Still using total bond market?

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DesertInvestor
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Still using total bond market?

Post by DesertInvestor » Tue Apr 14, 2020 1:07 pm

Hi,

I'm wondering with the recent drop in rates, if the community is still using total bond market for all bond holdings vs. short term bonds or some combo of intermediates/short term/TIPS? Asking for myself (40 and still employed) as well as parents account (near retirement but still working).

I don't have any low cost options in my tax deferred 401k outside of vanguard total bond market, but would shift to cash/short term bonds in taxable and more stock in 401k as alternative. Currently 401k is all bonds for tax protected yield.

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Re: Still using total bond market?

Post by livesoft » Tue Apr 14, 2020 1:10 pm

Still total bond here. I used to have some short-term corporate bond index maybe a year ago before going all total bond index.

However, I still have some TIAA traditional annuity and I sold some TIAA Real Estate and bought the available bond fund QCBMPX available in my 403(b). The latter may be different from a total bond index fund because it is up about 6% in the past couple of weeks since I bought it (I'm not complaining).
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Re: Still using total bond market?

Post by ochotona » Tue Apr 14, 2020 1:12 pm

I transitioned to Treasuries because the corporates in total bond market funds have increased risk of default. After the recession, I can move back. I don't depend on the coupon.
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Re: Still using total bond market?

Post by oldcomputerguy » Tue Apr 14, 2020 1:13 pm

DW and I are both retired, myself since 2017 and her since last November. I have enough in short-term Treasuries to bridge us to time to start Social Security (next year for me, five more years for her). All the rest of our fixed-income allocation is in total bond.
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Re: Still using total bond market?

Post by Nowizard » Tue Apr 14, 2020 1:20 pm

We use Total Bond primarily with about 10% of our bond holdings being in Short Term Bond.

Tim

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Munir
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Re: Still using total bond market?

Post by Munir » Tue Apr 14, 2020 1:29 pm

I am a retiree in distribution phase and have just moved from Total Bond Market to Intermediate Treasury Index (VSIGX).

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Re: Still using total bond market?

Post by GaryA505 » Tue Apr 14, 2020 1:31 pm

I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.

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Re: Still using total bond market?

Post by SimpleMan68 » Tue Apr 14, 2020 1:33 pm

GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
What would you suggest in its place?
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Re: Still using total bond market?

Post by GaryA505 » Tue Apr 14, 2020 1:36 pm

SimpleMan68 wrote:
Tue Apr 14, 2020 1:33 pm
GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
What would you suggest in its place?
I don't know. I'm waiting for Boglehead V2.0 for guidance. :D

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Re: Still using total bond market?

Post by stocknoob4111 » Tue Apr 14, 2020 1:43 pm

GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
With a broad statement like that you need to give your reasons why you think it's obsolete, otherwise the statement by itself does not mean much.
Last edited by stocknoob4111 on Tue Apr 14, 2020 1:43 pm, edited 1 time in total.

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Re: Still using total bond market?

Post by MadHungarian » Tue Apr 14, 2020 1:43 pm

I still am, for most of my bonds, where the duration is appropriate for my situation.
The thing about passive indexing, rather than market timing, is that by definition you're always going to be holding some market sectors that are out-of-favor and apparently over-valued at the moment. One of the reasons we do this is because it's hard to accurately predict which sectors will really turn out to have been over-valued and which sectors will actually turn out to have had the behavior we wanted. The future always seems to be so unpredictable!

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Re: Still using total bond market?

Post by GaryA505 » Tue Apr 14, 2020 1:44 pm

stocknoob4111 wrote:
Tue Apr 14, 2020 1:43 pm
GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
With a broad statement like that you need to give your reasons why you think it's obsolete, otherwise the statement by itself does not mean much.
Because interest rates are controlled by the government, and they intend to keep them near 0.

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Re: Still using total bond market?

Post by Alex GR » Tue Apr 14, 2020 1:48 pm

Never had BND, I use BIV for the bond portion. Not sure if this was the right decision or not (opinions vary) but I've held BIV since I formed the portfolio.
Looking for suggestions on what else I could add in light of recent events. Treasuries? TIPS? Perhaps just CDs/CD ladder? Tnx

nix4me
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Re: Still using total bond market?

Post by nix4me » Tue Apr 14, 2020 1:56 pm

I agree with poster above - bonds appear obsolete now that interest rates are 0.

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Re: Still using total bond market?

Post by nisiprius » Tue Apr 14, 2020 2:29 pm

1) I am still using total bond market (for about half my fixed income; Vanguard Inflation-Protected Securities Fund for the other half).

2) The best asset allocation depends on the relative characteristics of the assets in the portfolio. The absolute return of bonds does not tell you anything. If the expected returns of stocks, bonds, and the riskless asset all drop by the same amount, the best asset allocation remains unchanged.

3) Very few people in the investment industry make money from investors who stay the course in a simple portfolio of a few index funds. The money is always to be made by inducing people to change. Almost all of the suggestions you see that originate in the industry urge change, and try to argue that every change in the market is a reason for changing your investments. Make allowance for that bias.

4) Low return is disappointing, but the market never promised me anything. I doubt that it is possible to increase return much without increasing risk. I simply don't understand why uncertain times and a financial crisis would be expected to increase peoples' risk tolerance; if anything, I would expect it to decrease it.

5) If the interest rates on the most competitive bank savings accounts were to hold solid at the 1.50% my best account is paying now, and if the SEC return on Total Bond were to dive well below 1.50% and show every sign of staying there, then, yes, I might consider exchanging Total Bond for a savings account. I don't think that's likely--all the banks seem to be in a race to cut interest rates.
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Re: Still using total bond market?

Post by nisiprius » Tue Apr 14, 2020 2:32 pm

GaryA505 wrote:
Tue Apr 14, 2020 1:44 pm
...Because interest rates are controlled by the government, and they intend to keep them near 0...
Only the overnight rate is "set" by the government, and as Phineas G. Whoopee keeps explaining to me, even that isn't really set--it's a target, which is why it is quoted as "0-0.25%."

The interest rates most important to me the ones that apply to the 8.3-year average maturity of Total Bond, i.e. the 7- and 10-year rates, and those are set by the market. Yes, the government exerts influence, but it doesn't control them--it simply participates in the market along with everyone else, even if it is something of an 800-pound gorilla.
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Re: Still using total bond market?

Post by ruralavalon » Tue Apr 14, 2020 2:39 pm

Alex GR wrote:
Tue Apr 14, 2020 1:48 pm
Never had BND, I use BIV for the bond portion. Not sure if this was the right decision or not (opinions vary) but I've held BIV since I formed the portfolio.
Looking for suggestions on what else I could add in light of recent events. Treasuries? TIPS? Perhaps just CDs/CD ladder? Tnx
Like you I use only Vanguard Intermediate-term Bond Index Fund, but the regular fund share class (VBILX).

I think it's unwise to shift funds based on "recent events". I will stay the course.

With 20/20 hindsight it would have been good to have intermediate-term or long-term Treasuries, but that ship has already sailed.
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Re: Still using total bond market?

Post by ruralavalon » Tue Apr 14, 2020 2:43 pm

nix4me wrote:
Tue Apr 14, 2020 1:56 pm
I agree with poster above - bonds appear obsolete now that interest rates are 0.
Don't make the mistake of basing investment decisions on current events. U.S. bonds are often top performers, it changes every year.

pdf, "Callan Table of Periodic Returns".
Last edited by ruralavalon on Tue Apr 14, 2020 2:50 pm, edited 1 time in total.
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Re: Still using total bond market?

Post by Munir » Tue Apr 14, 2020 2:49 pm

Isn't the fixed income portion of a portfolio supposed to be the stable ballast i.e. less volatile? If VBTLX shows up as more volatile than what investors expected (the current 2020 drop), they will turn to treasuries which have the same or lower total return but don't fluctuate as much as VBTLX which has dropped much more in 2020 that it did in 2008.

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Re: Still using total bond market?

Post by Phineas J. Whoopee » Tue Apr 14, 2020 3:01 pm

Hi DesertInvestor.

With respect to your portfolio as a whole and its behavior, what is the purpose of your fixed income allocation? The answer to that question is the key to answering what you asked.

PJW

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Re: Still using total bond market?

Post by Dominic » Tue Apr 14, 2020 3:09 pm

GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
The anti-TBM crowd seems to be growing over time. First they said you should avoid the MBS due to their call risk, and buy intermediate-term bond index. Then the correlation of corporates with the stock market was called into question and a growing group of people advocated holding CDs or intermediate-term Treasuries. Now I'm seeing a group (who have swayed me, by the way) saying that we should hold at least some long-term Treasuries to benefit from crisis rate drops.

I wouldn't be surprised if the future wisdom is to hold some combination of CDs, high-yield savings, short-term TIPS, and long-term Treasuries. It's an extremely low credit risk barbell.

That said, I don't think that TBM is a bad investment. After all, it's still mostly government-backed, and in most times, it will provide higher returns than a Treasury-only portfolio. I think particularly for investors who aren't, say, 80% or more in equities, that's worth the added risk. I don't think TBM is obsolete, but I don't think that it will be the default bond choice going forward.

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Re: Still using total bond market?

Post by SimpleMan68 » Tue Apr 14, 2020 3:26 pm

Total Bond is comprised of MBS, Corporates and Treasuries, of varying maturities. Would anyone be willing to tell me which particular slice of the total bond market will outperform over the next ten years? :)
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Re: Still using total bond market?

Post by ruralavalon » Tue Apr 14, 2020 3:30 pm

:moneybag
Dominic wrote:
Tue Apr 14, 2020 3:09 pm
GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
The anti-TBM crowd seems to be growing over time. First they said you should avoid the MBS due to their call risk, and buy intermediate-term bond index. Then the correlation of corporates with the stock market was called into question and a growing group of people advocated holding CDs or intermediate-term Treasuries. Now I'm seeing a group (who have swayed me, by the way) saying that we should hold at least some long-term Treasuries to benefit from crisis rate drops.

I wouldn't be surprised if the future wisdom is to hold some combination of CDs, high-yield savings, short-term TIPS, and long-term Treasuries. It's an extremely low credit risk barbell.

That said, I don't think that TBM is a bad investment. After all, it's still mostly government-backed, and in most times, it will provide higher returns than a Treasury-only portfolio. I think particularly for investors who aren't, say, 80% or more in equities, that's worth the added risk. I don't think TBM is obsolete, but I don't think that it will be the default bond choice going forward.
I would be surprised if the future wisdom is as complex as a combination of (1) CDs, (2) high-yield savings, (3) short-term TIPS, and (4) long-term Treasuries.
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Re: Still using total bond market?

Post by dmcmahon » Tue Apr 14, 2020 3:31 pm

I've never been a fan of it, using it only in cases where I had no other choice (529 funds, my deferred comp plan). For the majority of my bond assets I prefer laddered treasuries and CDs. I use TIPS in my 401k/IRA.

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Re: Still using total bond market?

Post by bugleheadd » Tue Apr 14, 2020 3:50 pm

What type of treasuries is a good alternative to BND right now? How much does it yield?

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Re: Still using total bond market?

Post by retiredjg » Tue Apr 14, 2020 4:05 pm

I'm still using Total Bond although it is not my only bond fund. But it wasn't my only bond fund before this mess either. I have not changed my bonds at all.

If that is the best bond fund available in your 401k, I would not go looking for bonds elsewhere...unless you want to buy some I Bonds or CDs in taxable.

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Re: Still using total bond market?

Post by WillRetire » Tue Apr 14, 2020 4:10 pm

Yes, still sticking with total bond in the form of FTBFX, which incidentally, is up YTD thanks in part to rebalancing at the appropriate times. For stability, part of our AA is (and has been) in riskless, i.e. cash and/or securities that cannot go down in value. So, we don't stress much when stock & bond markets go nuts. We're 40/35/25.

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Re: Still using total bond market?

Post by onourway » Tue Apr 14, 2020 4:15 pm

Total Bond returned nearly 10% for calendar year 2019. I can handle a few years of lower returns just fine thanks.

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Re: Still using total bond market?

Post by bdpb » Tue Apr 14, 2020 5:02 pm

SimpleMan68 wrote:
Tue Apr 14, 2020 3:26 pm
Total Bond is comprised of MBS, Corporates and Treasuries, of varying maturities. Would anyone be willing to tell me which particular slice of the total bond market will outperform over the next ten years? :)
If stocks go up over that time then I don't really care which bonds I hold. I expect they'll all probably marginally return the same.

If stocks go down over that time then I expect Treasuries to outperform. That's why I hold Treasuries instead of Total Bond.

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Re: Still using total bond market?

Post by SimpleMan68 » Tue Apr 14, 2020 5:08 pm

bdpb wrote:
Tue Apr 14, 2020 5:02 pm
SimpleMan68 wrote:
Tue Apr 14, 2020 3:26 pm
Total Bond is comprised of MBS, Corporates and Treasuries, of varying maturities. Would anyone be willing to tell me which particular slice of the total bond market will outperform over the next ten years? :)
If stocks go up over that time then I don't really care which bonds I hold. I expect they'll all probably marginally return the same.

If stocks go down over that time then I expect Treasuries to outperform. That's why I hold Treasuries instead of Total Bond.
Stocks are going to under perform over the next ten years?
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Re: Still using total bond market?

Post by Third Son » Tue Apr 14, 2020 5:14 pm

GaryA505 wrote:
Tue Apr 14, 2020 1:31 pm
I think Total Bond is obsolete. I suspect the Boglehead doctine will reflect this soon.
This statement lacks value unless there is something to fill up the open ended comment with something substantive. My situation dictates that I have reached the end of my risk taking journey. I could put all of our wealth in a cookie jar and live off of that for the the rest of our days. I choose to keep a 40/60 portfolio and FXNAX (Fidelity Total Bond) does fine for our circumstances. It also earns more than the cookie jar scenario. To just flatly say it is a poor vehicle is just wrong.
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Re: Still using total bond market?

Post by friar1610 » Tue Apr 14, 2020 5:47 pm

I exchanged a combination of Total Bond Mkt Index and ST Bond Index in my IRA for a slice of ST Treasury Index. Totally eliminated the ST Bond Index; kept most - but not all - of the Total Bond Mkt Index. Reason: to give myself a few years worth of future RMDs in a highly liquid but very low volatility fund. I might consider an intermediate-term alternative to TBM but see a reason to do so immediately.
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Re: Still using total bond market?

Post by tetractys » Tue Apr 14, 2020 5:54 pm

DesertInvestor wrote:
Tue Apr 14, 2020 1:07 pm
I'm wondering with the recent drop in rates, if the community is still using total bond market for all bond holdings vs. short term bonds or some combo of intermediates/short term/TIPS?
I'm sticking with my usual intermediate term bonds VBLIX and TIPs VAIPX. Things are always changing: VAIPX: It's too much trouble to bounce around the latest trend and seldom worth it. 2. VBLIX: Negative convexity is a loser and I don't see the need to invest in a fund designed to contain enough liquidity for Earth's entire population to buy into.
Last edited by tetractys on Tue Apr 14, 2020 5:55 pm, edited 1 time in total.

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Re: Still using total bond market?

Post by bi0hazard » Tue Apr 14, 2020 5:54 pm

Yes, still using my total bond market; it's doing exactly what it's supposed to. Not switching because it's not in vogue this week, day or year. :beer

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Re: Still using total bond market?

Post by Hector » Tue Apr 14, 2020 5:56 pm

I have never used the total bond fund.
I am holding iBond/MM/short term Treasurys/short term CDs/Stable Value fund right now.

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Re: Still using total bond market?

Post by frand » Tue Apr 14, 2020 6:18 pm

I am surprised at those who can invest in TIAA 3% guaranteed, choose to invest in total bond whose yield is less than 2% instead. Are you expecting the rate to drop further?

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Re: Still using total bond market?

Post by retiredjg » Tue Apr 14, 2020 6:33 pm

Because of the way you asked your question, people are giving answers based on what they have available. Some are ignoring what you have available in your tax-deferred account.

You need to take that into consideration when you read the answers.

Your question is not about whether TBM is a good investment, but whether it is the best choice you have. Keep that in mind.

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Re: Still using total bond market?

Post by retired@50 » Tue Apr 14, 2020 7:09 pm

I still use Total Bond Market Index for most of my bond holdings. The other portion (about 20% - 25%) is in the Total International Bond Index. Since I plan on being a bond investor for the next 30 years or more, I'm not one to tinker.

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Re: Still using total bond market?

Post by Sandtrap » Tue Apr 14, 2020 8:33 pm

Total Bond + Investment Grade Corporate + Intermediate Term Treasuries

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Re: Still using total bond market?

Post by hirlaw » Tue Apr 14, 2020 8:58 pm

For me it is a mixture of: Total Bond, individual CD's (both secondary and direct), some individual Treasuries, individual Corp. bonds (Walmart and Berkshire Hathaway), some Muni Bond Funds, some individual muni's, and short term TIP fund.

As an aside, has anyone considered "iShares Aaa - A Rated Corporate Bond ETF" (QLTA)? It omits BBB bonds. I have been looking at it lately. It may help alleviate the "fallen angel" syndrome, where all investment grade bond funds are forced to sell a bond that has been downgraded to junk. Was wondering what you guys think.

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Re: Still using total bond market?

Post by nisiprius » Tue Apr 14, 2020 9:12 pm

Dominic wrote:
Tue Apr 14, 2020 3:09 pm
...Now I'm seeing a group (who have swayed me, by the way) saying that we should hold at least some long-term Treasuries to benefit from crisis rate drops...
But Total Bond Market does include some long-term Treasuries. In fact it is about 1/7th long-term bonds, though I'm not sure what portion of those are long-term Treasurys.

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Re: Still using total bond market?

Post by KyleAAA » Tue Apr 14, 2020 9:17 pm

I use long term treasuries and TIPS.

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Re: Still using total bond market?

Post by siriusblack » Tue Apr 14, 2020 9:23 pm

Dominic wrote:
Tue Apr 14, 2020 3:09 pm
I wouldn't be surprised if the future wisdom is to hold some combination of CDs, high-yield savings, short-term TIPS, and long-term Treasuries. It's an extremely low credit risk barbell.
Throw in some gold, and you have something approaching the "permanent portfolio". 25% gold, 25% cash (or short-term TIPS), 25% long-term treasuries, 25% stocks.

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Re: Still using total bond market?

Post by UpperNwGuy » Tue Apr 14, 2020 9:27 pm

There seem to be a lot of posts recently about which bond funds to use. It doesn't make a whole lot of difference. All of the bond funds mentioned in the previous comments will perform adequately in nearly any investor's portfolio. Just follow the usual two rules: get the right duration for your needs, and choose funds with bonds of high credit quality.

I suppose it is better that folk tinker with the bond side of their portfolios than they engage in market timing on the stock side of their portfolio.

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Re: Still using total bond market?

Post by nage234 » Tue Apr 14, 2020 9:29 pm

Does long term TIPS still make sense at close to zero yields?

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Re: Still using total bond market?

Post by mlcolorado » Tue Apr 14, 2020 11:12 pm

Based on "Keep it Simple," we have Total Bond (VBTLX) in our rollover IRAs, and High-Yield Tax-Exempt (VWALX) in our taxable accounts. We are about 50:50 Stocks:Bonds overall. Current split is about 64% of bond value in IRA Total Bond, and 36% in taxable High-Yield Tax-Exempt. There have been a series of "warnings" over the last 6 years (since we moved every thing to Vanguard in mid 2014 and set up these bond allocations) concerning interest rate risk, corporate exposure vs "whatever" and it has all just continued to be "good enough / safe enough" so far, including 2020's recent events. Has been easy to set it and forget it, and enjoy the monthly income now that we are retired. I believe that this is not "The Best Possible," but it seems to be OK so far.

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Re: Still using total bond market?

Post by 50/50 » Wed Apr 15, 2020 8:24 am

Yes, still using Total Bond + CD ladder. No changes planned.

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Re: Still using total bond market?

Post by sophienose » Wed Apr 15, 2020 11:38 am

frand wrote:
Tue Apr 14, 2020 6:18 pm
I am surprised at those who can invest in TIAA 3% guaranteed, choose to invest in total bond whose yield is less than 2% instead. Are you expecting the rate to drop further?
I shifted out of TIAA Bond Fund into TIAA Trad last month (provides most of the 'ballast' for a 50-50 allocation, and with some 'old' Trad vintages some of my trad accounts are guaranteed 3% but paying close to 4%), figuring that bonds will either stay at this level, or over the long haul perhaps rates increase and the value declines.
As someone on this site put it, it's 'almost' a no-brainer, but that no-brainer has the following two points to beware however:
1. institutional TIAA trad still paying 3%+ BUT individual accounts with TIAA are paying 1%. Which may make a decision to stay in total bond market seem more realistic
2. TIAA trad products have the long lock-in with access across 10 years. For me that fits well - retirement in about 10 years, but the lock-in can stymie any reallocation plans

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Re: Still using total bond market?

Post by Jack FFR1846 » Wed Apr 15, 2020 12:17 pm

50/50 stock and Bond for about $2.6MM now.

$918k total bond
$382k US Savings Bonds (present value)
Bogle: Smart Beta is stupid

3funder
Posts: 1405
Joined: Sun Oct 15, 2017 9:35 pm

Re: Still using total bond market?

Post by 3funder » Wed Apr 15, 2020 2:29 pm

Yes, and I'm perfectly content.

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