Individual treasury bonds vs FUND

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Ca$h
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Joined: Sun Nov 04, 2018 4:17 pm

Individual treasury bonds vs FUND

Post by Ca$h »

Hello Bogles!

I'm planning on putting aside some cash for a possible down payment. (Possible because I own a house that I could live in forever, although it's not my dream house. If there were a market downturn, I'd gladly upsize. I'm not interested in paying today's red-hot prices and having to work the extra decade to pay off a larger place.)

I'm planning on slowly building up this possible down-payment in an account separate that other retirement/savings accounts--separate for the sake of keeping track of what money is for what.

I've decided to put most or all of this cash in Treasuries and was planning on just going to treasuries direct to buy them. Sorry for the long preamble, here are my 2 questions:

1- Is there any advantage from buying from treasurydirect vs through Vanguard (where I have other savings)?

2 - What is the role of a Treasury fund (same question applies to a TIPS fund) in a portfolio? When does it make sense to buy, say, VSIGX or similar? I'm planning on buying and most likely holding until bonds mature so can't imagine a fund would be beneficial in my situation, this is asked out of curiosity, ie I can't see an advantage to a fund in this situation, yet they exist...

Thank you and have a happy Friday!
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WoodSpinner
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Re: Individual treasury bonds vs FUND

Post by WoodSpinner »

OP,

I would use a short term bond fund or money-market.

You don’t know exactly when you will need to deploy the money so it’s difficult to match duration to bond funds or individual bonds. Plus you may not have the luxury of waiting for bonds to mature.

WoodSpinner
mega317
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Re: Individual treasury bonds vs FUND

Post by mega317 »

I believe treasury direct will let you buy in increments smaller than 1000 dollars. This likely doesn’t matter for you. Buying instead through a brokerage will make it possible to sell before maturity if it turns out you want to do that.

A fund will function like a ladder (doesn’t mature, constant duration) and is considerably faster to manage. Some people really take exception to calling it easier as maintaining your own individual bonds is not that hard. A fund will fluctuate in value, but so will your individual bonds, it’s just easier to see with the fund.
https://www.bogleheads.org/forum/viewtopic.php?t=6212
dbr
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Re: Individual treasury bonds vs FUND

Post by dbr »

Ca$h wrote: Fri May 13, 2022 7:57 am
2 - What is the role of a Treasury fund (same question applies to a TIPS fund) in a portfolio? When does it make sense to buy, say, VSIGX or similar? I'm planning on buying and most likely holding until bonds mature so can't imagine a fund would be beneficial in my situation, this is asked out of curiosity, ie I can't see an advantage to a fund in this situation, yet they exist...

Thank you and have a happy Friday!
For most personal investors most of the money in fixed income is part of a portfolio of stocks and bonds set at a certain level of risk and return for the long run. Bond funds are a highly convenient and practical building block for that purpose.

It may be you have not yet seen a need for anything except equities for long term holdings. At some point you would want to address that.
jebmke
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Re: Individual treasury bonds vs FUND

Post by jebmke »

WoodSpinner wrote: Fri May 13, 2022 8:45 am OP,

I would use a short term bond fund or money-market.

You don’t know exactly when you will need to deploy the money so it’s difficult to match duration to bond funds or individual bonds. Plus you may not have the luxury of waiting for bonds to mature.

WoodSpinner
This is what I would do. 99% of the Short-term Treasury Index Fund (Vanguard) are in 1-3 years and average duration is 1.9 years. ER is 7bp.
When you discover that you are riding a dead horse, the best strategy is to dismount.
lostcoast
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Re: Individual treasury bonds vs FUND

Post by lostcoast »

OP, read the posts at viewtopic.php?t=377583 and see what you think.
Buying through Vanguard is what I do.
jebmke
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Location: Delmarva Peninsula

Re: Individual treasury bonds vs FUND

Post by jebmke »

Ca$h wrote: Fri May 13, 2022 7:57 am I'm planning on putting aside some cash for a possible down payment. (Possible because I own a house that I could live in forever, although it's not my dream house. If there were a market downturn, I'd gladly upsize. I'm not interested in paying today's red-hot prices and having to work the extra decade to pay off a larger place.)
Not part of your original topic but keep in mind that if the housing market comes off those red hot prices, your existing house may well be affected. I assume that your cash build-up is to cover the difference between your new house equity and the existing equity in your current home which would be sold.
When you discover that you are riding a dead horse, the best strategy is to dismount.
Topic Author
Ca$h
Posts: 8
Joined: Sun Nov 04, 2018 4:17 pm

Re: Individual treasury bonds vs FUND

Post by Ca$h »

All good input, thanks for your thoughts!
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