Bond Component of 3-fund portfolio

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pfb3326
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Joined: Wed Dec 26, 2007 8:19 pm

Bond Component of 3-fund portfolio

Post by pfb3326 » Sat May 23, 2020 9:06 am

When constructing a 3-fund portfolio to be held long term: VTSAX (Total Stock Market Index), VTIAX (Total International Stock Index) and a Bond component, which is better for the bond portion:

1. 100% VBTLX (Total Bond Market Index)
2. 50% VBTLX (Total Bond Market Index) and 50% VTAPX (Short-Term Inflation Protected Securities Index
3. Something else

Thanks for your suggestions.

retired@50
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Re: Bond Component of 3-fund portfolio

Post by retired@50 » Sat May 23, 2020 9:08 am

pfb3326 wrote:
Sat May 23, 2020 9:06 am

1. 100% VBTLX (Total Bond Market Index)
You got the correct answer on your first try! Congratulations.

Regards,
This is one person's opinion. Nothing more.

22twain
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Re: Bond Component of 3-fund portfolio

Post by 22twain » Sat May 23, 2020 10:55 am

pfb3326 wrote:
Sat May 23, 2020 9:06 am
which is better
What does “better” mean to you, in this situation?
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!

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ruralavalon
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Re: Bond Component of 3-fund portfolio

Post by ruralavalon » Sat May 23, 2020 11:01 am

pfb3326 wrote:
Sat May 23, 2020 9:06 am
When constructing a 3-fund portfolio to be held long term: VTSAX (Total Stock Market Index), VTIAX (Total International Stock Index) and a Bond component, which is better for the bond portion:

1. 100% VBTLX (Total Bond Market Index)
2. 50% VBTLX (Total Bond Market Index) and 50% VTAPX (Short-Term Inflation Protected Securities Index
3. Something else

Thanks for your suggestions.
I suggest # 1, Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) by itself.

I suggest not using a TIPS fund unless in retirement or near retirement, if then.

If you want something else (# 3) you could consider Vanguard Intermediate-Term Bond Index Fund Admiral Shares (VBILX), more corporate bonds, fewer government bonds, no mortgage backed securities, and slightly longer duration than Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX).
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dbr
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Re: Bond Component of 3-fund portfolio

Post by dbr » Sat May 23, 2020 1:01 pm

There are many possible choices for bond investments none of which are universally "better" than others. Total bond is the standard recommendation possibly in part because choosing that means the almost never productive discussion of all the alternatives never gets started.

There is a tendency on this forum for some amount of upset when a bond fund loses a little money, but in a long term investment portfolio the measure is the risk and return of the portfolio and not the gaining and losing in any single part. In any case far and away the largest lever on what the portfolio will do is the allocation between stocks and bonds and not just exactly what bonds are owned.

I am comfortable suggesting any low cost, diversified* bond fund probably in the general duration of intermediate. Total Bond is an example of that.

*While all treasuries is not technically "diversified" the risks there are very small and Treasury funds are fine too.

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