Bonds - Throw it all on the table!!!

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pascalwager
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Re: Bonds - Throw it all on the table!!!

Post by pascalwager » Fri Dec 09, 2016 12:12 am

1) Vanguard ST and IT Treasury Funds, 50:50 (IRA).
2) DFA Global Bond (VA).
3) HY Savings (taxable)

The bonds are 5% and savings 15% of portfolio. Overall AA is 80/5/15.

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Re: Bonds - Throw it all on the table!!!

Post by ThreeBears » Fri Dec 09, 2016 1:57 am

abuss368 wrote:The 10 year yield is very low. I read that Bill Gross has said it is almost to low and that investors should take a "break" from bonds!

Huh? :confused
Hi Abuss368 --- Just a heads up. Of course, he may be right. But, it's not the first time Bill has been nervous about low interest rates.

Similar advice. Same Guy. Five years ago.

http://www.pragcap.com/bill-gross-sells ... it-matter/
“Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., told PBS this week that yields are too low. His $237 billion Total Return Fund held no government-related debt as of Feb. 28, according to a report on the Pimco website.”

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Continue the march....

Post by hudson » Fri Dec 09, 2016 5:57 am

abuss368 wrote:This was an excellent thread. I am curious if this thread was started today with the current environment if the responses would be different?
I agree...great thread...no change for me except maybe look into tax loss harvesting.
The thread goes back to 2014.

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Re: Continue the march....

Post by abuss368 » Mon Dec 12, 2016 10:36 pm

hudson wrote:
abuss368 wrote:This was an excellent thread. I am curious if this thread was started today with the current environment if the responses would be different?
I agree...great thread...no change for me except maybe look into tax loss harvesting.
The thread goes back to 2014.
Thank you!
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Re: Bonds - Throw it all on the table!!!

Post by McGilicutty » Tue Dec 13, 2016 7:01 pm

I don't own any bonds, bond funds, CDs or any type of fixed-income investment. All of my investments are in SPY. I don't see any reason to own fixed income in such a low interest rate environment. Why knock down your returns for basically no benefit?

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Re: Bonds - Throw it all on the table!!!

Post by patrick013 » Tue Dec 13, 2016 10:12 pm

ThreeBears wrote:
abuss368 wrote:The 10 year yield is very low. I read that Bill Gross has said it is almost to low and that investors should take a "break" from bonds!

Huh? :confused
Hi Abuss368 --- Just a heads up. Of course, he may be right. But, it's not the first time Bill has been nervous about low interest rates.

Similar advice. Same Guy. Five years ago.

http://www.pragcap.com/bill-gross-sells ... it-matter/
“Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., told PBS this week that yields are too low. His $237 billion Total Return Fund held no government-related debt as of Feb. 28, according to a report on the Pimco website.”
Well too low or too high is when a yield spread strategy should kick in.
Take gains at your wish when spreads are low, and buy comfortably
when spreads are high. Spreads are getting higher.

When someone says the yield curve will be flat because of some forward
indication I remind myself the curve is positively sloped 90% of the time.
The curve today is quite similar to a year ago, before bond spreads became
very low.
age in bonds, buy-and-hold, 10 year business cycle

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arcticpineapplecorp.
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Re: Bonds - Throw it all on the table!!!

Post by arcticpineapplecorp. » Tue Dec 13, 2016 10:58 pm

McGilicutty wrote:I don't own any bonds, bond funds, CDs or any type of fixed-income investment. All of my investments are in SPY. I don't see any reason to own fixed income in such a low interest rate environment. Why knock down your returns for basically no benefit?
A couple of things:

1. Were you invested in 2000-2002? Were you invested in 2008-2009? If yes, did you keep adding money or did you stop and wait until the market recovered? If no, how do you know you can handle another such 40-50% decline? Can you handle a 20% or 30% decline? That's a distinct possibility at some point in the future. Will you hold onto SPY if it falls? Will you buy more?

2. Why the SPY? Do you not believe in the rest of the market like small and mid cap stocks, which are in the total stock market index fund? Small caps and mid caps have done better this year (as of 12/13/16) which has provided a return of 14.20% for VTI rather than 13.48% for SPY. When large caps beat small/mid, SPY will outperform, but when small/mid beat large cap, VTI will outperform. Something to consider.

3. I assume you're not retired, and therefore continue to make contributions (investments). The market in the U.S. keeps hitting new highs which means you're buying stocks at higher prices (which tends to lead to lower returns. Buying stocks at lower prices tends to lead to higher returns). By that measure, international stocks are cheaper than U.S. stocks (and are so by many measures such as p/e ratio, price to book, etc.) So have you considered putting new money (new contributions) into a total international stock index fund (or ETF) rather than the more expensive U.S. SPY fund?

4. "knock down your returns for basically no benefit"-- yes bonds can reduce returns. But you know what else they reduce? Volatility. That IS the benefit. So many would gladly give up a little return in exchange for reducing the gyrations of their portfolio. Everybody has to know what their limits are.

That's all for now.
"Invest we must." -- Jack Bogle | “The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.” -- William Bernstein

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Re: Bonds - Throw it all on the table!!!

Post by Deltoid » Wed Dec 14, 2016 1:50 pm

I keep 40% of my portfolio in fixed income. My preference is for treasuries for their liquidity and relative safety. I prefer to take my risk in the equity portion of my portfolio and have the treasuries for ballast to trade for cheap equity in market falls.

I use individual treasury issues purchased at auction in my IRA and Vanguard Total Bond Market in my 401K. I also use munis (VTEB) in my taxable account, partly because I don't have enough tax advantaged capacity for my total bond exposure and partly because today's low rate environment seems to me to make the case for bonds in tax advantaged less strong. I end up with about 40% of bond exposure in munis and most of the other 60% in individual treasury issues.

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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Sat Dec 31, 2016 12:01 am

We have received many good and updated responses to this excellent thread. Keep them coming! This is good considering the challenging interest rate environment.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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abuss368
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Thu Nov 23, 2017 11:22 am

This has been a great thread and tons of great information and thoughts. Is it perhaps time for some updated thoughts and comments?
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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abuss368
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Fri Nov 24, 2017 1:14 pm

In reading back over this thread, one thing has become obvious. The role of TIPS in an investment portfolio. TIPS were much more popular. Now, with Vanguard's research and investment experts recommendations, International Bonds are somewhat more popular.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Sandtrap
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Re: Bonds - Throw it all on the table!!!

Post by Sandtrap » Fri Nov 24, 2017 3:03 pm

I would like to try an open ended thread on your personal bond strategy.

Please simply note:

1) List the bond funds, individual bonds, CD's, etc. that you invest in
2) In which account what fixed income securities are held
3) Allocation as a percentage of Fixed Income
4) Allocation to bonds overall (i.e. age in bonds, etc.)
5) Any other plans such as adding more bonds funds, consolidating and merging, etc.

Hopefully this thread provides an inside peak into how Bogleheads manage their fixed income allocation and will help other investors.
1: Vanguard Total Bond Admiral plus (substantial partials in Balanced Funds) [No International, No TIPS, No REITS.]
1:.CD's
2: Vanguard, banks.
3: Bond funds roughly 80% of fixed.
4: 36/65 equities/fixed
5: Fund simplification, lower ER (ave .08 basis points), rebalancing with substantial outside funds to 30/70. In progress.

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Re: Bonds - Throw it all on the table!!!

Post by hoops777 » Fri Nov 24, 2017 6:55 pm

Deleted
K.I.S.S........so easy to say so difficult to do.

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Re: Bonds - Throw it all on the table!!!

Post by Aleuromancer » Sat Nov 25, 2017 1:50 pm

1) List the bond funds you invest in

TSP Government Securities (G-Fund)
An Intermediate Corporate Bond fund (which appears to hold some international bonds as well)
Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

2) In which account what fixed income securities are held?

The G-Fund is held in my deferred 457, i.e. the Thrift Savings Plan (I have this due to my prior work with the federal government)
The unnamed Intermediate Corp Bond I hold because it is the only bond fund available in my state deferred 401k.
VCIT is a very small bond holding in my Roth IRA.

3) Allocation as a percentage of fixed income.

It presently comes out to 50% G-Treasuries, 50% Intermediate Corporate Bonds.

4) Allocation to bonds overall?
It comes out to Age -20 in bonds.

5) Any other plans such as adding more bonds funds, consolidating and merging, etc.

While my bond allocation seems fairly simple enough, in order to increase my corporate bonds to the 50% allocation, I had to build up some in my Vanguard ROTH Ira, which has been previously dedicated to stocks only. I'm thinking I want to have bond holdings in all my seperate pots right now.

Also, I thought, if I am not in retirement, and bonds are about safety, perhaps I should hold less corporates and purchase some TIPS instead. But I can't decide if I should hold VIPSX or the Vanguard Short-Term Inflation-Protected Securities ETF.

Also, I've thought about increasing my overall bond allocation, as I am nearly7 51 years old now, and wondering if I am taking on too much risk than I should be. I am typically a more aggressive investor, so I may just look at what the Vanguard Retirement funds hold bondwise to get an idea of where I should be.

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Re: Bonds - Throw it all on the table!!!

Post by cfs » Sat Nov 25, 2017 6:34 pm

abuss368 wrote:
Fri Nov 24, 2017 1:14 pm
In reading back over this thread, one thing has become obvious. The role of TIPS in an investment portfolio. TIPS were much more popular. Now, with Vanguard's research and investment experts recommendations, International Bonds are somewhat more popular.
This is very interesting, I remember the good old days when everybody and his brother were recommending a 50/50 split between Vanguard Total Bond and Vanguard Tips bond fund. What happened with this combo?. Wishing everyone a Merry Christmas, and thanks for reading.
~ Your Money, Your Portfolio, Your Decision ~

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Re: Bonds - Throw it all on the table!!!

Post by MnD » Sat Nov 25, 2017 6:47 pm

TSP G fund - 75% of fixed income (in TSP account)
Dodge and Cox Global Bond Fund - 25% of fixed income (in various accounts).

Fixed income is 30% of overall portfolio that % is set for life.
Might increase Global Bond Fund % versus TSP G to 33%-50% of fixed income after retirement, but no hurry.

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Re: Bonds - Throw it all on the table!!!

Post by jhfenton » Sat Nov 25, 2017 7:02 pm

1) List the bond funds, individual bonds, CD's, etc. that you invest in
2) In which account what fixed income securities are held
3) Allocation as a percentage of Fixed Income
4) Allocation to bonds overall (i.e. age in bonds, etc.)
5) Any other plans such as adding more bonds funds, consolidating and merging, etc.


Age:47, wife 47
Portfolio: High six figures
Fixed income allocation: Currently 20.1% of portfolio, sliding to 30% at minimum retirement target
Equity allocation: 50/50 US/Intl, heavily tilted to small value in US, small and EM internationally

Fixed Income owned
VOHIX (Vanguard Ohio Long-Term Tax Exempt) (maintained at 1/3 of small taxable account, plus 1/3 VIOV (SCV) and 1/3 VWO (EM))
VSIGX (Vanguard Intermediate Government/Treasury Bond Index Fund Admiral) (traditional IRA)
VICSX (Vanguard Intermediate Corporate Bond Index Fund Admiral) (traditional IRA)
VSCSX (Vanguard Short-Term Corporate Bond Index Fund Admiral) (traditional IRA)
Brokered CDs (traditional IRA)
PTTRX (PIMCO Total Return Institutional) (401(k)) (only bond fund in 401(k))

I have no fixed income in our Roth accounts or my HSA. They are 100% equity.

I don't plan on making any major bond changes between now and retirement, except eventually expanding fixed income into the HSA and Roth accounts.

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Re: Bonds - Throw it all on the table!!!

Post by zonto » Sat Nov 25, 2017 7:48 pm

1) List the bond funds, individual bonds, CD's, etc. that you invest in

- Vanguard Internediate Term Bond Index (VBILX)
- Vanguard Total Bond Market Index (VBTIX)

2) In which account what fixed income securities are held

Traditional 401(k)s. Very good Vanguard choices within.

3) Allocation as a percentage of Fixed Income

100% VBILX. Will start using VBTIX in my wife's 401(k) when I need more bonds to maintain my portfolio allocation.

4) Allocation to bonds overall (i.e. age in bonds, etc.)

32 years old. 33% in bonds (static).

5) Any other plans such as adding more bonds funds, consolidating and merging, etc.

Once 401(k) accounts are both 100% VBILX and VBTIX, will use Vanguard intermediate term municipal bond fund in my taxable account.

If market drops significantly, will consider moving to 80/20 stock/bond. May revisit international bonds in the future when yields are higher.

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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Sat Nov 25, 2017 8:03 pm

cfs wrote:
Sat Nov 25, 2017 6:34 pm
abuss368 wrote:
Fri Nov 24, 2017 1:14 pm
In reading back over this thread, one thing has become obvious. The role of TIPS in an investment portfolio. TIPS were much more popular. Now, with Vanguard's research and investment experts recommendations, International Bonds are somewhat more popular.
This is very interesting, I remember the good old days when everybody and his brother were recommending a 50/50 split between Vanguard Total Bond and Vanguard Tips bond fund. What happened with this combo?. Wishing everyone a Merry Christmas, and thanks for reading.
Hi cfs -

Indeed. One does not read too many posts like that anymore.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Bonds - Throw it all on the table!!!

Post by Doc » Sun Nov 26, 2017 11:11 am

jhfenton wrote:
Sat Nov 25, 2017 7:02 pm
PTTRX (PIMCO Total Return Institutional) (401(k)) (only bond fund in 401(k))
Oh it's terrible that PTTRX is the only bond fund available. :D

Three year rolling return chart for PTTRX and Total Bond. (DFIHX added only to highlight the funds of interest.)

Image
http://quotes.morningstar.com/chart/fun ... 22%3A36%7D
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Re: Bonds - Throw it all on the table!!!

Post by jhfenton » Sun Nov 26, 2017 4:55 pm

Doc wrote:
Sun Nov 26, 2017 11:11 am
jhfenton wrote:
Sat Nov 25, 2017 7:02 pm
PTTRX (PIMCO Total Return Institutional) (401(k)) (only bond fund in 401(k))
Oh it's terrible that PTTRX is the only bond fund available. :D
:beer I've made peace with it. :D It has performed well enough, despite the expense ratio (which they recently raised from 46 bp to 51 bp). (They raised the fee 5 bp across most of their bond funds. It was strange enough that M* called them out on it.)

I obviously don't like the fee. I don't like the fact that their strategy is so opaque that normal bond fund metrics (duration, credit rating, SEC yield), don't apply in a straightforward manner. I don't like that I don't know what interest rate, currency, and credit bets they're making. I don't like that I have to trust that their not doing anything that is going to blow up in their faces during the next market crisis. (They did well in 2008 under Bill Gross, performing inline with Total Bond, and then made some savvy bets to sore when credit markets recovered in 2009. I, of course, didn't see any of that out performance.)

I don't like most of the choices in my 401(k), so I'm left with Vanguard Mid Cap Value Index Admiral and PIMCO Total Return. (They have the Vanguard Target Retirement fund lineup, but most of the single asset class funds are over-priced active funds.) When my 401(k) takes in more new money combined than both of our Roth IRAs and my HSA, it's hard for me not to use the fund.

The only other fixed income fund is an uncompetitive stable value fund that currently yields 1.57%, just below the 1-year treasury. Last summer (2016), its yield was in-line with the 7-year treasury, only 10-20 bp lower. Its yield has only very slowly ticked up this year as short and intermediate rates have risen.

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Re: Bonds - Throw it all on the table!!!

Post by oldzey » Sun Nov 26, 2017 11:09 pm

1) List the bond funds, individual bonds, CD's, etc. that you invest in

I invest in a TIAA Traditional Annuity - Retirement Annuity.

2) In which account what fixed income securities are held

My TIAA Traditional Annuity - Retirement Annuity is held in a 403b Defined Contribution Retirement Plan.

3) Allocation as a percentage of Fixed Income

100% of my fixed income is invested in the TIAA Traditional Annuity - Retirement Annuity.

4) Allocation to bonds overall (i.e. age in bonds, etc.)

My allocation formula is: Age - 30 = % to fixed income. I currently have 20% of my portfolio (overall) allocated to fixed income.

5) Any other plans such as adding more bonds funds, consolidating and merging, etc.

No.
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Re: Bonds - Throw it all on the table!!!

Post by Doc » Mon Nov 27, 2017 7:37 am

jhfenton wrote:
Sun Nov 26, 2017 4:55 pm
I've made peace with it. It has performed well enough, despite the expense ratio (which they recently raised from 46 bp to 51 bp). (They raised the fee 5 bp across most of their bond funds. It was strange enough that M* called them out on it.)
You missed the point. PTTRX outperformed Vanguard's TBM fund in nearly every three year period over the last ten years. The total return over the ten year period was a little over 1% annually better than TBM. The biggest problem with PTTRX is the $100k minimum at many brokers making it out of reach for many. Your 401k probably has a low minimum.
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Re: Bonds - Throw it all on the table!!!

Post by B. Wellington » Mon Nov 27, 2017 8:34 am

In the past I have struggled with this question. How much in bonds? Which bond funds? As well as how soon do I need the money?

Today we use a "simple" Wellington/ Wellesley mix. A good % of this is in tax deferred accounts. ( Also a very small % in company stock.)

60/38 with a small 2% in cash. (Total portfolio.)

I have added a ST treasury fund in the past, however I don't believe a small amount in (extra) bonds would make any measurable difference?

YMMV... :beer

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Re: Bonds - Throw it all on the table!!!

Post by tucker99 » Mon Nov 27, 2017 12:15 pm

B. Wellington wrote:
Mon Nov 27, 2017 8:34 am
In the past I have struggled with this question. How much in bonds? Which bond funds? As well as how soon do I need the money?

Today we use a "simple" Wellington/ Wellesley mix. A good % of this is in tax deferred accounts. ( Also a very small % in company stock.)

60/38 with a small 2% in cash. (Total portfolio.)

I have added a ST treasury fund in the past, however I don't believe a small amount in (extra) bonds would make any measurable difference?

YMMV... :beer
Yea, same here. Until recently I followed the age in percentage of bond and balance in stock. In my case I'm 62 and that bond allocation was too much with the stock market so strong right now. I'm at 45% bonds and 55% stock in the 3-fund portfolio. I'm semi-retired and have the dividends sent home as a distribution; this is a very nice stipend.

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Re: Bonds - Throw it all on the table!!!

Post by jhfenton » Mon Nov 27, 2017 2:23 pm

Doc wrote:
Mon Nov 27, 2017 7:37 am
jhfenton wrote:
Sun Nov 26, 2017 4:55 pm
I've made peace with it. It has performed well enough, despite the expense ratio (which they recently raised from 46 bp to 51 bp). (They raised the fee 5 bp across most of their bond funds. It was strange enough that M* called them out on it.)
You missed the point. PTTRX outperformed Vanguard's TBM fund in nearly every three year period over the last ten years. The total return over the ten year period was a little over 1% annually better than TBM. The biggest problem with PTTRX is the $100k minimum at many brokers making it out of reach for many. Your 401k probably has a low minimum.
No. I got your point. That's why I said that I've made my peace with it, despite it not being the kind of bond fund I would pick on my own, and definitely not the kind of fund company I would choose to do business with on my own.

Of course, as I said, most of the outperformance was in 2008-2009, which was before I invested in the fund. :beer

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Re: Bonds - Throw it all on the table!!!

Post by Doc » Mon Nov 27, 2017 3:35 pm

jhfenton wrote:
Mon Nov 27, 2017 2:23 pm
Of course, as I said, most of the outperformance was in 2008-2009, which was before I invested in the fund.
Go to the M* chart and expand the time to 1990. The PIMCO fund outperformed most of the time. Agree the greatest outperformance was during the Lehman period but that may say something about active management during times of stress. Or it might just be that the high dependence on derivatives means that PTTRX can get out of a bad situation faster and more cheaply than a "stay your course" index fund.

Unlike in equities I think that active bond funds can compete well with their index counterparts. That said I wouldn't want to invest in the higher cost share classes of PTTRX. But there is always Harbor Bond Fund Institutional Class HABDX with an e/r of 0.51 and an initial purchase of only $1k. Same management team as PTTRX with similar objective and performance. Go to the M* chart and add HABDX.

If I was going to have a three fund portfolio the bond part would not be a BBgBarc Agg Index fund.
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Re: Bonds - Throw it all on the table!!!

Post by Taylor Larimore » Mon Nov 27, 2017 3:58 pm

Unlike in equities I think that active bond funds can compete well with their index counterparts.
Doc:

According to the DowJones SPIVA report for the 15 years ending June 30, 2017, ALL 13 styles of fixed-income managed bond funds underperformed their index benchmark.

https://us.spindices.com/documents/spiv ... r-2017.pdf

Best wishes.
Taylor
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Re: Bonds - Throw it all on the table!!!

Post by jhfenton » Mon Nov 27, 2017 4:09 pm

Doc wrote:
Mon Nov 27, 2017 3:35 pm
jhfenton wrote:
Mon Nov 27, 2017 2:23 pm
Of course, as I said, most of the outperformance was in 2008-2009, which was before I invested in the fund.
Go to the M* chart and expand the time to 1990. The PIMCO fund outperformed most of the time. Agree the greatest outperformance was during the Lehman period but that may say something about active management during times of stress. Or it might just be that the high dependence on derivatives means that PTTRX can get out of a bad situation faster and more cheaply than a "stay your course" index fund.

Unlike in equities I think that active bond funds can compete well with their index counterparts. That said I wouldn't want to invest in the higher cost share classes of PTTRX. But there is always Harbor Bond Fund Institutional Class HABDX with an e/r of 0.51 and an initial purchase of only $1k. Same management team as PTTRX with similar objective and performance. Go to the M* chart and add HABDX.

If I was going to have a three fund portfolio the bond part would not be a BBgBarc Agg Index fund.
I agree with you on all counts. I believe active bond management in bond funds can more than pay for itself (at least at Vanguard levels of cost). This is doubly true in less liquid areas of the bond market like munis and below investment grade corporates.

I'm not a fan *at all* of the BBgBarc Agg Index. Its composition in no reflects any market judgment as to an efficient mix of bonds.

All of that said, I don't mind and I own, three Vanguard bond index funds: int treasury, int corp, and short corp. They follow fairly liquid markets, have lower minimums for Admiral shares ($10K vs $50K), and, at this point, slightly lower expenses. (And Vanguard's "investment grade" funds are not pure corporate funds. They have a non-trivial percentage of treasuries and agency bonds.)

But I don't believe active bonds funds can add 35+ bp of value without taking additional risk. So if my 401(k) had cheap treasury and corporate index funds, I'd probably invest in those over PTTRX.

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Re: Bonds - Throw it all on the table!!!

Post by Doc » Mon Nov 27, 2017 4:42 pm

jhfenton wrote:
Mon Nov 27, 2017 4:09 pm
But I don't believe active bonds funds can add 35+ bp of value without taking additional risk.
The question is "what risk"?

How about a short term mid quality active dark Green fund with 1.28% TTM and 30 day SEC yield of 1.57% with the a price variation as charted or a mid quality index Orange fund with 1.59% TTM and a 30 day SEC yield of 1.91%:

Image

Do you take the index fund with the higher yield but higher risk or the active fund with lower yield but lower risk?

Or do you take the light green index fund with slightly higher yields but more risk?

The answer is: "it depends ..."
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Re: Bonds - Throw it all on the table!!!

Post by WoodSpinner » Mon Nov 27, 2017 5:04 pm

Ok, here goes ...

1. CDs (Next year Expenses + Emergency Fund)
2. Vanguard Short Term Bond (VCSH) - Year 2 & 3 Expenses
3. Vanguard Intermediate Term Bond (BIV) Year 4-10 Expenses

Currently at 52% (Equities)/ 44% Bonds/ 4% Cash (CDs)

Fire in Dec2017.

:D

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Re: Bonds - Throw it all on the table!!!

Post by Doc » Mon Nov 27, 2017 5:29 pm

Taylor Larimore wrote:
Mon Nov 27, 2017 3:58 pm
Doc:

According to the DowJones SPIVA report for the 15 years ending June 30, 2017, ALL 13 styles of fixed-income managed bond funds underperformed their index benchmark.
Duh?

A > A - e/r

According to William Sharpe:
If "active" and "passive" management styles are defined in sensible ways, it must be the case that

(1) before costs, the return on the average actively managed dollar will equal the return on the average passively managed dollar and

(2) after costs, the return on the average actively managed dollar will be less than the return on the average passively managed dollar
https://web.stanford.edu/~wfsharpe/art/ ... active.htm

Even Jack Bogle no longer likes the BBgBarc Agg Index.

Why is some random index the basis for comparison?

Why does our favorite fund company keep changing the index for their funds?
Vanguard wrote: Right now three of their funds are in the process of changing their index. 3 fixed income index funds to change benchmarks and names

August 8, 2017
SPIVA's business is selling indexes to be used by fund providers. Do you think their methodology doesn't reflect that "their" indexes "beat" something or other. If it didn't beat something they would either change their methodology or go out of business.
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Re: Bonds - Throw it all on the table!!!

Post by Tyler Aspect » Mon Nov 27, 2017 5:50 pm

Taxable:
Intermediate term bond index

Tax Deferred:
total bond index
intermediate term corporate index / CD ladder (2 - 4 - 6 years)
Past result does not predict future performance. Mentioned investments may lose money. Contents are presented "AS IS" and any implied suitability for a particular purpose are disclaimed.

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Re: Bonds - Throw it all on the table!!!

Post by hoops777 » Mon Nov 27, 2017 6:20 pm

I have a large amount of brokered CDs mixed in with a few high quality Corp bonds and GO muni’s.We also have a decent amount of i bonds.
Last edited by hoops777 on Tue Nov 28, 2017 12:57 pm, edited 1 time in total.
K.I.S.S........so easy to say so difficult to do.

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Bogle on Vanguard Total Bond Market Index Fund

Post by Taylor Larimore » Mon Nov 27, 2017 8:45 pm

Doc wrote:Even Jack Bogle no longer likes the BBgBarc Agg Index.
Doc:

If you are inferring that Jack Bogle no longer likes Vanguard Total Bond Market, you are mistaken. This is what he wrote his latest book, "The Little Book of Common Sense Investing."
"Deep down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holdings in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund." *
Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Re: Bogle on Vanguard Total Bond Market Index Fund

Post by triceratop » Mon Nov 27, 2017 9:08 pm

Taylor Larimore wrote:
Mon Nov 27, 2017 8:45 pm
Doc wrote:Even Jack Bogle no longer likes the BBgBarc Agg Index.
Doc:

If you are inferring that Jack Bogle no longer likes Vanguard Total Bond Market, you are mistaken. This is what he wrote his latest book, "The Little Book of Common Sense Investing."
"Deep down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holdings in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund." *
Best wishes
Taylor
Taylor,
Those two statements are not incompatible.
"To play the stock market is to play musical chairs under the chord progression of a bid-ask spread."

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Re: Bogle on Vanguard Total Bond Market Index Fund

Post by Doc » Mon Nov 27, 2017 10:33 pm

Taylor Larimore wrote:
Mon Nov 27, 2017 8:45 pm
Doc wrote:Even Jack Bogle no longer likes the BBgBarc Agg Index.
Doc:

If you are inferring that Jack Bogle no longer likes Vanguard Total Bond Market, you are mistaken. This is what he wrote his latest book, "The Little Book of Common Sense Investing."
"Deep down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holdings in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund." *
Best wishes
Taylor
Because of this, says John C. Bogle, founder of the Vanguard Group, total bond indexes “are deeply flawed — and that’s coming from an indexer.” He adds that individual investors should keep only about one-third of their bond stake in Treasuries and government debt, reflecting the market’s mix based on private investors such as pension and mutual funds.
http://www.nytimes.com/2013/04/28/your- ... lance.html

So as triceratop implied just because "the vast majority of American families would be better served" with what amounts to a two fund portfolio does not mean that Bogle thinks that total bond indexes are not deeply flawed.

If I were only allowed to have two funds in my portfolio the bond part might be a Total bond Market Fund although I would prefer a Bloomberg Barclays U.S. Intermediate Government/Credit Bond Index fund which seems to be more in keeping with Bogle's current thinking. The fact that Vanguard does not offer a fund based on that index might have something to do with Bogle's comment in his book.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Bonds - Throw it all on the table!!!

Post by WildBill » Mon Nov 27, 2017 11:37 pm

Howdy

Very interesting thread.

I hold 35% of my total portfolio in bonds, with the objective that this part of the portfolio is an LMP for 30 years. I am a 62 year old retiree. If the bonds keep up with inflation I am satisfied.

40 % of the Bond part of Portfolio is held in taxable account, in Vanguard Intermediate Term Munis.

10% is held in taxable in assortment of Treasuries, I Bonds and several muni bond CEFs

50 % is in IRA in Vanguard Total Bond Market.

Happy fixed income investing

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

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Re: Bonds - Throw it all on the table!!!

Post by BigJohn » Tue Nov 28, 2017 12:45 am

Doc wrote:
Mon Nov 27, 2017 10:33 pm
If I were only allowed to have two funds in my portfolio the bond part might be a Total bond Market Fund although I would prefer a Bloomberg Barclays U.S. Intermediate Government/Credit Bond Index fund which seems to be more in keeping with Bogle's current thinking. The fact that Vanguard does not offer a fund based on that index might have something to do with Bogle's comment in his book.
Doc, isn't VG intermediate Term Bond Index (VBILX) fairly close? Looks like it tracks 5-10 year vs intermediate term index and has a bit longer duration than the index you mentioned. However, it has almost the same duration as VG TBM so it seems like a reasonable substitute. In any case, it's my choice for the bond fund I use in non-taxable accounts.

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Re: Bonds - Throw it all on the table!!!

Post by Doc » Tue Nov 28, 2017 7:45 am

BigJohn wrote:
Tue Nov 28, 2017 12:45 am
Doc wrote:
Mon Nov 27, 2017 10:33 pm
If I were only allowed to have two funds in my portfolio the bond part might be a Total bond Market Fund although I would prefer a Bloomberg Barclays U.S. Intermediate Government/Credit Bond Index fund which seems to be more in keeping with Bogle's current thinking. The fact that Vanguard does not offer a fund based on that index might have something to do with Bogle's comment in his book.
Doc, isn't VG intermediate Term Bond Index (VBILX) fairly close? Looks like it tracks 5-10 year vs intermediate term index and has a bit longer duration than the index you mentioned. However, it has almost the same duration as VG TBM so it seems like a reasonable substitute. In any case, it's my choice for the bond fund I use in non-taxable accounts.
Unfortunately not. In order to get to the 1-10 bogey you would need to use both the Vg Intermediate and short term funds in the right proportion. Not a big deal and may have some tax efficiency if you have some bonds in taxable. But you lose the one bond fund simplicity which is what Taylor popularizes.

Regarding the duration: Long bonds are not usually recommended in a typical stock/bond portfolio except for some high equity positions when long Treasuries may be beneficial. The longer duration is more a result of the index than good policy for the typical retail investor.

That said I would prefer the 5-10 Gov/Corp index over TBM if I only could use one fund.
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Re: Bonds - Throw it all on the table!!!

Post by BigJohn » Tue Nov 28, 2017 7:56 am

Doc wrote:
Tue Nov 28, 2017 7:45 am
Long bonds are not usually recommended in a typical stock/bond portfolio except for some high equity positions when long Treasuries may be beneficial.
Doc, I'm confused. The int term index fund doesn't contain long bonds, as least by my understanding. Everything is in the 5-10 year range. On the other hand, it looks like TBM currently contains about 13% at >20 years which is one of the reasons I choose not to use it. So I while I agree that 1-10 and 5-10 are not the same, it appears that both avoid long bonds. What am I missing?

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Re: Bonds - Throw it all on the table!!!

Post by Doc » Tue Nov 28, 2017 8:05 am

Right. I was just expending on your "a bit longer duration" comment.

I use a Treasury ladder for a large part of our portfolio. That and a much smaller tax advantaged position than many here means we have a lot of bonds in taxable and hence use a lot of different bond funds to maximize tax efficient placement.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Thu Nov 30, 2017 7:08 pm

Bogleheads -

Thank you! This is a great thread with a lot of informative strategies and thoughts. What is interesting is having the updated responses and the change in interest rates since the thread was started.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Bogle on Vanguard Total Bond Market Index Fund

Post by abuss368 » Thu Nov 30, 2017 7:13 pm

Taylor Larimore wrote:
Mon Nov 27, 2017 8:45 pm
Doc wrote:Even Jack Bogle no longer likes the BBgBarc Agg Index.
Doc:

If you are inferring that Jack Bogle no longer likes Vanguard Total Bond Market, you are mistaken. This is what he wrote his latest book, "The Little Book of Common Sense Investing."
"Deep down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holdings in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund." *
Best wishes
Taylor
I am reading Jack's updated 10th Anniversary edition of "The Little Book of Common Sense Investing", and that was my understanding as well.

In fact, the Jack's statement can be found in Chapter 18 - Page 200.
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Re: Bonds - Throw it all on the table!!!

Post by Shikoku » Fri Dec 01, 2017 1:33 am

I am using TIAA Traditional as a substitute for bond. It is presently earning 3.21%. Principal and 3.0% return is guaranteed as long as TIAA is in good financial standing. TIAA Traditional is 35% of my portfolio.
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Re: Bogle on Vanguard Total Bond Market Index Fund

Post by Doc » Fri Dec 01, 2017 6:15 pm

abuss368 wrote:
Thu Nov 30, 2017 7:13 pm
Taylor Larimore wrote:
Mon Nov 27, 2017 8:45 pm
Doc wrote:Even Jack Bogle no longer likes the BBgBarc Agg Index.
Doc:

If you are inferring that Jack Bogle no longer likes Vanguard Total Bond Market, you are mistaken. This is what he wrote his latest book, "The Little Book of Common Sense Investing."
"Deep down I remain absolutely confident that the vast majority of American families would be well served by owning their equity holdings in a Standard and Poor's 500 Index fund (or a total stock market index fund) and holding their bonds in a total bond market index fund." *
Best wishes
Taylor
I am reading Jack's updated 10th Anniversary edition of "The Little Book of Common Sense Investing", and that was my understanding as well.

In fact, the Jack's statement can be found in Chapter 18 - Page 200.
Because of this, says John C. Bogle, founder of the Vanguard Group, total bond indexes “are deeply flawed — and that’s coming from an indexer.” He adds that individual investors should keep only about one-third of their bond stake in Treasuries and government debt, reflecting the market’s mix based on private investors such as pension and mutual funds.
http://www.nytimes.com/2013/04/28/your- ... allocation
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Sat Dec 09, 2017 3:24 pm

I am curious in terms of how many Bogleheads hold Treasury bonds in a taxable account.
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Re: Bonds - Throw it all on the table!!!

Post by Doc » Sat Dec 09, 2017 6:10 pm

abuss368 wrote:
Sat Dec 09, 2017 3:24 pm
I am curious in terms of how many Bogleheads hold Treasury bonds in a taxable account.
Almost all of our Treasuries are in taxable except for a temporary allocation as a "just in case" fund in case congress manages to screw up the tax bill and crash the stock market.

Breaking up our core bond portfolio into pieces and putting the Treasuries in taxable makes sense for our tax situation.
A scientist looks for THE answer to a problem, an engineer looks for AN answer and lawyers ONLY have opinions. Investing is not a science.

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Re: Bonds - Throw it all on the table!!!

Post by Thesaints » Sat Dec 09, 2017 6:29 pm

1) List the bond funds, individual bonds, CD's, etc. that you invest in
2) In which account what fixed income securities are held
3) Allocation as a percentage of Fixed Income
4) Allocation to bonds overall (i.e. age in bonds, etc.)
5) Any other plans such as adding more bonds funds, consolidating and merging, etc.


OTTOMH
20% in Series I savings bonds
10% in tips (Vanguard)
<10% in high yield (Vanguard)
<10% gnma (vanguard)
5% CA iterm. term (Vanguard)
Balance: cash/short term

Part of the tips and short term in a tax advantaged account. All the rest held directly.

Not sure I understand. Is there any other “fixed income “ ?

30%, but I’m not counting my vested pension rights. Otherwise it would be around 50%

Age is only a number. I don’t think that rule applies to my case.

I,m trying to maintain my stock portion at 70%. Not easy these days.

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Re: Bonds - Throw it all on the table!!!

Post by Trelin946 » Sat Dec 09, 2017 6:32 pm

We have the following:
Vanguard total bond market and Vanguard California LT tax exempt.

Zero plans to throw it all. They keep me sleeping well at night during those turbulent days of equity markets. Plus we are of retirement age.

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