 8:50 pm Your 30 and your wife is 26? I don't see any reason for you to be in bonds, especially as they are at historically high prices. :sharebeer
Historically high prices occur quite often.

Market timing is almost always a bad idea. Prices might be higher next week, next month and next year.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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welderwannabe
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Re: Adding some bonds

Post by welderwannabe »

ericcohen wrote: Tue Jul 02, 2019 8:50 pm Your 30 and your wife is 26? I don't see any reason for you to be in bonds, especially as they are at historically high prices. :sharebeer
Everything is at historically high prices.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
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