75% equities, 15% fixed income, 10% alternatives
equities regions split at market weight (domestic/intl developed/emerging)
TSP: 63% of portfolio (G Fund, S Fund, I Fund)
IRA: 33% of portfolio, all AQR multifactor funds (QSMLX, QICLX, QEELX, QSPIX)
taxable: 4% of portfolio, prepaid cards earning 5%+
My fixed income is earning 2.5% with zero volatility. 25% is in prepaid cards earning 5%+, but this isn't scalable any further. The remaining 75% is in the G Fund, which earns 1.75% this month.
The new taxable brokerage account will represent over 10% of my portfolio. I should be able to add it to it further in the future. I was originally planning to throw the whole thing into Vanguard Total World Stock ETF (VT) and not bother with tilting in taxable, but then I remembered that I have long considered extending the duration of my fixed income holdings. I never did it before because it would have taken away from the tilts in my IRA.
Because my prepaid cards holdings are not scalable, the decision at the margin is between continuing to use only the G Fund, or extending duration with something like one of these options.
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Target Duration = 5.0 years Duration Yield % of FI in ETF Blended Yield Vanguard Extended Duration Treasury ETF (EDV) 24.3 2.20% 21% 1.84% Vanguard Long-Term Treasury ETF (VGLT) 17.9 2.09% 28% 1.84% iShares 20+ Year Treasury Bond ETF (TLT) 18.0 2.02% 28% 1.83% iShares 10-20 Year Treasury Bond ETF (TLH) 12.4 1.74% 40% 1.75% G Fund 0.0 1.75%
The G Fund yield should rise to ~1.875% at the start of November, so a comparison to today's yields would be a 35 bp advantage for the G Fund/ETF blend over actual 5-year Treasuries, which earn 1.58% today.
To head off the people who will recommend the Three Fund Portfolio, I will not use something like the F Fund or Vanguard Total Bond Market when they have large allocations to short- and intermediate-term Treasuries that earn less than the 1.75% of the G Fund.
My marginal federal income tax rate is 22% and I do not pay state income tax.
Thoughts on extending duration from 0 to 5 years? Is it worth adding 5 years (or any number of years) of duration for potential correlation or "flight to quality" benefits in exchange for only 10 bp in higher expected return?