Bonds - Throw it all on the table!!!

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abuss368
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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.
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 » 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?
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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

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

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

Post by Doc » 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!
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 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
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

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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?
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 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!
Taylor
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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).
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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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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