Bonds - Throw it all on the table!!!

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

Post by abuss368 » Sat Dec 09, 2017 7:00 pm

Bogleheads -

I started this thread almost 4 years ago and it has provided a wealth of information, strategies, and perspective.

I am curious, since I started this thread, if thoughts and perspectives have evolved or changed regarding International Bonds as an asset class and the strategy as recommended by Vanguard investment experts (i.e. 30% of fixed income allocation).

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

Post by BuyAndHoldOn » Sat Dec 09, 2017 9:27 pm

abuss368 wrote:
Sat Dec 09, 2017 7:00 pm
Bogleheads -

I started this thread almost 4 years ago and it has provided a wealth of information, strategies, and perspective.

I am curious, since I started this thread, if thoughts and perspectives have evolved or changed regarding International Bonds as an asset class and the strategy as recommended by Vanguard investment experts (i.e. 30% of fixed income allocation).

Best.
To answer your question above: With the distortions by Central Banks, I have no interest in International bonds now. And probably for the rest of this decade, and who knows how long after that. But I am open to the idea in general. And some parts of the world (read: EM bonds) have performed well, but you had to get in at the right time.

To answer the original question:

1) List the bond funds, individual bonds, CD's, etc. that you invest in Total bond/ETF equivalent, VMLTX short-term Muni, and MUB the S&P Indexed Muni bond ETF
2) In which account what fixed income securities are held Taxable. I want stable assets to be accessible; and with such low returns + nontaxable muni bonds, my tax situation is not really impacted.
3) Allocation as a percentage of Fixed Income 100%. I am pleased with my Credit Union *except* for their CDs/investment products.
4) Allocation to bonds overall (i.e. age in bonds, etc.) currently ~20% of invested assets. The % is not what matters to me; it is the amount of accessible savings for either emergencies or future purchasing needs as they arise.
5) Any other plans such as adding more bonds funds, consolidating and merging, etc I plan to buy treasuries *if* yields move up more. I wouldn't buy so many taxable bonds if Municipal bonds had higher yields [adjusting for duration and credit risk], and I would buy state-specific municipal bonds (avoid state income tax) if I had more money to invest in bonds, and was confident I would not move states again.

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

Post by abuss368 » Sat Dec 30, 2017 2:38 pm

Our Vanguard bond funds and money market fund paid the monthly dividend today. It is nice to see the yields starting to increase. This must be very helpful to retirees.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Sat Dec 30, 2017 11:54 pm

Does anyone expect the Vanguard Intermediate TIPS funds to have a better year in 2018? With yields rising, will the dividends increase?
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Re: Bonds - Throw it all on the table!!!

Post by Doc » Sun Dec 31, 2017 8:11 am

abuss368 wrote:
Sat Dec 30, 2017 11:54 pm
Does anyone expect the Vanguard Intermediate TIPS funds to have a better year in 2018? With yields rising, will the dividends increase?
Not enough to notice unless they sell a whole lot of shorter maturities and buy longer. In that case they raise dividends at the cost of taking capital losses which won't show up on the divs. Bad policy in my opinion.
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Re: Bonds - Throw it all on the table!!!

Post by siamond » Sun Dec 31, 2017 7:40 pm

abuss368 wrote:
Sat Dec 09, 2017 7:00 pm
I am curious, since I started this thread, if thoughts and perspectives have evolved or changed regarding International Bonds as an asset class and the strategy as recommended by Vanguard investment experts (i.e. 30% of fixed income allocation).
Actually, yes. Originally, I just couldn't see the point of diversifying bonds. Now, I would happily do so if there was a low ER global bonds fund. Although frankly, one strategy or another (US bonds or diversified bonds) is quite unlikely to make much of a difference, and clearly did not with the known past returns. See a fairly detailed study in this blog entry.

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

Post by abuss368 » Mon Jan 01, 2018 11:22 am

siamond wrote:
Sun Dec 31, 2017 7:40 pm
abuss368 wrote:
Sat Dec 09, 2017 7:00 pm
I am curious, since I started this thread, if thoughts and perspectives have evolved or changed regarding International Bonds as an asset class and the strategy as recommended by Vanguard investment experts (i.e. 30% of fixed income allocation).
Actually, yes. Originally, I just couldn't see the point of diversifying bonds. Now, I would happily do so if there was a low ER global bonds fund. Although frankly, one strategy or another (US bonds or diversified bonds) is quite unlikely to make much of a difference, and clearly did not with the known past returns. See a fairly detailed study in this blog entry.
Thank you for sharing. Over the past few years, in terms of adding international bonds, I have learned that it appears to not make much difference one way or another.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Mon Jan 01, 2018 12:07 pm

I am curious how many Bogleheads simply use only one bond fund and have no need for any additional funds or complexity.
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Re: Bonds - Throw it all on the table!!!

Post by Doc » Mon Jan 01, 2018 12:20 pm

abuss368 wrote:
Mon Jan 01, 2018 12:07 pm
I am curious how many Bogleheads simply use only one bond fund and have no need for any additional funds or complexity.
17,429 ± :D
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Re: Bonds - Throw it all on the table!!!

Post by spdoublebass » Mon Jan 01, 2018 12:36 pm

abuss368 wrote:
Mon Jan 01, 2018 12:07 pm
I am curious how many Bogleheads simply use only one bond fund and have no need for any additional funds or complexity.
I think I replied to a different thread, but here it is again anyway.
I use two funds for stocks, so mentally, adding complexity to my bond funds help me not tinker with my stock allocation. Also, this is all new to me, so learning about Bonds is something I need to do and much more complex than I ever thought.

I only have 10% in bonds, so that’s pretty hard to screw up. The only thing I’d toss out there for discussion is this, if you are going to add Int Bonds, why not add the EM fund as well? Say at a 2:1 ratio. So if you want 30% in Int. Bonds, why not go 20% Int Bond and 10% EM Bond? If you look at that combined return it’s much more in line with TBM. Also if you follow the world market portfolio, which I’m not recommending only referencing, market weight of EM bonds are lacking in TIBM. The figures are off but it’s roughly 2:1 TIBM to EM Bond.
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Re: Bonds - Throw it all on the table!!!

Post by abuss368 » Mon Jan 01, 2018 12:59 pm

Doc wrote:
Mon Jan 01, 2018 12:20 pm
abuss368 wrote:
Mon Jan 01, 2018 12:07 pm
I am curious how many Bogleheads simply use only one bond fund and have no need for any additional funds or complexity.
17,429 ± :D
Ha ha! How did you calculate that number?
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Re: Bonds - Throw it all on the table!!!

Post by Doc » Mon Jan 01, 2018 1:14 pm

abuss368 wrote:
Mon Jan 01, 2018 12:59 pm
Doc wrote:
Mon Jan 01, 2018 12:20 pm
abuss368 wrote:
Mon Jan 01, 2018 12:07 pm
I am curious how many Bogleheads simply use only one bond fund and have no need for any additional funds or complexity.
17,429 ± :D
Ha ha! How did you calculate that number?
I just added up all the posters who never responded to any of Swedroe's bond posts.
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 abuss368 » Mon Jan 01, 2018 1:30 pm

Doc wrote:
Mon Jan 01, 2018 1:14 pm
abuss368 wrote:
Mon Jan 01, 2018 12:59 pm
Doc wrote:
Mon Jan 01, 2018 12:20 pm
abuss368 wrote:
Mon Jan 01, 2018 12:07 pm
I am curious how many Bogleheads simply use only one bond fund and have no need for any additional funds or complexity.
17,429 ± :D
Ha ha! How did you calculate that number?
I just added up all the posters who never responded to any of Swedroe's bond posts.
Doc -

That was good! :beer

Happy New Year!
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Re: Bonds - Throw it all on the table!!!

Post by Broken Man 1999 » Mon Jan 01, 2018 1:34 pm

Currently our bond portion is 49% of our portfolio. All of our portfolio is in tax-advantaged plans, save $27.09 in taxable.

Bonds are scattered across these accounts:

Vanguard Annuity
My TIRA
Wife's TIRA
US Savings Bonds Series I and Series EE (Vast majority in Series I held as paper bonds, remainder at Treasury Direct)

Breakdown of Bonds:

Vanguard Short Term Treasury: 41.6%
Vanguard intermediate Term Treasury: 16.5%
Vanguard Total Bond: 28.3%
US Savings Bonds Series I and Series EE: 13.6%

I will be trimming the number of bond funds in 2018, most likely exchanging Vanguard Intermediate Term Treasury for Vanguard Total Bond.

Broken Man 1999
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Re: Bonds - Throw it all on the table!!!

Post by peppers » Mon Jan 01, 2018 2:48 pm

Long story short version 401k fund changes

The bond fund in my 401k will no longer be available in 2018. The new bond fund will be a "Fund of Funds", 5 to be exact.

Breakdown/ % of fund

Pimco Total Return 25.51
Western Asset Core Plus Bond I 25.49
BlackRock US Debt Index Fund E 23.16
BlackRock Core Bond K 12.98
Western Asset Core Bond I 12.86

Current ER is 0.21
Duration 6.22
Weighted average maturity 10.66

My existing Stable Value Fund will move into the new SVF.
I will have the option of opening a brokerage link account, so I am considering moving the bond fund assets there.
"..the cavalry ain't comin' kid, you're on your own..."

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

Post by abuss368 » Mon Jan 01, 2018 2:58 pm

peppers wrote:
Mon Jan 01, 2018 2:48 pm
Long story short version 401k fund changes

The bond fund in my 401k will no longer be available in 2018. The new bond fund will be a "Fund of Funds", 5 to be exact.

Breakdown/ % of fund

Pimco Total Return 25.51
Western Asset Core Plus Bond I 25.49
BlackRock US Debt Index Fund E 23.16
BlackRock Core Bond K 12.98
Western Asset Core Bond I 12.86

Current ER is 0.21
Duration 6.22
Weighted average maturity 10.66

My existing Stable Value Fund will move into the new SVF.
I will have the option of opening a brokerage link account, so I am considering moving the bond fund assets there.
Why would they offer additional complexity for bond funds with a fund of fund?
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Re: Bonds - Throw it all on the table!!!

Post by peppers » Mon Jan 01, 2018 3:18 pm

abuss368 wrote:
Mon Jan 01, 2018 2:58 pm
peppers wrote:
Mon Jan 01, 2018 2:48 pm
Long story short version 401k fund changes

The bond fund in my 401k will no longer be available in 2018. The new bond fund will be a "Fund of Funds", 5 to be exact.

Breakdown/ % of fund

Pimco Total Return 25.51
Western Asset Core Plus Bond I 25.49
BlackRock US Debt Index Fund E 23.16
BlackRock Core Bond K 12.98
Western Asset Core Bond I 12.86

Current ER is 0.21
Duration 6.22
Weighted average maturity 10.66

My existing Stable Value Fund will move into the new SVF.
I will have the option of opening a brokerage link account, so I am considering moving the bond fund assets there.
Why would they offer additional complexity for bond funds with a fund of fund?
That's another part of the "Long story".
Globalmegacorp has 3 401k plans. My work group's 401k plan is moving to the largest one. The Fund of Funds has an inception date of October 1999.

Hint: This all goes back to when ol' Mother Bell cut the 7 kids loose.....and then the sibling rivalry started.
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Re: Bonds - Throw it all on the table!!!

Post by WpgGuy » Mon Jan 01, 2018 4:00 pm

I'm in my late 30s, and my target AA is 80% stock, 20% bonds (currently 82/18 to be precise). Bond holdings are:

All bonds held in taxable account, of the bond holdings they are:
44% VCAIX - California Intermediate Muni (I live in CA), 0.19% ER, 5.6 year ave duration
44% VWITX - National Intermediate Muni, 0.19% ER, 5.3 year ave duration
12% VTEB - National Intermediate Muni, 0.09% ER, 5.7 yr ave duration

Overall ER is 0.18%, average duration 5.5yr.

My overall strategy after reading tons about bonds on this forum + books, was to go with a 50/50 split between CA muni + National Muni's, however a combination of Schwab's high mutual fund purchase fees & higher ERs on non-Vanguard bond funds forced me into a slightly different mix at the cost of some CA tax efficiency. CMF is the only other option for CA intermediate w/ Schwab, but has 0.25% ER, so this disqualified it for me. The other option is moving everything to Vanguard, but I like many others I really like Schwab's customer service & website.

As others have stated, I hold no bonds in my tax free account as I'd rather use the tax advantaged space for index funds which are more likely to grow & benefit. Simplicity is also a factor, as my taxable portfolio is quite a bit larger than my tax free, so I'm forced to hold some bonds in taxable whether I like it or not, so might as well keep things simple and hold them at one brokerage.

As for my AA choice of 20% bonds, this was driven by three major factors: my tolerance for risk (medium), the overall price of equities (high) and target retirement date (~45). As I get closer to retirement or the S&P 500 PEs get too frothy, I'll probably move this up to 30%.

Anyhow, that's my bond strategy & reasoning.

P.S. Much thanks to this board and it's members, as I've learned so much from you all. Good luck to everyone in 2018!

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

Post by stimulacra » Mon Jan 01, 2018 4:16 pm

IRA

Bond (desired allocation):
- 1/3 VBTLX: Vanguard Total Bond Market Admiral Shares
- 1/3 VICSX: Vanguard Intermediate Term Corporate Bond Admiral Shares
- 1/3 VIPSX: Vanguard Inflation Protected Securities Investor Shares

Bonds make up 30% of my total allocation so I try to keep each fund at around 10% when I rebalance.

This is a new allocation for me, beginning of 2017 I was closer to 20% bond allocation overall.

For 401K, bonds are 30% in some total bond fund, no ticker provided by the plan administrator.

Zero bonds in taxable.

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

Post by Taylor Larimore » Mon Jan 01, 2018 7:07 pm

Why would they offer additional complexity for bond funds with a fund of fund?
Peppers:

A "fund of fund" reduces complexity. In your case it consolidated 5 bond funds into 1.

Happy New Year!
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Re: Bonds - Throw it all on the table!!!

Post by aj76er » Mon Jan 01, 2018 8:02 pm

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

* Vanguard Total Bond Market Fund Institutional Class
* Ally 11-month no-penalty CDs
* I-Bonds

2) In which account what fixed income securities are held

* TBM fund is held in 401k

3) Allocation as a percentage of Fixed Income

Only TBM is represented in my portfolio that is used for rebalancing, and thus it has a "percentage" assigned to it.
My cash holdings are viewed in terms of "years of living expenses" and are not used for periodic rebalancing with other assets.
I used to combine bonds+cash (into a single portfolio) but it made the mental model difficult to work with. CDs and I-Bonds are difficult to rebalance with and, as a percentage of a portfolio, they don't really make sense to me.
Rather, I view my cash holdings as having a specific purpose - to guard against "sequence of returns risk" in early retirement. In addition, it could also be viewed as a large emergency fund (for when the market is down); and also as a sleep aid :P

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

I use a moving target that depends on both age and portfolio size. This is represented as a google sheets equation in my rebalancing spreadsheet, so I never need to think about it. Currently, it is something like:

BondAA = (15% + (35%-15%)*CurrentPortBalance/DesiredPortBalance)
IF BondAA >= AGE
BondAA = AGE
ELSE IF BondAA <= AGE-15
BondAA = AGE - 15

So, the primary driver is a savings target to a desired portfolio size (generating enough to cover living expenses at 2-3% SWR). Then I put limits based on my age (ie. not too conservative and not too aggressive).

Again, my cash holdings are outside of the above equation (eg. not counted in DesiredPortBalance).

I currently have 3X living expenses in cash holdings.
CDs = 2X
I-Bonds = 1X

Currently, I'm only adding to I-Bonds (to get up to 2X minimum)

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

I constantly think about adding a TIPs fund. I am also intrigued by many (pre-2008) posts about adding TIPs funds; but lately not so much. I also think about using a pure treasury fund (instead of TBM).
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Re: Bonds - Throw it all on the table!!!

Post by Portfolio7 » Mon Jan 01, 2018 8:24 pm

1) Right now I'm 100% Stable Value, though 2 years ago I was 100% Intermediate Treasuries. The SV fund yield is 1% higher than Int Trsy's now.
2) I pretty much only have tax-advantaged accounts.
3) About 32% bonds for the year.
4) FI allocation is age less 10-20. depending on how I perceive the market. 10= high risk 15 = base, 20 = low risk
5) I try to keep my bond approach simple, but am also trying to learn more about it. Reading Swedroe's bond book right now.
An investment in knowledge pays the best interest.

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

Post by The529guy » Mon Jan 15, 2018 11:36 am

This morning I thought I'd revisit one of my favorite posts.

70/30, with the 30% across:

55% TIAA Traditional - 403b
33% Stable Value Fund - 401k
12% Vanguard California Long-Term Tax-Exempt Fund (VCITX) - taxable

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

Post by abuss368 » Sat Nov 24, 2018 3:30 pm

Has anyone changed their bond allocation with he increase in interest rates? Is anyone worried about a bond selloff?

We have stayed the course with Total Bond Index and Intermediate Term Tax Exempt.

Thoughts and perspectives welcome!
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Re: Bonds - Throw it all on the table!!!

Post by UpperNwGuy » Sat Nov 24, 2018 3:35 pm

I split my bond holdings evenly between Total Bond and Intermediate Term Tax Exempt. Together they make up 40% of my portfolio. I am staying the course. I am not tempted to own certificates of deposit or pure Treasury funds.

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

Post by AerialWombat » Sat Nov 24, 2018 3:49 pm

abuss368 wrote:
Sat Nov 24, 2018 3:30 pm
Has anyone changed their bond allocation with he increase in interest rates? Is anyone worried about a bond selloff?

We have stayed the course with Total Bond Index and Intermediate Term Tax Exempt.

Thoughts and perspectives welcome!
I have not changed my overall AA since I started this securities journey back in April. Still at 30/70 stocks bonds.

What I did do, however, was panic and dump my US and ex-US small cap equity holdings last week (VSS and VBR). With that cash I bought more Wellesley and a REIT ETF. This is all in 401k.

I count SRET as part of my equity portion, although they are nearly half mortgage REIT so I could see somebody arguing that it has much more bond-like interest rate risk.

50% of my entire securities portfolio is Vanguard muni bond funds (in taxable).

I think I’m getting closer to a portfolio I can live with, and it’s only 4 funds. Light years better than the dozen I had over the summer.

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

Post by mikeyzito22 » Sat Nov 24, 2018 4:00 pm

abuss368 wrote:
Mon Feb 10, 2014 11:08 pm
I believe it is fair to say that Bogleheads employ many different strategies in terms of bonds in their portfolios.

I am of the opinion that whether an investor invests in one or more bond funds, the end result is probably close to the same over the long term. Would this be a fair and reasonable assessment?
Yes, and after reading this, I think the three fund portfolio is dead. Almost every answer has multiple bond funds in it.

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

Post by sambb » Sat Nov 24, 2018 4:07 pm

i use TBM in tax deferred and intermed term and LT term tax exempt in taxable.

The concept of tax efficient fund placment is flawed in high tax brackets since tax equivalent muni yields are really good, and one would have to pay taxes on index fund dividends. I wish that wiki would be revised more.

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

Post by abuss368 » Sat Nov 24, 2018 5:20 pm

mikeyzito22 wrote:
Sat Nov 24, 2018 4:00 pm
abuss368 wrote:
Mon Feb 10, 2014 11:08 pm
I believe it is fair to say that Bogleheads employ many different strategies in terms of bonds in their portfolios.

I am of the opinion that whether an investor invests in one or more bond funds, the end result is probably close to the same over the long term. Would this be a fair and reasonable assessment?
Yes, and after reading this, I think the three fund portfolio is dead. Almost every answer has multiple bond funds in it.
The Three Fund Portfolio is one of the largest (maybe thee largest) threads on the forum. In fact Taylor Larimore wrote and excellent book "The Bogleheads Guide to the Three Fund Portfolio". I would encourage anyone to read it.

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

Post by abuss368 » Sat Nov 24, 2018 5:21 pm

sambb wrote:
Sat Nov 24, 2018 4:07 pm
i use TBM in tax deferred and intermed term and LT term tax exempt in taxable.

The concept of tax efficient fund placment is flawed in high tax brackets since tax equivalent muni yields are really good, and one would have to pay taxes on index fund dividends. I wish that wiki would be revised more.
Rick Ferri has often recommended an approach called "equal location" versus "asset location". Essentially the same funds in each account.
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Re: Bonds - Throw it all on the table!!!

Post by mikeyzito22 » Sat Nov 24, 2018 5:35 pm

abuss368 wrote:
Sat Nov 24, 2018 5:20 pm
mikeyzito22 wrote:
Sat Nov 24, 2018 4:00 pm
abuss368 wrote:
Mon Feb 10, 2014 11:08 pm
I believe it is fair to say that Bogleheads employ many different strategies in terms of bonds in their portfolios.

I am of the opinion that whether an investor invests in one or more bond funds, the end result is probably close to the same over the long term. Would this be a fair and reasonable assessment?
Yes, and after reading this, I think the three fund portfolio is dead. Almost every answer has multiple bond funds in it.
The Three Fund Portfolio is one of the largest (maybe thee largest) threads on the forum. In fact Taylor Larimore wrote and excellent book "The Bogleheads Guide to the Three Fund Portfolio". I would encourage anyone to read it.

Best.
Well, yes it is a good book. However, as you can see with at least THESE posts that the three fund isn't adhered to by most bogleheads. I even saw a poll thread once that asked how many people strictly use the three fund, and it said less than 20%. So, maybe high net worth individuals need more funds...or they are just the ones to post how many awesomely different bond funds they have seemed to acquire? Regardless, to each their own and I'm not trying to demean anyone's choices, it just seems a bit silly that the whole point was supposed to be simplicity.

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

Post by UpperNwGuy » Sat Nov 24, 2018 7:49 pm

mikeyzito22 wrote:
Sat Nov 24, 2018 5:35 pm
. . . as you can see with at least THESE posts that the three fund isn't adhered to by most bogleheads. I even saw a poll thread once that asked how many people strictly use the three fund, and it said less than 20%. . .
And that makes me sad.

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

Post by abuss368 » Sun Nov 25, 2018 11:38 am

I have thought about International Bonds but am unsure. Vanguard Total Bond Index includes foreign bonds issued in U.S. Dollars and Vanguard Total International Bond includes U.S. companies issuing bonds in other currencies.

We are a global economy and business world.
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

Turbo29
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Re: Bonds - Throw it all on the table!!!

Post by Turbo29 » Sun Nov 25, 2018 11:56 am

UpperNwGuy wrote:
Sat Nov 24, 2018 7:49 pm
mikeyzito22 wrote:
Sat Nov 24, 2018 5:35 pm
. . . as you can see with at least THESE posts that the three fund isn't adhered to by most bogleheads. I even saw a poll thread once that asked how many people strictly use the three fund, and it said less than 20%. . .
And that makes me sad.
That's because this site espouses a religion. And like most religions, most of the followers definitely do not follow all of the precepts, even if they believe in principle.

I used to follow a strength training site that promoted a certain program. They went though the workout logs kept by members on the site and found that a very small percentage actually followed the program as written.

Interesting thing is that if someone asked me for a workout program I would direct them there (it is a free site like this) and tell them to follow the program. I wasn't (and don't currently) following it myself.

It seems to me that much the same phenomenon applies here.

hoops777
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Re: Bonds - Throw it all on the table!!!

Post by hoops777 » Sun Nov 25, 2018 4:32 pm

I have gone to mostly brokered CDs in lieu of bond funds and I am very content with that decision.
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 abuss368 » Mon Nov 26, 2018 9:10 am

I have not read many posts with Bogleheads investing in Vanguard’s tax exempt index bond fund that was created a couple of years ago.
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

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

Post by BigJohn » Mon Nov 26, 2018 10:18 am

abuss368 wrote:
Mon Nov 26, 2018 9:10 am
I have not read many posts with Bogleheads investing in Vanguard’s tax exempt index bond fund that was created a couple of years ago.
No compelling reason to switch from VG Int Term Tax-Exempt and this newer index fund still has a 0.25% purchase fee.

The only change I've made since my last post here has been to add the IT TIPS fund in a 50/50 split with IT Bond Index. I finally concluded that the deep risk from inflation needed some mitigation given my earlier than typical retirement age and a higher bond allocation.

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

Post by mikeyzito22 » Fri Nov 30, 2018 11:48 pm

Turbo29 wrote:
Sun Nov 25, 2018 11:56 am
UpperNwGuy wrote:
Sat Nov 24, 2018 7:49 pm
mikeyzito22 wrote:
Sat Nov 24, 2018 5:35 pm
. . . as you can see with at least THESE posts that the three fund isn't adhered to by most bogleheads. I even saw a poll thread once that asked how many people strictly use the three fund, and it said less than 20%. . .
And that makes me sad.
That's because this site espouses a religion. And like most religions, most of the followers definitely do not follow all of the precepts, even if they believe in principle.

I used to follow a strength training site that promoted a certain program. They went though the workout logs kept by members on the site and found that a very small percentage actually followed the program as written.

Interesting thing is that if someone asked me for a workout program I would direct them there (it is a free site like this) and tell them to follow the program. I wasn't (and don't currently) following it myself.

It seems to me that much the same phenomenon applies here.
And that makes me sad. In Portland.

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

Post by Offshore » Sat Dec 01, 2018 8:30 am

abuss368 wrote:
Sat Nov 24, 2018 3:30 pm
Has anyone changed their bond allocation with he increase in interest rates? Is anyone worried about a bond selloff?

We have stayed the course with Total Bond Index and Intermediate Term Tax Exempt.

Thoughts and perspectives welcome!
I saw a significant TLH opportunity in Intermediate Term Tax Exempt Bond fund which prompted me to sell the entire lot in October. The proceeds are still in a MM fund after 1 month. Not sure what to do with it. VG recommends Short Term bond funds (including the Short Term Tax Exempt), however, I've noticed that dividends from the Short Term Tax Exempt and the Municipal MM would be very similar. I'm sitting in the Municipal MM for now.

abuss368, did you pass up an opportunity to TLH in your Int. Term Tax Exempt fund? If so, why?

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

Post by bearcub » Sat Dec 01, 2018 9:00 am

VIPSX + VTIPS the two Vanguard TIPs funds in my TRA. IRA. Corp. bonds within Global Wellesley Fund in my Roth IRA. Wife has corps. in her Mairs + Power Balanced Fund in her Roth IRA. I also have a few years of EE Savings bonds from years ago from my old job.

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

Post by dcop » Sun Dec 02, 2018 3:56 am

abuss368 wrote:
Wed Jan 29, 2014 6:29 pm

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

The only value I see in bonds is the dividend. So that said I invest heavily in Wellington and Wellesley that way im on both sides of equity/bond. Then about 18% of my portfolio is in Vanguard Long-Term Investment-Grade Fund Admiral Shares which is paying me about 4.5%. Of course the high risk of the bonds is the reason for higher rates but whenever my original purchase price is down it should cycle back eventually. All I really care about is the monthly div since I'm 60 and retired. Cashing in on NAV gains I can do with the equities and fore-mentioned balanced funds. All this only refers to my tax-deferred accounts. I don't have any bonds in my taxable accounts.

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

Post by columbia » Thu Dec 06, 2018 5:42 pm

I’m not too proud....

I don’t understand the case where one would prefer STRIPS (or an ETF like EDV) over long treasuries.

Help on understanding that would be appreciated.

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

Post by HEDGEFUNDIE » Thu Dec 06, 2018 6:22 pm

columbia wrote:
Thu Dec 06, 2018 5:42 pm
I’m not too proud....

I don’t understand the case where one would prefer STRIPS (or an ETF like EDV) over long treasuries.

Help on understanding that would be appreciated.
The duration of EDV is 24.3 yrs compared to VUSTX which is 16.6 yrs; duration is how long it takes for the bondholder to get repaid, zero coupon bonds make no regular interest payments and so it makes sense the duration should be longer.

This means EDV has much higher volatility and slightly higher returns than “ordinary” long treasuries (6.5% CAGR vs 4.9% CAGR over past 10 years).

When paired with TSM in a portfolio, EDV’s higher volatility actually produces a portfolio with higher Sharpe ratio due to its negative correlation with stocks.
Last edited by HEDGEFUNDIE on Thu Dec 06, 2018 6:52 pm, edited 2 times in total.

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

Post by columbia » Thu Dec 06, 2018 6:46 pm

Danke

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

Post by spdoublebass » Fri Dec 07, 2018 12:57 pm

HEDGEFUNDIE wrote:
Thu Dec 06, 2018 6:22 pm
columbia wrote:
Thu Dec 06, 2018 5:42 pm
I’m not too proud....

I don’t understand the case where one would prefer STRIPS (or an ETF like EDV) over long treasuries.

Help on understanding that would be appreciated.
The duration of EDV is 24.3 yrs compared to VUSTX which is 16.6 yrs; duration is how long it takes for the bondholder to get repaid, zero coupon bonds make no regular interest payments and so it makes sense the duration should be longer.

This means EDV has much higher volatility and slightly higher returns than “ordinary” long treasuries (6.5% CAGR vs 4.9% CAGR over past 10 years).

When paired with TSM in a portfolio, EDV’s higher volatility actually produces a portfolio with higher Sharpe ratio due to its negative correlation with stocks.
What I still do not understand, even though many have explained it to me, is how you exit these funds.

I agree 100% with what you stated above. You stated facts.

My problem is if I'm 20 or 30 years old with a 90/10 AA, holding 10% in EDV. When I want to shorten my duration what do I do?
Also, what do I do if interest rates have been rising close tot the time that I want to shorten my duration and EDV has been declining in value?

My only point is that there seems to be an understated perfect storm that people do not want to talk about where when you go to shorten your duration, you might have a loss in EDV. I know you can shorten duration by adding a different bond fund to the mix, that I understand.

The only way I see this panning out well is to shorten your duration later on by adding shorter term bond funds with new money. Unless, EDV is up when you want to shorten duration, then you could sell some and buy something shorter.

All I mean, this is more of a hands on approach and I do not put this into the simple category. Not that it is bad, just not as simple as a 3 or 2 fund. There is no guarantee.
I'm trying to think, but nothing happens

4nwestsaylng
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Re: Bonds - Throw it all on the table!!!

Post by 4nwestsaylng » Fri Dec 07, 2018 3:34 pm

all my fixed income has been in the TSP G fund the past two years, no plans to change until interest rates stabilize and the long rate improves.

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

Post by aristotelian » Fri Dec 07, 2018 3:57 pm

Turbo29 wrote:
Sun Nov 25, 2018 11:56 am

That's because this site espouses a religion. And like most religions, most of the followers definitely do not follow all of the precepts, even if they believe in principle.
I do not see anywhere that the three fund portfolio is the be all and end all of investing. What I have gotten most out of this community is a set of general guidelines: diversification, keep cost low, and minimize taxes. The three fund portfolio is one way to do it but there are others. If there is an analogy to religion, it is more like the Beatitudes than the Ten Commandments.

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

Post by HEDGEFUNDIE » Fri Dec 07, 2018 4:54 pm

spdoublebass wrote:
Fri Dec 07, 2018 12:57 pm
HEDGEFUNDIE wrote:
Thu Dec 06, 2018 6:22 pm
columbia wrote:
Thu Dec 06, 2018 5:42 pm
I’m not too proud....

I don’t understand the case where one would prefer STRIPS (or an ETF like EDV) over long treasuries.

Help on understanding that would be appreciated.
The duration of EDV is 24.3 yrs compared to VUSTX which is 16.6 yrs; duration is how long it takes for the bondholder to get repaid, zero coupon bonds make no regular interest payments and so it makes sense the duration should be longer.

This means EDV has much higher volatility and slightly higher returns than “ordinary” long treasuries (6.5% CAGR vs 4.9% CAGR over past 10 years).

When paired with TSM in a portfolio, EDV’s higher volatility actually produces a portfolio with higher Sharpe ratio due to its negative correlation with stocks.
What I still do not understand, even though many have explained it to me, is how you exit these funds.

I agree 100% with what you stated above. You stated facts.

My problem is if I'm 20 or 30 years old with a 90/10 AA, holding 10% in EDV. When I want to shorten my duration what do I do?
Why do you want to shorten your duration? The only correct answer is you have grown old and your investing horizon has shortened below EDV's duration, and so holding an ultra-long bond fund no longer suits your needs. And if this were the case, you would have seen significant total return from the previous 20-30 years that you held EDV, very little chance of a loss over that long of a holding period.

If you want to shorten duration because you think interest rates are going up, that is pure market timing and not worthy of discussion on Bogleheads. How many people were convinced interest rates had nowhere to go but up for the next several years? And all of a sudden last week the Fed comes out and says we are "within spitting distance" of neutral rates. So much for market timing...

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

Post by hdas » Fri Dec 07, 2018 5:04 pm

HEDGEFUNDIE wrote:
Fri Dec 07, 2018 4:54 pm
Why do you want to shorten your duration? The only correct answer is you have grown old and your investing horizon has shortened below EDV's duration, and so holding an ultra-long bond fund no longer suits your needs. And if this were the case, you would have seen significant total return from the previous 20-30 years that you held EDV, very little chance of a loss over that long of a holding period.

If you want to shorten duration because you think interest rates are going up, that is pure market timing and not worthy of discussion on Bogleheads. How many people were convinced interest rates had nowhere to go but up for the next several years? And all of a sudden last week the Fed comes out and says we are "within spitting distance" of neutral rates. So much for market timing...
Good points. However, Im becoming convinced that the proper thing to do is to leverage the short end. And I completely understand why this is not appealing or feasible for most ppl. H
Stay the course and buy some more.

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

Post by irishguy » Fri Dec 07, 2018 5:09 pm

1) Total Bond Index, S-T Investment Grade, Total Int'l Bond Index
2) Bonds are held in traditional IRA's
3) 55% Bonds, 5% Prime Money Market
4) Age-10%
5) May drop increase bonds to 65-70% as I approach 80

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