Bonds - Throw it all on the table!!!

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

Post by abuss368 » Wed Jan 29, 2014 6:29 pm

Bogleheads there have been many excellent threads over the last couple of weeks related to bonds. I started a couple with polls and the results were excellent. Often a poll is limited, needs more options, etc.

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.

Best.
Last edited by abuss368 on Wed Jan 29, 2014 6:34 pm, edited 1 time in total.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Wed Jan 29, 2014 6:31 pm

We invest in:

1) Total Bond Index and Intermediate Term Tax Exempt.
2) Total Bond Index is in each of our Roth IRAs and Intermediate Term Tax Exempt in in taxable.
3) We follow an "age less 10" allocation to Fixed Income.
4) No plans to add additional bond funds, individual bonds, overlap, etc. We plan to stay the course.
5) The only change could be to increase to "age in bonds" in the years and decades ahead.

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

Post by Rodc » Wed Jan 29, 2014 6:44 pm

Some years ago I had no access to emerging stocks in my 401K, but could get fidelity's emerging bond fund so I got a slice of that. It has done really well and never saw a real reason to get rid of it. Probably would not get it now since I use vanguard's total international fund, which up to now would have been my loss. Who knows what the future holds. This is my one active fund.

Otherwise I hold a modest collection of long TIPS and an intermediate treasury fund. I decided that you get your dose of safety with the fewest bonds if you get the safest bonds. Or for a fixed allocation to bonds you maximize the safety of a portfolio it you use the safest bonds. Not to mention with the emerging bonds you could argue I have used up my space for less than the safest bonds already.

Frankly I am not convinced there more than a vanishingly small difference one high quality low cost bond fund to the next at the portfolio level. If you go short you earn less but it takes fewer to get your desired level of safety so you can hold more stocks; if you go longer you get more return but you have to own more of them giving up room for generally higher return stocks.

I did a study of this some years ago looking a different maturity treasuries and other than at the very ends of the spectrum it made no meaningful difference.

I expect factoring in slightly higher risk bonds would be very similar: slightly higher returns, but to get the same level of risk you have to hold more of them, and less in stocks, which is likely just a wash.
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Re: Bonds - Throw it all on the table!!!

Post by grap0013 » Wed Jan 29, 2014 6:47 pm

I don't have any bonds. If I did they would go 100% into the fidelity 7 year treasury bond index fund. If bonds are for safety, then you want the safest ones for the most protection during downturns.
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Re: Bonds - Throw it all on the table!!!

Post by ot1138 » Wed Jan 29, 2014 6:53 pm

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

Vanguard total bond market and Vanguard tax exempt.

2) In which account what fixed income securities are held

I keep all fixed income in taxable accounts. This is the opposite of what the wiki suggests. My reasoning for this is that my future expected returns for equities will be significantly higher than bonds, so I'd rather shelter as much equities as I can in TAA accounts.

3) Allocation as a percentage of Fixed Income

100%

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

6%. I dropped it from 18% a few months ago. Partly because rates can't go much lower (and even if they do, there is limited appreciation potential). Partly because I have so much in cash on the sidelines.

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

If rates move up, I will likely increase my bond holdings. In the meantime, I've reallocated some of that cash to REITs and MLPs.

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

Post by mnvalue » Wed Jan 29, 2014 6:56 pm

1) I Bonds and Total Bond Market
2) I Bonds are their own thing, obviously. The rest is in a Roth IRA. My Total Bond Market position isn't large enough to fill my once yearly 401k ETF purchase via the brokerage window, which I use to escape high cost funds. In turn, I only purchase once a year to minimize the high commissions. And, even if it was large enough, I have to be able to sell bonds to rebalance if the market drops. I tax-adjust my asset allocation using estimated average (not marginal) retirement tax rates. My 401k currently has a large Roth percentage, so while I'd prefer to have bonds in pre-tax space (so the higher returning equities expand Roth space faster), my current situation is fine.
3) The I bonds have the highest historical fixed rate, so I plan to hold them to maturity. Selling them even for rebalancing is not an option. I'm not buying more I bonds for retirement; new fixed income is going into Total Bond only.
4) I follow a "copy the Vanguard Target Fund for my age" plan, so currently 10% to fixed income.
5) I'm considering adding Total International Bond in the same proportions as the Vanguard Target Fund for my age. The I Bonds would count as U.S. bonds, thus reducing Total Bond Market but not Total International Bond.
Last edited by mnvalue on Wed Jan 29, 2014 8:19 pm, edited 1 time in total.

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

Post by nisiprius » Wed Jan 29, 2014 7:08 pm

In order of decreasing amount: important amounts in
Vanguard Total Bond, VBMFX (well, VBLTX Admiral shares actually, I guess).
collection of individual TIPS;
collection of series I savings bonds;

and small amounts of
Vanguard Inflation Protected Securities (VIPSX),
Vanguard Short-Term Bond Index (VBISX), and
Vanguard Short-Term Inflation Protected Security Index (VTIPX).

VIPSX is intended to serve as a buffer for gradual withdrawals from the TIPS portfolio--withdraw from VIPSX and replenish as TIPS mature. The other two are substitutes for Prime Money Market because I just can't bear to see even relatively small holdings earning as little as would do in Prime, and it's inconvenient to move them to bank accounts. The VBISX account was established before VTIPX was introduced and I'm not changing it because it has checkwriting attached to it. I haven't done any deep thinking on VBISX versus VTIPX, I used VTIPX more recently because I like inflation-indexed things, and because I figure if it's good enough for Vanguard to use in their Target Funds it's good enough for me.
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Re: Bonds - Throw it all on the table!!!

Post by madbrain » Wed Jan 29, 2014 7:16 pm

abuss368 wrote: 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
Galliard Stable Value Fund in 401k . 38% of fixed income.
Vanguard High-Yield Corporate Fund Admiral (VWEAX) in Roth IRA . 37% of fixed income .
Vanguard California Intermediate-Term Tax-Exempt Fund Admiral (VCADX) in taxable account . 25% of fixed income.
4) Allocation to bonds overall (i.e. age in bonds, etc.)
About 33%, about 4-5% less than age in bonds.
5) Any other plans such as adding more bonds funds, consolidating and merging, etc.
I'm adding more primarily my 401k stable value until my bonds get closer to "age in bonds".

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

Post by White Coat Investor » Wed Jan 29, 2014 7:22 pm

abuss368 wrote: 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.
1) Schwab TIPS ETF, G Fund, Peer to Peer Loans (mostly at Lending Club)
2) 401K, TSP, Roth IRA
3) 10%, 10%, 5%
4) 25% of portfolio = fixed income
5) None at the present time.

The portfolio is not particularly interest rate sensitive and it is positioned well against inflation. The P2P loans boost the expected return quite a bit, but there's still plenty of very dry powder there for rebalancing in a stock market downturn. I pair it with a rather aggressive slice and dice equity portfolio.

It's all probably more complicated than it needs to be but it is fun watching the moving parts.

I think it is pretty hard to screw up your fixed income allocation. There are so many great options out there. If only their expected returns were a little higher.

Another higher risk/higher return fixed income option I've been considering is in private real estate mortgages. I've been seeing a few at 9-10%. Locks your money up for 5 years and it is possible you'd have to foreclose to get your moola, but it is backed by a piece of real estate, unlike the P2P loans. Chasing yield might not be a great idea, but it sometimes seems silly to tie money up that I don't expect to spend for decades in securities yielding less than inflation.
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Re: Bonds - Throw it all on the table

Post by Bracket » Wed Jan 29, 2014 7:28 pm

20% of my retirement portfolio is fixed income, split as follows:

8% TSP G Fund
8% total bond market index fund (mostly via TSP F Fund)
4% TIPS in DFA TIPS fund (DIPSX)
All in tax-deferred accounts (401k And TSP)

I have a very small amount in Vanguard Int Term Tax Exempt fund.
(I felt the the best way for me to learn about owning munis was to own some munis)

And a very small amount in Fidelity Intermediate Bond Fund (FTHRX) an actively managed fund in my 401k since there is no bond index fund available to me there

My plan is to stay at 20% in bonds until age 45 (I turn 38 this year) then increase fixed income to perhaps 30%. My goal is 60/40 at retirement but my exact glide path to get there is not yet fully decided.

If and when I run out of tax advantaged space for bonds I will use the VG int term tax exempt fund in lieu of total bond market index. (My Roth's are filled up with REITs, SCV, and Some EM, so no bonds there as of now)

I also currently hold about 10% of my emergency fund in I Bonds, but consider that separate from my retirement assets.

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

Post by DSInvestor » Wed Jan 29, 2014 7:30 pm

1) Total Bond Market Admiral and Inflation Protected Securities Admiral
2) Solo 401k and Roth IRA. Tax advantaged only. Tax advantaged holds entire bond allocation and stocks. taxable is stocks only
3) TBM 50% of bonds, TIPS 50% of bonds
4) 60/40 stock/bond
Wiki

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

Post by HongKonger » Wed Jan 29, 2014 7:39 pm

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

Hong Kong Bond Index Fund

2) In which account what fixed income securities are held

Regular share dealing account - non taxable

3) Allocation as a percentage of Fixed Income

100%

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

10%

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

No to adding bonds. Yes to adding CDs.

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

Post by peppers » Wed Jan 29, 2014 7:54 pm

1. Stable Value Fund and Barclays Capital Government Credit Index
2. 401k
3. 67% and 33%
4. 60%
5. None
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Re: Bonds - Throw it all on the table!!!

Post by travelerfromsj » Wed Jan 29, 2014 8:20 pm

1. Vanguard Total Bond Market, Vanguard GNMA, and Vanguard Limited-Term Tax Exempt
2. The first two are in IRAs, and the munis are in taxable
3. 50%, 20%, 30%
4. 33% in bonds, which is age - 20. Yikes.
5. Due to a stellar 2013, we're getting pretty close to our number, and I think it's time to move to safety. I'm starting to look at reducing our stock holdings and buying individual bonds and CDs, possibly laddered. No firm plans yet, though.

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

Post by berntson » Wed Jan 29, 2014 8:37 pm

1) We invest in BND because that's by far the best option in my wife's 401k. If we had more flexibility, I would do a bond barbell with long-term treasuries and cash.

2) Wife's 401k.

3) 80% in BND and the rest in cash

4) We consider our bonds to be our emergency funds. So, depending on how you slice it, we're either 90/10 with no emergency fund or 100/0 with an emergency fund.

5) Repeating the first point, I would do a bond barbell mostly as a way to free up some tax-advantaged space. (Why have 100% bonds in your tax-advantaged space when you can have 30% in tax-advantaged and the rest in a savings account? And with the same or better after tax return!)

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

Post by NightOwl » Wed Jan 29, 2014 8:51 pm

Hi abuss368,

Age-20 in bonds; currently 20% in bonds. Fidelity Spartan U.S. Bond Index Advantage (FSITX) held in 401(k) is 100% of portfolio fixed income. Might add TIPS near retirement.

I'm honestly puzzled by the amount of (metaphorical) bandwidth expended on this board about bond allocation.

I get that people in or near retirement might want to shorten duration -- though if planning for a 20+ year retirement I think that's potentially a big mistake unless you are highly susceptible to behavioral mistakes related to NAV. I also get that people who have access to CDs and/or stable value funds in retirement accounts should carefully consider those options. For those of us many years from retirement (especially those who lack CD/stable value options), I don't get deviating from total bond, duration, stay the course.

I think that some people are way over-thinking this deal. I think that they think that they're out-thinking the bond market. I disagree.

There, I've thrown it all on the table!

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

Post by Stonebr » Wed Jan 29, 2014 9:14 pm

1. Stable Value in 401k.
2. Ally Bank -- combination of CD and Online Savings
3. iBonds.

50/50

I don't like market value bond funds and avoid them like a plague. If I had to be in one I'd probably stay short.

Retired and taking distributions. So, obviously, no plans to buy bonds other than rebalancing. I'll be taking my tax refund in iBonds, however. :happy
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Re: Bonds - Throw it all on the table!!!

Post by apex84 » Wed Jan 29, 2014 9:44 pm

Bonds are 20% of my retirement portfolio which is split between 403(b) plan & Roth IRA.

Vanguard Total Bond Market: 60% of fixed income
Vanguard Total International Bond: 20% of fixed income
Vanguard Inflation-Protected Securities: 20% of fixed income

I also hold both the Limited-Term & Intermediate-Term national muni funds in a taxable account as my cash reserves, but I don't count this money as part of my investment account.

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

Post by G-Money » Wed Jan 29, 2014 9:59 pm

1) TBM equivalent (fixed income portion of Vanguard Balanced Index Fund) & PenFed CDs.
2) TBM in 401(k). CDs in Roth IRA.
3) 25% TBM, 75% CDs.
4) Age-15 in bonds.
5) No plans to change fixed income allocation.
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Re: Bonds - Throw it all on the table!!!

Post by papito23 » Wed Jan 29, 2014 10:09 pm

ot1138 wrote:1) List the bond funds, individual bonds, CD's, etc. that you invest in
...
I keep all fixed income in taxable accounts. This is the opposite of what the wiki suggests. My reasoning for this is that my future expected returns for equities will be significantly higher than bonds, so I'd rather shelter as much equities as I can in TAA accounts.
This just came to me the other day. Not an original thought, but original to me. I can't figure out why I hadn't seen this on Bogleheads before, after reading hundreds of posts. Perhaps because so many are in high income tax brackets, that the tax inefficiency is just too hard to bear? Not my case.
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Re: Bonds - Throw it all on the table!!!

Post by joe8d » Wed Jan 29, 2014 10:11 pm

VG STIG
VG NY LT Tax Exp
VG Hi Yld
VG TBM /TIBM ( 20% Roth LS Growth Componet )
Ally CD Ladder
Ally Online Savings
Barclays Online Savings
EE Bonds (The old one's)
I bonds ( 1.6 real)
HH Bonds
Last edited by joe8d on Wed Jan 29, 2014 11:07 pm, edited 1 time in total.
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Re: Bonds - Throw it all on the table!!!

Post by castlemodesto » Wed Jan 29, 2014 10:25 pm

age 60 (just retired)
55% fixed 45% stocks

50% stable value ...3.5% in 403b ( can withdraw at any time to take advantage of higher rates elsewhere unless there is a run on the fund
20% ST bonds ... in ROTH (for income before medicare to quality for health insurance premium credits
20% CDs ... 7 year PenFed 3% in IRA( can withdraw all but $1000 if better rates turn up before 7 years since aged over 59.5)
10% I Bonds... 0.2% plus inflation ( can redeem after 12 months with tiny penalty if better rates come up either in I Bond or elsewhere

plan to mostly draw down fixed income first 13+ years :short term bonds (ROTHS) , stable value and CDs .....(by not planning on touching stocks for 13 years I hope to avoid the most serious sequence of returns risks) ; hopefully stocks will at least keep up with inflation
In about 3 years ( when hopefully returns are higher) start buying 10 year TIPS to create a yearly ladder for inflation protection ( at least until decide whether to annuitize (SPIA) some or all of the fixed income).
once stocks get above 60% probably start doing mix of fixed and bonds to fund TIPS ladder to keep fixed between 40 to 60%.

did a real SPIA of 1/4 of fixed funds. I still mentally count that as fixed (although it is income not assets now.
also invested some fixed assets into a rental house. still consider this as as like a fixed inflation adjusted asset as the equity is very likely to keep growing by inflation and produce bond like income (3+% pa)

With my fixed assets/ income I tried to have : diversified ,low risk,almost no volatility , with reasonable almost guaranteed returns (for the near future at least), with a reasonable amount of inflation protection. It is not completely liquid, but enough to have the ability to take advantage of the( hopefully) increasing interest rates in the next 5 years
No long term , no intermediate term (for the next few years), no international, no junk
No taxable

regrets: would rather have the ST Bonds (in ROTH) in 7 year PenFed,( better returns with no risk) but I think I have missed that boat. I doubt they will continue the 3% deal past Friday.
Last edited by castlemodesto on Wed Jan 29, 2014 10:58 pm, edited 2 times in total.

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

Post by pascalwager » Wed Jan 29, 2014 10:42 pm

US Treasury Inflation Savings Bonds (I Bonds): Treasury Direct; 17% of FI

Cash: bank savings; 83% of FI

Bonds and cash: 12% of portfolio

Plan to purchase $10k I Bond each year. If yields rise, might gradually transfer some equity money into my latent DFA one-year bond fund and VG short-term bond index.

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

Post by Sriracha » Wed Jan 29, 2014 11:03 pm

Fidelity Spartan US Bond Index Advantage (FSITX) in 401k
Fidelity Spartan Short Term Treasury Bond Index Advantage (FSBAX) in 401k
Vanguard Short Term Inflation-Protected Securities Index Admiral in tIRA

My AA is 65/35.

I'm about 60/40 Intermediate/short on the bond side with the above funds. I'm far enough away from retirement that if I could get a low cost intermediate bond fund index in the 401k that didn't include MBS (of which I'm not a fan), then the ratio probably wouldn't be so heavy on the short side. But with MBS in FSITX, the likelihood of rising rates at some point (let's say -- sometime before rates decrease all that much), and the fact that FSBAX is the only other bond index available to me in the 401k, I'm opting for this plan. Can't complain; they are all very low cost.
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Re: Bonds - Throw it all on the table!!!

Post by pjstack » Thu Jan 30, 2014 1:10 am

I've reduced it all to one fund, VBIAX, which is "moderate growth" balanced fund, 60% stock and 40% bonds.
I also have some (paper) I-Bonds, which brings my total AA to more like 40% stock and 60% bonds.
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Re: Bonds - Throw it all on the table!!!

Post by tm6391 » Thu Jan 30, 2014 2:44 am

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

Vanguard Total Bond Mkt Ix Ist Pls (VBMPX)

2) In which account what fixed income securities are held

All of it in a 401k with Vanguard

3) Allocation as a percentage of Fixed Income

99% of fixed income

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

30% bonds (not really age in bonds... I'm 35)

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

I'm currently happy with my entire bond allocation in one fund and one account so no plans to change that. I also don't have plans of increasing my bond allocation for another 5 years or so. I'm comfortable with 70/30.

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

Post by richard » Thu Jan 30, 2014 6:34 am

ot1138 wrote:I keep all fixed income in taxable accounts. This is the opposite of what the wiki suggests. My reasoning for this is that my future expected returns for equities will be significantly higher than bonds, so I'd rather shelter as much equities as I can in TAA accounts.
It really depends on your numbers, but that often is not the best strategy.

A large part, if not most, of equity returns are increases in value (as opposed to yield), which accumulate tax-free, so there would be no current tax on this portion if held in taxable. When you start spending from the portfolio, sales of stock in taxable are taxed at capital gains rates, while withdrawals from a 401(k) or IRA are taxed at ordinary income rates, which are likely to be higher. Also, remember that reinvested yield increases total basis.

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

Post by Exuberent » Thu Jan 30, 2014 7:35 am

Married - average age of husband and wife is 55

We invest in two ETFs for fixed income - BND (Vanguard Total Bond Market) and TIP (ishares Barclays TIPS Bond Fund)
All fixed income is in our IRAs
BND is 62% of our fixed income - TIP is 38%
We are 45% in Bonds (average age minus 10%)
No plans to add more funds or consolidate.

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

Post by linenfort » Thu Jan 30, 2014 7:59 am

abuss368 wrote: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.
1) What: Treasury notes and bonds .725
----------------------------------------- non-treasury holdings: .275
Vanguard Pennsylvania muni fund (#77) .08
National muni funds, intermediate and short-term .08
Vanguard intermediate corporate (VCIT) .08
Vanguard intermediate index (BIV) .025
Fidelity high-yield (SPHIX) .01


2) Where:
Munis in taxable of course
Corporate in Roth and 401(k)
Treasuries in tax-deferred where possible, with overflow in taxable

3) % of fixed income: listed with each item above.
There's a permanent portfolio ("pp") core within the grand total, and that dictates that long-term treasury bonds make up ~25% of the pp. (Note that long bonds are not nearly 25% of total holdings, just 25% of the pp core).

4) bonds overall: first and foremost, I maintain that 25% mentioned immediately above, but the pp core may become more or less of the grand total.
Overall, stocks/bonds ratio is about 50/50.

5) Plans: BIV and SPHIX are probably superfluous and I may get rid of them. Corporate+munis can never be more than treasuries. In other words, treasuries will always be 50% or more of bond total.

(Edit: added the missing l to superfluous only)
Last edited by linenfort on Fri May 23, 2014 3:34 pm, edited 2 times in total.
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Re: Bonds - Throw it all on the table!!!

Post by carolinaman » Thu Jan 30, 2014 8:16 am

1 - Vg ST Corp 8%, Vg InvGr 10%, Vg HY Corp 11%, DODIX 11%, Vg Muni 5%, SV 16%, CD 18%, TIPS 4%, Cash/MM 18%

2 - all are in tax deferred accounts except for munis and most of cash

3 - see #1

4 - my objective is age in bonds although my FI is slightly below that at 65% (age is 69)

As I take RMDs, I plan to invest in equities and munis in taxable accounts. I would also like to buy more TIPS, but only once the return is more favorable. CDs were recent purchase of Penfed 5 year CDs at 3%. If SV return continues to trend downward (LT 2% now) I may reinvest that in either CDs or better FI options. I recently sold some property which is why my cash is so high. I am still trying to figure out what to do with that.

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

Post by RNJ » Thu Jan 30, 2014 8:18 am

Average age of married couple minus 10 = 35% allocation to bonds. More of a trend than a rule. We had a good couple of years and moved a bit of money from stocks to bonds.

1) ~ 2/3 of bond holdings in intermediate-term bonds: VG Intermediate Treasuries fund in 401k & IRA, Baird Intermediate Muni in taxable, individual munis in taxable(an artifact from my days with an advisor).

2) ~ 1/4 in VG & Fido TIPS funds (IRA / 401k, respectively)

3) Remainder in cash and PenFed CDs, both in taxable.

I've recently gone a little longer in duration with my bond funds but I'm also holding more cash, keeping overall duration about the same. In extending the duration of funds (by holding more intermediate term in taxable), I also made a point of going safety first, opting for Baird rather than VG Intermediate TE, with Baird's shorter duration, higher quality, and - of course - lower yield.

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

Post by hudson » Thu Jan 30, 2014 8:23 am

I try to keep Larry Swedroe's advice in mind with bonds where he says something like: "Go with AAA/AA rated bonds."
Therefore, I like treasuries and AAA/AA municipal bonds...as follows:

Vanguard Intermediate-Term Tax-Exempt Fund Admiral Shares (not all AAA/AA)
Vanguard Intermediate-Term Treasury Fund Admiral Shares
Baird Intermediate Municipal Bond Fund Class Institutional (Closer to AAA/AA than Van. Intermed. Term Tax-Ex.)
Vanguard Inflation-Protected Securities Fund Admiral Shares
Penfed CDs
IBonds

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

Post by Cernel » Thu Jan 30, 2014 8:44 am

1) List the bond funds, individual bonds, CD's, etc. that you invest in
Vanguard's Intermediate Term Index Fund Admiral Shares
Vanguard's Intermediate Term Investment Grade Bond Fund Admiral Shares
Vanguard's Inflation Protected Securities Fund Admiral Shares
12 5-Year CDs ranging in rates from 2.09% - 2.66%

2) In which account what fixed income securities are held
The 3 Bond funds are in my Retirement accounts and the CDs are in my non-retirement account

3) Allocation as a percentage of Fixed Income
Not sure what you mean by this but my CDs represent 90% of my Cash allocation the other 10% is On-Line Savings. In regard to my Bonds they are equally split, thus each representing 1/3rd of my Bond Allocation.

4) Allocation to bonds overall (i.e. age in bonds, etc.)
My overall allocation is 50/45/5 (Equity/Bonds/Cash)
I don't follow any given strategy, per se, other than what I have documented in my IPS which says that wehn I turn 66 my overall allocation will move to 45/45/10 and then when I turn 80 my allocation will move to 40/50/10. I do review my IPS annually and could change this allocation but to date I haven't made any changes to my planned allocations through time.

5) Any other plans such as adding more bonds funds, consolidating and merging, etc.
Nothing more than following my re-balance strategy.

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

Post by abuss368 » Thu Jan 30, 2014 9:05 am

This is shaping up to be a very good thread.

Thank you Bogleheads.
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Re: Bonds - Throw it all on the table!!!

Post by White Coat Investor » Thu Jan 30, 2014 9:11 am

richard wrote:
ot1138 wrote:I keep all fixed income in taxable accounts. This is the opposite of what the wiki suggests. My reasoning for this is that my future expected returns for equities will be significantly higher than bonds, so I'd rather shelter as much equities as I can in TAA accounts.
It really depends on your numbers, but that often is not the best strategy.

A large part, if not most, of equity returns are increases in value (as opposed to yield), which accumulate tax-free, so there would be no current tax on this portion if held in taxable. When you start spending from the portfolio, sales of stock in taxable are taxed at capital gains rates, while withdrawals from a 401(k) or IRA are taxed at ordinary income rates, which are likely to be higher. Also, remember that reinvested yield increases total basis.
On the contrary, in our low yield times, it is the right strategy for almost everyone. Run the numbers and you'll see. You have to consider not only the tax-efficiency of the asset, but also the expected return. Several changes in recent years make bonds in taxable much more attractive.

1) Low yields/low expected returns for bonds
2) Higher taxes on stocks- 23.8% for some
3) Smaller, sometimes even negative, difference between muni yields and treasury yields

Run the numbers for yourself. You might be very surprised. I don't have a taxable account, but if I did, it would be filled with I Bonds and Munis. This can be altered, of course, if you donate appreciated shares of equities to charity or just plan to hold them to death to get the step-up in basis then. But for anyone in a moderate to high tax bracket actually planning to sell their equities at some point, you're going to want bonds in taxable.
1) Invest you must 2) Time is your friend 3) Impulse is your enemy | 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course

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

Post by midareff » Thu Jan 30, 2014 9:19 am

Age 66, retired and in drawdown. Desired AA is roughly 48/48/4, equities, bonds and cash. At the moment it is closer to 45/52/3 as I draw from bonds in taxable monthly and wanted a little extra cushion there after my last rebalance, the end of last year. All finds cited are VG. At the present time my AA is as above with little inclination to change or review it for another age 70. I'm not overly concerned about inflation as 70% of our income is cola'd and most of our expenses are fixed.

About 18% of all funds in the total portfolio are in tax-exempt bonds in a taxable account. They are Limited Term and Intermediate Term in approximately a 1:2 relationship. Automatic monthly withdrawals are against IT and dividends from Total US, SV and Total x-US and Small Int are paid to my bank. Total WR slightly < 2.5% @ this time, all from taxable.

The remaining bonds are in a TIRA and are all corporate. ST IG, IT IG and HY. ST IG and HY are in a 1:2 relationship, roughly 6% and 12% of total, with the balance being IT IG. The other funds in my TIRA are REITs and Health Care, which are about 16% of total. I chose to use corporates for the extra yield and more favorable yield to duration ratio since I am 5 years from first RMD, which I feel is more than adequate for any recovery of a black swan hit to bonds. TIRA produces slightly over $2K monthly in dividends which are reinvested.

Statistically the bond portfolio has a weighted average duration of 4.55 years, a 3.65% weighted distribution yield, a REAL yield of -.26% (12 month # and those numbers may change a bit @ tomorrow's COB) vs. a much larger negative REAL number for TBM, which I also calculate as a reference but don't currently own. I used to own the IT Index and TIPS, but moved away from them about 2 years ago when I rolled into my current portfolio when I retired. I had been "stuck" with Nationwide and Schwab as employer account options and had accounts at Fido (taxable and Roth) and VG (taxable) outside of work. When I am closer to RMD I will have a better look at government bond interest rates, CPI, etc., and make a determination if I want to move back to the IT Index, GNMA's, TIPS, etc., all of which I have owned previously, and had their time. Everything is on excel spreadsheets and I export the latest M* Views and everything updates.
Last edited by midareff on Thu Jan 30, 2014 9:35 am, edited 1 time in total.

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

Post by ML 59 » Thu Jan 30, 2014 9:20 am

38% - TBM (VBTLX)
35% - IT Treasury (VFITX)
19% - IT Investment Grade (VFICX)
9% - IT Bond Index (VBILX)

All in Tax Deferred (401s and IRAs).

Roughly: age – 20; all in bond funds at this time.

Considering CD laddering, and still trying to understand if TIPS would be beneficial.

abuss368, Your threads (and others') on bonds have been very helpful.

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

Post by ofcmetz » Thu Jan 30, 2014 9:29 am

We have lots of accounts due to the wife holding two part time jobs and my job.

Fixed Income: 30% Target for portfolio. We are using new contributions to move towards a goal of 50% Stable Value/ 50% Bond Funds. I'm not counting cash held in bank accounts.

(Percentages are of fixed income)

His 457B: 23.3% Stable Value and 5% PIMCO Total Return
His 403B: 56.3% TIAA Traditional
Her 401K: no fixed income
Her 403B: no fixed income
Her ROTH: 15.3% Vanguard Intermediate Term Bond Index Fund
His ROTH: no fixed income
Treasury Direct: negligible amount in I Bonds

Been busy working with all the ice and snow here so haven't been able to spend much time posting.

Jeff
Never underestimate the power of the force of low cost index funds.

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

Post by greg24 » Thu Jan 30, 2014 9:36 am

Total Bond Market in our IRAs.
In my 403b, TBM, TIPS and TIAA Traditional.
In my wife's 401k, ~TBM and ~TIPS.

We held age in bonds until we reached age 40 a couple years ago. I'm plannning on sticking at 60/40 for the foreseeable future. I appreciate the diversification and safety of bonds, so I had what many around here consider "too much bonds" in my 30s. But I also can't see myself approaching 50 and putting half my investments in bonds. I'm going with my own "permanent portfolio" of 60/40.

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

Post by linuxizer » Thu Jan 30, 2014 9:36 am

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

VFSTX (Vanguard Short-term Investment-Grade)

2) In which account what fixed income securities are held

Roth IRA (we have no taxable investments)

3) Allocation as a percentage of Fixed Income

100%

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

Age in bonds. (low 30's)

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

May add a small amount of IT or LT Treasuries at some point for their interaction with the stock side of the portfolio.

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

Post by BuckyBadger » Thu Jan 30, 2014 9:42 am

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

Vanguard Total US Bond index

2) In which account what fixed income securities are held

Mostly in His 401k. Some in Her 403b because it's easier to tweak my allocation for on-the-fly rebalancing.

3) Allocation as a percentage of Fixed Income

100%. No substantial cash other than EF and short term savings. I.e. no cash earmarked for retirement.

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

Right at 305 for two 33 year olds.

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

Will gradually increase as we get older to about 5% below our age (i.e. 35% at 40 years old)

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

Post by gkaplan » Thu Jan 30, 2014 9:53 am

abuss368 wrote:Bogleheads there have been many excellent threads over the last couple of weeks related to bonds. I started a couple with polls and the results were excellent. Often a poll is limited, needs more options, etc.

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.

Best.
1) TSP G Fund and Vanguard TIPS fund (VAIPX)

2) TSP and Roth IRA

3) TSP – 22.5%, TIPS fund 77.5%

4) How does this differ from 3, above? [Forty Percent]

5) Once my retirement papers go through, I plan to transfer my TIPS fund to Vanguard. 2/3 will go to the short-term investment grade fund, and 1/3 will go to the intermediate term investment grade fund.

(Number (4) edited to show percentage of fixed income to overall allocation.)
Last edited by gkaplan on Thu Jan 30, 2014 3:56 pm, edited 2 times in total.
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Re: Bonds - Throw it all on the table!!!

Post by richard » Thu Jan 30, 2014 10:10 am

EmergDoc wrote:
richard wrote:
ot1138 wrote:I keep all fixed income in taxable accounts. This is the opposite of what the wiki suggests. My reasoning for this is that my future expected returns for equities will be significantly higher than bonds, so I'd rather shelter as much equities as I can in TAA accounts.
It really depends on your numbers, but that often is not the best strategy.

A large part, if not most, of equity returns are increases in value (as opposed to yield), which accumulate tax-free, so there would be no current tax on this portion if held in taxable. When you start spending from the portfolio, sales of stock in taxable are taxed at capital gains rates, while withdrawals from a 401(k) or IRA are taxed at ordinary income rates, which are likely to be higher. Also, remember that reinvested yield increases total basis.
On the contrary, in our low yield times, it is the right strategy for almost everyone. Run the numbers and you'll see. You have to consider not only the tax-efficiency of the asset, but also the expected return. Several changes in recent years make bonds in taxable much more attractive.

1) Low yields/low expected returns for bonds
2) Higher taxes on stocks- 23.8% for some
3) Smaller, sometimes even negative, difference between muni yields and treasury yields

Run the numbers for yourself. You might be very surprised. I don't have a taxable account, but if I did, it would be filled with I Bonds and Munis. This can be altered, of course, if you donate appreciated shares of equities to charity or just plan to hold them to death to get the step-up in basis then. But for anyone in a moderate to high tax bracket actually planning to sell their equities at some point, you're going to want bonds in taxable.
Lower bond yields, less of a spread between capital gains taxes and ordinary income taxes and less of a spread between munis and treasuries all push against the conventional advice of holding tax efficient stocks (and munis) in taxable and bonds (and tax inefficient stocks) in tax-deferred accounts. How far they push depends on the numbers.

I find it hard to believe all of the factors you list will persist, although anything is possible. A slower economy associated with low bond yields should also diminish stock returns, higher taxes on stocks depends on income level, the spread between ordinary rates and capital gains rates can easily change and at some point the traditional positive spread between munis and treasuries should return.

Assume no yield on stocks or bonds and that stocks increase in value over time. Holding stocks in taxable results in no tax until they are sold, with increases in value taxed at capital gains rates. Holding stocks in tax-deferred results in no tax until they are withdrawn, with withdrawals taxed at ordinary income rates. So long as cap gains rates are lower than ordinary income rates, holding stocks in taxable wins. Add interest on bonds and dividends on stocks and it becomes a question of numbers (further complicated by the frequently debated question of whether one should discount the value of assets, especially in tax-deferred, due to tax rates).

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

Post by poppa23 » Thu Jan 30, 2014 10:19 am

70 /30 Bond Stock... I feel I dont need to take any risk as I have hit our number and I still have 10 years to work to increase that number..
90 % in individual California Muni Bonds GO and Revenue AA or better with various maturity dates and various regions throughout California for diversity.
10% In Interm Term Tax Exempt to act as my savings account...

All coupon money is reinvested in bonds and all kept in taxable account. Tax free space is 100 % equity...

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

Post by midareff » Thu Jan 30, 2014 10:38 am

Sooooo many roads to Dublin.

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

Post by abuss368 » Thu Jan 30, 2014 12:43 pm

ML 59 wrote:
abuss368, Your threads (and others') on bonds have been very helpful.
Thank you.

That is what makes this forum so great!
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Thu Jan 30, 2014 12:47 pm

gkaplan wrote:
abuss368 wrote:Bogleheads there have been many excellent threads over the last couple of weeks related to bonds. I started a couple with polls and the results were excellent. Often a poll is limited, needs more options, etc.

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.

Best.

4) How does this differ from 3, above.
Simple - are you "age in bonds" or "age something or another" or "lost in space"?
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 abuss368 » Thu Jan 30, 2014 12:49 pm

poppa23 wrote:70 /30 Bond Stock... I feel I dont need to take any risk as I have hit our number and I still have 10 years to work to increase that number..
Congrats! Isn't that a great position to be in?
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 fishnskiguy » Thu Jan 30, 2014 1:06 pm

In our 25/75 stock/ bond portfolio, our fixed income breakdown is:

Five year rotating CD ladder at credit union: 38%
3% real I-bonds: 25%
TIPS and TIPS fund: 15%
Short term bond index fund: 12%
Total bond market index fund: 10%

All FI is in tax advantaged accounts except half of the CD ladder is in taxable due to no room in IRAs.

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

Post by abuss368 » Thu Jan 30, 2014 1:15 pm

This is a really good thread thus far. I was corresponding with livesoft a few days ago and I agree that one thing is probably clear with bonds: An investor can probably own many, a couple, or one single bond fund, and will probably end up in the same place with very close results.

The simplicity of bond investing. It appears many bond funds are not needed.

Keep investing simple.
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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