Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equal

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iamblessed
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Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equal

Post by iamblessed »

amounts? Is that going out far enough in time to replace something like the total bond fund? I guess that way I could rebalance once a year when one came do. For those of you doing this can you explain the details to me that you do.
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retired@50
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by retired@50 »

Have you read the wiki on building a bond ladder?

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welderwannabe
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by welderwannabe »

iamblessed wrote: Thu Nov 24, 2022 10:27 am amounts? Is that going out far enough in time to replace something like the total bond fund? I guess that way I could rebalance once a year when one came do. For those of you doing this can you explain the details to me that you do.
No, 1-5 years would be closer to a short term average maturity. Total bond is an intermediate maturity, currently around 8.8 years. You'd want to do 1-15 years to approximate total bond the way you are describing.

You could also buy an 8 year, 9 year, and 10 year treasury. Then every year sell the 8 year and buy a new 10 year. That would also get you close with only 3 bonds to deal with.
I am not an investment professional, but I did stay at a Holiday Inn Express last night.
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Horton
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by Horton »

Why do you want to do this? You’re just building your own fund. Seems easier to buy an ETF and pay the minimal expenses associated with it.
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Kevin M
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by Kevin M »

I'd compare a Treasury ladder to a Treasury fund, not to an investment-grade fund that holds non-Treasury securities.

You can look at the holdings of an intermediate-term Treasury fund, and use that as a guide to the maturity weightings in your ladder.

If you want to do a rolling ladder, then a Treasury fund would be about the same, and would be easier to manage. Individual Treasuries would be good for a non-rolling ladder, in which case your duration will gradually decline over time, unlike a fund. Others suggest using a combination of funds, with periodic exchanges to adjust duration to your needs.

For a non-rolling ladder, I don't think you need to care about how your ladder rungs compare to a fund.

Kevin
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welderwannabe
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by welderwannabe »

Horton wrote: Thu Nov 24, 2022 12:27 pm Why do you want to do this? You’re just building your own fund. Seems easier to buy an ETF and pay the minimal expenses associated with it.
Some people like to own Treasurys directly. Easy to buy and no fees. Myself, I do both.

OP, if you wanted funds (which I find easier than ETFs as I can do auto investing):

VSIGX Vanguard Intermediate-Term Treasury Index Fund Admiral Shares Expense Ratio .07%
VGIT (ETF version of the above) Expense Ration .04%
FUAMX Fidelity® Intermediate Term Treasury Bond Index Fund with an ER of .03% (My favorite)

Or, buy Treasurys directly: ER 0.00%
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Jags4186
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by Jags4186 »

Horton wrote: Thu Nov 24, 2022 12:27 pm Why do you want to do this? You’re just building your own fund. Seems easier to buy an ETF and pay the minimal expenses associated with it.
As nicely explained to me by TheTimeLord in another thread, it makes sense to have a bond ladder so you never lose face value amount.

A short term treasury fund is down over 5% this year—on the most conservative bond fund investment you can make. A treasury bond maturing would deliver to you face value regardless of what has happened with interest rates.
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vineviz
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by vineviz »

Horton wrote: Thu Nov 24, 2022 12:27 pm Why do you want to do this? You’re just building your own fund. Seems easier to buy an ETF and pay the minimal expenses associated with it.
Exactly
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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vineviz
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by vineviz »

Jags4186 wrote: Thu Nov 24, 2022 1:07 pm
Horton wrote: Thu Nov 24, 2022 12:27 pm Why do you want to do this? You’re just building your own fund. Seems easier to buy an ETF and pay the minimal expenses associated with it.
As nicely explained to me by TheTimeLord in another thread, it makes sense to have a bond ladder so you never lose face value amount.
One of you misunderstood the topic, I’m afraid.

If you replicate a bond fund’s holdings by purchasing the same underlying bonds, you have all the same risks as if you’d simply purchased the fund.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Kevin M
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Re: Explain to me how I can use individual treasury bonds as my bond portion. Should I buy 1,2,3,4,5 year bonds in equa

Post by Kevin M »

You can download VSIGX holdings from here: https://institutional.vanguard.com/inve ... /fund/1943

You can import the download into a spreadsheet to see the holdings as of the most recent date available, currently 10/31/2022.

There were 109 Treasuries in the portfolio as of 10/31/2022. Average maturity = 1/16/2028, average coupon = 2.21%, average yield = 4.00%, average price = 92.21.

Here is a chart of holding % by maturity:

Image

Kevin
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