Bond/FI offerings in my 401k

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RyeBourbon
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Joined: Tue Sep 01, 2020 12:20 pm
Location: NJ/Philly

Bond/FI offerings in my 401k

Post by RyeBourbon »

I've always skewed more heavily to stock funds in my 401k's and feel I have a pretty good understanding of them. But I'm about 5 years away from retiring and have decided to move to a less risky 70/30 AA. The question is how to decide the bond / fixed income side of the equation.

These are my options in my 401k at T Rowe Price:
FIAM Core C Plus (FCPCC) 0.30% ER
Fidelity Inflation Protected Bond Index Fund (FIPDX) 0.05% ER
State Street US Bond Index Fund (SSBIM) 0.02% ER
Stable Value (7-day yield = 2.04%) 0.15% ER

The State Street fund is relatively new and the FIAM Core has a higher ER. Is there any downside to going with FIPDX as my entire FI allocation?
aristotelian
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Re: Bond/FI offerings in my 401k

Post by aristotelian »

US Bond would have somewhat higher risk/reward. Inflation Protected (TIPS) is generally regarded as defensive but that could be appropriate for your stated purpose of nearing retirement and getting more conservative. Of course, you could do some of each.
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Duckie
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Re: Bond/FI offerings in my 401k

Post by Duckie »

RyeBourbon wrote:The State Street fund is relatively new and the FIAM Core has a higher ER. Is there any downside to going with FIPDX as my entire FI allocation?
State Street U.S. Bond Index Fund has been around since 1997. I recommend it over TIPS.
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anon_investor
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Re: Bond/FI offerings in my 401k

Post by anon_investor »

RyeBourbon wrote: Fri Nov 20, 2020 5:59 pm I've always skewed more heavily to stock funds in my 401k's and feel I have a pretty good understanding of them. But I'm about 5 years away from retiring and have decided to move to a less risky 70/30 AA. The question is how to decide the bond / fixed income side of the equation.

These are my options in my 401k at T Rowe Price:
FIAM Core C Plus (FCPCC) 0.30% ER
Fidelity Inflation Protected Bond Index Fund (FIPDX) 0.05% ER
State Street US Bond Index Fund (SSBIM) 0.02% ER
Stable Value (7-day yield = 2.04%) 0.15% ER

The State Street fund is relatively new and the FIAM Core has a higher ER. Is there any downside to going with FIPDX as my entire FI allocation?
Take a closer look at that stable value fund. Does it have a fixed guaranteed interest rate for a set period of time? 2.04% is pretty good in this low interest rate environment.
Topic Author
RyeBourbon
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Joined: Tue Sep 01, 2020 12:20 pm
Location: NJ/Philly

Re: Bond/FI offerings in my 401k

Post by RyeBourbon »

anon_investor wrote: Fri Nov 20, 2020 9:38 pm
RyeBourbon wrote: Fri Nov 20, 2020 5:59 pm I've always skewed more heavily to stock funds in my 401k's and feel I have a pretty good understanding of them. But I'm about 5 years away from retiring and have decided to move to a less risky 70/30 AA. The question is how to decide the bond / fixed income side of the equation.

These are my options in my 401k at T Rowe Price:
FIAM Core C Plus (FCPCC) 0.30% ER
Fidelity Inflation Protected Bond Index Fund (FIPDX) 0.05% ER
State Street US Bond Index Fund (SSBIM) 0.02% ER
Stable Value (7-day yield = 2.04%) 0.15% ER

The State Street fund is relatively new and the FIAM Core has a higher ER. Is there any downside to going with FIPDX as my entire FI allocation?
Take a closer look at that stable value fund. Does it have a fixed guaranteed interest rate for a set period of time? 2.04% is pretty good in this low interest rate environment.
The problem is it's hard to get info on any of the options other than FIPDX. It seems the others are proprietary to T Rowe and it's hard to find anything else about them, e.g. on Morningstar. It seems pretty consistent at around 2% but of course you don't get any capital upside (or downside) that bonds would get you.

Here's what I have for the Stable Value:
The Stable Value Fund's objective is to provide a competitive yield, while maintaining principal stability. It invests primarily in a diversified portfolio of synthetic investment contracts, bank investment contracts, guaranteed investment contracts, and separate account contracts issued by insurance companies and/or banks.

3 Month 0.53%
YTD 1.85%
1 year 2.24%
3 year 2.27%
5 year 2.15%
10 years 2.35%
Since Inception 4.82%
Inception Date September 12, 1988
Gross Expense Ratio 0.15%
Net Expense Ratio 0.15%
Limitation N/A N/A
As of 04/30/2019
7-Day SEC Yield = 2.04%
As of 11/22/2020

The T. Rowe Price Stable Value Common Trust Fund is not a mutual fund. It is a common trust fund established by T. Rowe Price Trust Company under Maryland banking law, and its units are exempt from registration under the Securities Act of 1933. Units of the trust are not deposits or obligations of, or guaranteed by, the U.S. government or its agencies or T. Rowe Price Trust Company. Although the trust seeks to preserve the value of your investment at $1.00 per unit, it is possible to lose money by investing in the trust.

Total return of the Stable Value Fund is reported net of an annual trustee fee of 0.15% assessed against assets invested in the trust by participating plans. (The 0.15% trustee fee was implemented as of 06/29/04; for prior periods, net of fees performance was calculated using the historical gross returns of the trust and then deducting the 0.15% fee.)
Topic Author
RyeBourbon
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Re: Bond/FI offerings in my 401k

Post by RyeBourbon »

Duckie wrote: Fri Nov 20, 2020 9:33 pm
RyeBourbon wrote:The State Street fund is relatively new and the FIAM Core has a higher ER. Is there any downside to going with FIPDX as my entire FI allocation?
State Street U.S. Bond Index Fund has been around since 1997. I recommend it over TIPS.
Here's what I have for that fund:

The Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Barclays U.S. Aggregate Bond Index (the Index) over the long term. The Fund is managed using a passive or indexing investment approach, by which SSGA attempts to replicate, before expenses, the performance of the Index. SSGA will typically seek to replicate index returns through investments in the cash markets - actual holdings of debt securities and other instruments - rather than through notional or synthetic positions achieved through the use of derivatives, such as futures contracts or swap transactions.

3 Month -1.32%
YTD N/A
1 year N/A
3 year N/A
5 year N/A
10 years N/A
Since Inception 5.41%
Inception Date October 2, 2019
Gross Expense Ratio 0.02%
Net Expense Ratio 0.02%
Limitation N/A
As of 09/30/2019
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anon_investor
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Joined: Mon Jun 03, 2019 1:43 pm

Re: Bond/FI offerings in my 401k

Post by anon_investor »

RyeBourbon wrote: Fri Nov 20, 2020 9:50 pm
anon_investor wrote: Fri Nov 20, 2020 9:38 pm
RyeBourbon wrote: Fri Nov 20, 2020 5:59 pm I've always skewed more heavily to stock funds in my 401k's and feel I have a pretty good understanding of them. But I'm about 5 years away from retiring and have decided to move to a less risky 70/30 AA. The question is how to decide the bond / fixed income side of the equation.

These are my options in my 401k at T Rowe Price:
FIAM Core C Plus (FCPCC) 0.30% ER
Fidelity Inflation Protected Bond Index Fund (FIPDX) 0.05% ER
State Street US Bond Index Fund (SSBIM) 0.02% ER
Stable Value (7-day yield = 2.04%) 0.15% ER

The State Street fund is relatively new and the FIAM Core has a higher ER. Is there any downside to going with FIPDX as my entire FI allocation?
Take a closer look at that stable value fund. Does it have a fixed guaranteed interest rate for a set period of time? 2.04% is pretty good in this low interest rate environment.
The problem is it's hard to get info on any of the options other than FIPDX. It seems the others are proprietary to T Rowe and it's hard to find anything else about them, e.g. on Morningstar. It seems pretty consistent at around 2% but of course you don't get any capital upside (or downside) that bonds would get you.

Here's what I have for the Stable Value:
The Stable Value Fund's objective is to provide a competitive yield, while maintaining principal stability. It invests primarily in a diversified portfolio of synthetic investment contracts, bank investment contracts, guaranteed investment contracts, and separate account contracts issued by insurance companies and/or banks.

3 Month 0.53%
YTD 1.85%
1 year 2.24%
3 year 2.27%
5 year 2.15%
10 years 2.35%
Since Inception 4.82%
Inception Date September 12, 1988
Gross Expense Ratio 0.15%
Net Expense Ratio 0.15%
Limitation N/A N/A
As of 04/30/2019
7-Day SEC Yield = 2.04%
As of 11/22/2020

The T. Rowe Price Stable Value Common Trust Fund is not a mutual fund. It is a common trust fund established by T. Rowe Price Trust Company under Maryland banking law, and its units are exempt from registration under the Securities Act of 1933. Units of the trust are not deposits or obligations of, or guaranteed by, the U.S. government or its agencies or T. Rowe Price Trust Company. Although the trust seeks to preserve the value of your investment at $1.00 per unit, it is possible to lose money by investing in the trust.

Total return of the Stable Value Fund is reported net of an annual trustee fee of 0.15% assessed against assets invested in the trust by participating plans. (The 0.15% trustee fee was implemented as of 06/29/04; for prior periods, net of fees performance was calculated using the historical gross returns of the trust and then deducting the 0.15% fee.)
Maybe your fund is not like this, but often times stable value funds have a guaranteed interest rate for a set period of time, e.g. 1 month, 1 quarter, etc. For example my 401k plan has a stable value fund with a guaranteed rate for 3 month, then it can change. That might be worth further investigation since a US total bond index fund is barely yielding over 1% right now and 2% with minimal principal risk is compelling. Stable value funds are rarely found outside 401k plans so worth exploring further.

Otherwise the State Street US Bond Index Fund (SSBIM) is perfectly fine, it is you basic US total bond index fund.

If you are worried about inflation Fidelity Inflation Protected Bond Index Fund (FIPDX) would be okay. Past returns will not look great because we have been in a low inflation environment for over a decade.

Your entire bond allocation into SSBIM would be reasonable.
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