Alternatives to bond funds

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oakbluffs
Posts: 4
Joined: Mon Mar 12, 2018 7:40 pm

Alternatives to bond funds

Post by oakbluffs » Mon Mar 12, 2018 8:33 pm

Hello,

I have a 60/40 Trad IRA portfolio with the bond portion primarily in VBTLX with a smaller amount in VFSTX. I am 60 years old and expect to work another 3-4 years before retiring. As interest rates increase, and the value of my bond holdings falls, I am seeking alternatives to bond funds. The 5 year return for VBTLX is 1.62% and the one year return is .41%. My question is wouldn't it be more prudent to go with an online savings account at 1.5 % and add in 1-2 year CDs where the funds would have FDIC insurance? I have a tough time understanding the math of bond funds but based on my limited knowledge I don't see the upside of owning these funds. The average duration of VBTLX is 6.1 years. Given my 3-4 year time frame, is 6.1 too far in the future to benefit from the interest in VBTLX bonds being reinvested at a higher rate? Thanks in advance for your feedback.

livesoft
Posts: 63093
Joined: Thu Mar 01, 2007 8:00 pm

Re: Alternatives to bond funds

Post by livesoft » Mon Mar 12, 2018 9:15 pm

Did you read this other thread on the same subject also started in the past 24 hours?
viewtopic.php?f=1&t=244050

Welcome to the forum, too.

I will say that your time frame is not 3-4 years because when you retire, you don't die. Instead, you take another 30 years to spend down your portfolio. So your time frame is at least 30 years.
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lazylarry
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Re: Alternatives to bond funds

Post by lazylarry » Mon Mar 12, 2018 9:42 pm

yes I would read the other thread - yield and return are two different things.
http://quotes.morningstar.com/chart/fun ... ture=en_US
Vanguard appears to have a 2.6% yield.

Your desired allocation depends on how much risk you can take and what your needs will be during retirement. If you don't need very much and can survive on your current allocation, you don't need bonds, you could stick to CDs. But if you want to withdraw more, then you will need more in bonds/stocks.
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oakbluffs
Posts: 4
Joined: Mon Mar 12, 2018 7:40 pm

Re: Alternatives to bond funds

Post by oakbluffs » Wed Mar 14, 2018 2:26 pm

livesoft wrote:
Mon Mar 12, 2018 9:15 pm
Did you read this other thread on the same subject also started in the past 24 hours?
viewtopic.php?f=1&t=244050

Welcome to the forum, too.

I will say that your time frame is not 3-4 years because when you retire, you don't die. Instead, you take another 30 years to spend down your portfolio. So your time frame is at least 30 years.
Thank you. I checked out the other thread and found it to be very helpful. I'm not sure if the BH forum allows links, but I found this article about bond funds on the Schwab site. It's informative and easy to understand.
https://www.schwab.com/resource-center/ ... rates-rise

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