Bond for a 100% Equity Investor?

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cpan00b
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Bond for a 100% Equity Investor?

Post by cpan00b » Tue Dec 18, 2018 1:58 pm

Any suggestion on what fund to add for a very simple investment portfolio? I'm 29 years old so have 30+ years until retirement. Currently my portfolio is 100% equities with breakdowns as follows:

Taxable
VTIAX (Total International) - 22.2%
VTSAX (Total US)- 51.0%

Roth
VTSAX (Total US) - 6.0%
VEXMX (Extended Market Index) - 3.1%

401K
FXSIX (Fideltiy 500 Index) - 9.6%
FSIVX (Fidleity International Index) - 8.2%

Summary:
Total US - 69.7%
Total International - 30.3%


If I want to slowly decrease my exposure to equities and reach an AA of 90-10, what's the best way to do it? I'm maxed out on my roth and 401k but can contribute to those accounts in January 2019.

1. Which 1 bond fund should I hold and in what account? I've previously had total bond market at VG.
2. Is there some upside to holding a bond fund I am not getting as opposed to holding cash in this rising interest rate enviornment? Checking accounts currently return about 2% which looks like it's higher than the 1 year, 3 year and 5 year returns of VG's total bond fund as listed on their website.

Thanks.

magicrat
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Re: Bond for a 100% Equity Investor?

Post by magicrat » Tue Dec 18, 2018 2:36 pm

cpan00b wrote:
Tue Dec 18, 2018 1:58 pm

1. Which 1 bond fund should I hold and in what account? I've previously had total bond market at VG.
2. Is there some upside to holding a bond fund I am not getting as opposed to holding cash in this rising interest rate enviornment? Checking accounts currently return about 2% which looks like it's higher than the 1 year, 3 year and 5 year returns of VG's total bond fund as listed on their website.

Thanks.
1. Vanguard Total Bond or any similar low-cost option. Bonds in pre-tax (401k or IRA).
2. SEC Yield on VBTLX is 3.33%

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David Jay
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Re: Bond for a 100% Equity Investor?

Post by David Jay » Tue Dec 18, 2018 2:40 pm

What is your objective behind the decision to go 90/10? Is it reduced account volatility? Is it having available funds for rebalancing after a stock downturn?

Your fund selection should reflect your objective.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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JoMoney
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Re: Bond for a 100% Equity Investor?

Post by JoMoney » Tue Dec 18, 2018 2:45 pm

"Total Bond Index" fund is a reasonable catch-all bond fund.
I like Series-I Savings Bonds. They're not great if you expect to use them for "rebalancing", but as a buy-and-hold position and "emergency fund" they're great, and effectively give you additional tax-deferred saving space.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

MotoTrojan
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Re: Bond for a 100% Equity Investor?

Post by MotoTrojan » Tue Dec 18, 2018 2:50 pm

In tax-advantaged accounts there is no difference between rebalancing existing funds and just adding to new ones really, so you could start now.

Topic Author
cpan00b
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Re: Bond for a 100% Equity Investor?

Post by cpan00b » Tue Dec 18, 2018 3:01 pm

David Jay wrote:
Tue Dec 18, 2018 2:40 pm
What is your objective behind the decision to go 90/10? Is it reduced account volatility? Is it having available funds for rebalancing after a stock downturn?

Your fund selection should reflect your objective.
It's having available funds for rebalancing after a stock downturn. I.e. i have had no money (besides my bi-monthly paycheck) to really take advantage of the downward spiral we've had since September 2018.

Topic Author
cpan00b
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Re: Bond for a 100% Equity Investor?

Post by cpan00b » Tue Dec 18, 2018 3:06 pm

magicrat wrote:
Tue Dec 18, 2018 2:36 pm
cpan00b wrote:
Tue Dec 18, 2018 1:58 pm

1. Which 1 bond fund should I hold and in what account? I've previously had total bond market at VG.
2. Is there some upside to holding a bond fund I am not getting as opposed to holding cash in this rising interest rate enviornment? Checking accounts currently return about 2% which looks like it's higher than the 1 year, 3 year and 5 year returns of VG's total bond fund as listed on their website.

Thanks.
1. Vanguard Total Bond or any similar low-cost option. Bonds in pre-tax (401k or IRA).
2. SEC Yield on VBTLX is 3.33%
So the main number to look at is the SEC Yield? Can someone explain to me what that % is and how it differs from the Average annual returns, which look to be updated monthly, but are -1.36%, 1.30% and 1.96% each, respectively, for 1 year, 3 years, and 5 years?

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David Jay
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Re: Bond for a 100% Equity Investor?

Post by David Jay » Tue Dec 18, 2018 3:06 pm

cpan00b wrote:
Tue Dec 18, 2018 3:01 pm
David Jay wrote:
Tue Dec 18, 2018 2:40 pm
What is your objective behind the decision to go 90/10? Is it reduced account volatility? Is it having available funds for rebalancing after a stock downturn?

Your fund selection should reflect your objective.
It's having available funds for rebalancing after a stock downturn. I.e. i have had no money (besides my bi-monthly paycheck) to really take advantage of the downward spiral we've had since September 2018.
In this case, I would tend towards two funds, an intermediate term fund and a short term fund. The short term fund will have very low volatility so it is always available for rebalancing. The intermediate term fund will be somewhat more sensitive to interest rates but will perform better over the long haul.

I would save the first 5% in Short Term (so it is available first) and the next 5% in Intermediate Term.

I use Vanguard Intermediate Term Bond (Total Bond is fine) and Vanguard Short Term Bond.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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cpan00b
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Re: Bond for a 100% Equity Investor?

Post by cpan00b » Tue Dec 18, 2018 3:07 pm

MotoTrojan wrote:
Tue Dec 18, 2018 2:50 pm
In tax-advantaged accounts there is no difference between rebalancing existing funds and just adding to new ones really, so you could start now.
You make a good point in that there's no tax hit to rebalancing. Guess mentally it's a fallacy to think I'm locking in my current losses by selling the equities I'm holding there.

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David Jay
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Re: Bond for a 100% Equity Investor?

Post by David Jay » Tue Dec 18, 2018 3:08 pm

cpan00b wrote:
Tue Dec 18, 2018 3:06 pm
So the main number to look at is the SEC Yield? Can someone explain to me what that % is and how it differs from the Average annual returns, which look to be updated monthly, but are -1.36%, 1.30% and 1.96% each, respectively, for 1 year, 3 years, and 5 years?
Without getting into the weeds, SEC yield is the "current" yield. Historic yields are what it has done in the past.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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vineviz
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Re: Bond for a 100% Equity Investor?

Post by vineviz » Tue Dec 18, 2018 3:22 pm

cpan00b wrote:
Tue Dec 18, 2018 1:58 pm
If I want to slowly decrease my exposure to equities and reach an AA of 90-10, what's the best way to do it? I'm maxed out on my roth and 401k but can contribute to those accounts in January 2019.

1. Which 1 bond fund should I hold and in what account? I've previously had total bond market at VG.
2. Is there some upside to holding a bond fund I am not getting as opposed to holding cash in this rising interest rate enviornment? Checking accounts currently return about 2% which looks like it's higher than the 1 year, 3 year and 5 year returns of VG's total bond fund as listed on their website.
The popular option is to use a total bond market fund, and you've got several recommendations for that approach.

The best option would be to use a long-term Treasury fund, like Vanguard Long-Term Treasury Index Fund (VLGSX) or the ETF equivalent (VGLT).

The first key to choosing bonds or a bond fund is to match the effective duration of the fund to your investment horizon, and the second key it choose bonds or a bond fund that efficiently diversify your other portfolio holdings. Because you already have a huge amount of equity exposure, replacing stocks with a bond fund containing corporate bonds (which also have equity exposure) isn't terribly efficient.

For an investor at your age, with a 50+ year investment horizon, contemplating a small (10% or so) bond allocation it's obvious to me that long-term Treasuries are the best option. They'll lower the volatility of your portfolio more than other choices while maximizing risk-adjusted return.

Image

https://www.portfoliovisualizer.com/eff ... y&ff3=true
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

rerod
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Re: Bond for a 100% Equity Investor?

Post by rerod » Tue Dec 18, 2018 3:30 pm

You don't want bonds at your age.. Wish someone would have told me that when I was 30

TheHouse7
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Re: Bond for a 100% Equity Investor?

Post by TheHouse7 » Tue Dec 18, 2018 3:40 pm

rerod wrote:
Tue Dec 18, 2018 3:30 pm
You don't want bonds at your age.. Wish someone would have told me that when I was 30
I'm (31) happy I read so much on this site about 100% stock investors. I like to think I might have a chance of sticking with one strategy instead of always thinking about changing my AA. I am sticking with 80/20. :beer

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Re: Bond for a 100% Equity Investor?

Post by nisiprius » Tue Dec 18, 2018 3:44 pm

vineviz wrote:
Tue Dec 18, 2018 3:22 pm
...They'll lower the volatility of your portfolio more than other choices while maximizing risk-adjusted return...
I propose this "friendly amendment:"

"In the past, over the time period I show on this chart, they would have lowered the volatility of your portfolio more than other choices and would have maximized risk-adjusted return. I expect them to do this in the future, too."
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

TylerS7
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Re: Bond for a 100% Equity Investor?

Post by TylerS7 » Tue Dec 18, 2018 3:51 pm

I'm about your age and have a very similar setup. I keep all of my accounts 100% stocks except my SimpleIRA (which is the equivalent to your 401k), in this account I hold only a Vanguard LifeStrategy Growth fund which is 80/20. Here is my setup:

Taxable:
Total International 30%
Total US 35%

Roth:
Total World 15%

Simple IRA:
VG Lifestrategy 20%

Last time I did the math this was approximately 4-5% in bonds. I'm done adding to my roth because of salary limits, but I contribute monthly to my SimpleIRA as well as my taxable probably at a 4:3 ratio in favor of the IRA. I check annually to see if my AA is thrown completely out of whack but I'm comfortable being anywhere from 0-10% bonds, and I try to be within 5% of 60:40 US to International with my equities.

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Re: Bond for a 100% Equity Investor?

Post by Dottie57 » Tue Dec 18, 2018 3:59 pm

vineviz wrote:
Tue Dec 18, 2018 3:22 pm
cpan00b wrote:
Tue Dec 18, 2018 1:58 pm
If I want to slowly decrease my exposure to equities and reach an AA of 90-10, what's the best way to do it? I'm maxed out on my roth and 401k but can contribute to those accounts in January 2019.

1. Which 1 bond fund should I hold and in what account? I've previously had total bond market at VG.
2. Is there some upside to holding a bond fund I am not getting as opposed to holding cash in this rising interest rate enviornment? Checking accounts currently return about 2% which looks like it's higher than the 1 year, 3 year and 5 year returns of VG's total bond fund as listed on their website.
The popular option is to use a total bond market fund, and you've got several recommendations for that approach.

The best option would be to use a long-term Treasury fund, like Vanguard Long-Term Treasury Index Fund (VLGSX) or the ETF equivalent (VGLT).

The first key to choosing bonds or a bond fund is to match the effective duration of the fund to your investment horizon, and the second key it choose bonds or a bond fund that efficiently diversify your other portfolio holdings. Because you already have a huge amount of equity exposure, replacing stocks with a bond fund containing corporate bonds (which also have equity exposure) isn't terribly efficient.

For an investor at your age, with a 50+ year investment horizon, contemplating a small (10% or so) bond allocation it's obvious to me that long-term Treasuries are the best option. They'll lower the volatility of your portfolio more than other choices while maximizing risk-adjusted return.

Image

https://www.portfoliovisualizer.com/eff ... y&ff3=true
A question: Doesn’t the chart reflect a period where long term bonds were paying a mch better rate than they are today? Volatility is still lower, liquidity is great but not interest rates.

NotTooDeepLearning
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Re: Bond for a 100% Equity Investor?

Post by NotTooDeepLearning » Tue Dec 18, 2018 4:12 pm

rerod wrote:
Tue Dec 18, 2018 3:30 pm
You don't want bonds at your age.. Wish someone would have told me that when I was 30
You say this on the heels of one of the largest bull runs in history. If stock prices were below where they were in several years ago right now, which is a real possibility for the future, I'd bet your advice would be different.

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vineviz
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Re: Bond for a 100% Equity Investor?

Post by vineviz » Tue Dec 18, 2018 4:23 pm

nisiprius wrote:
Tue Dec 18, 2018 3:44 pm
vineviz wrote:
Tue Dec 18, 2018 3:22 pm
...They'll lower the volatility of your portfolio more than other choices while maximizing risk-adjusted return...
I propose this "friendly amendment:"

"In the past, over the time period I show on this chart, they would have lowered the volatility of your portfolio more than other choices and would have maximized risk-adjusted return. I expect them to do this in the future, too."
I reject the amendment. I'm a big boy, fully capable of speaking for myself. Thanks though.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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vineviz
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Re: Bond for a 100% Equity Investor?

Post by vineviz » Tue Dec 18, 2018 6:06 pm

Dottie57 wrote:
Tue Dec 18, 2018 3:59 pm
A question: Doesn’t the chart reflect a period where long term bonds were paying a mch better rate than they are today? Volatility is still lower, liquidity is great but not interest rates.
It's true that long-term rates have been higher in the past, but then again so were intermediate-term rates so the relative attractiveness of the two durations hasn't shifted as a result of that.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

rerod
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Re: Bond for a 100% Equity Investor?

Post by rerod » Tue Dec 18, 2018 7:22 pm

NotTooDeepLearning wrote:
Tue Dec 18, 2018 4:12 pm
rerod wrote:
Tue Dec 18, 2018 3:30 pm
You don't want bonds at your age.. Wish someone would have told me that when I was 30
If stock prices were below where they were in several years ago right now,
If... How does anyone know that stocks might just shoot to even higher highs?
NotTooDeepLearning wrote:
Tue Dec 18, 2018 4:12 pm
rerod wrote:
Tue Dec 18, 2018 3:30 pm
You don't want bonds at your age.. Wish someone would have told me that when I was 30
You say this on the heels of one of the largest bull runs in history. If stock prices were below where they were in several years ago right now, which is a real possibility for the future, I'd bet your advice would be different.
I don't claim to know allot. I choose the simple 3-4 port because I have better things to do. But I can guarantee one thing.. A 100% port will outperform a 80/20 over 35 years, period..

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ruralavalon
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Re: Bond for a 100% Equity Investor?

Post by ruralavalon » Tue Dec 18, 2018 8:10 pm

What bond funds are offered in your 401k plan?

What is your tax bracket, both federal and state? What State to you pay any State income tax to?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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cpan00b
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Re: Bond for a 100% Equity Investor?

Post by cpan00b » Tue Dec 18, 2018 9:10 pm

ruralavalon wrote:
Tue Dec 18, 2018 8:10 pm
What bond funds are offered in your 401k plan?

What is your tax bracket, both federal and state? What State to you pay any State income tax to?
I don't have great bond options in the 401k which is with Fidelity. Here they are listed below along with the expense ratio. I am in the highest tax bracket for both federal and state. I also pay the exorbitant city tax that is NYC tax.

WT G RETIRE INC F35 0.65%
DOUBLELINE CORE FI I (DBLFX) 0.48%
FID CAPITAL & INCOME (FAGIX) 0.67%
NUVEEN INFL-PRO I (FYIPX) 0.72%

staythecourse
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Re: Bond for a 100% Equity Investor?

Post by staythecourse » Tue Dec 18, 2018 9:16 pm

vineviz wrote:
Tue Dec 18, 2018 3:22 pm
cpan00b wrote:
Tue Dec 18, 2018 1:58 pm
If I want to slowly decrease my exposure to equities and reach an AA of 90-10, what's the best way to do it? I'm maxed out on my roth and 401k but can contribute to those accounts in January 2019.

1. Which 1 bond fund should I hold and in what account? I've previously had total bond market at VG.
2. Is there some upside to holding a bond fund I am not getting as opposed to holding cash in this rising interest rate enviornment? Checking accounts currently return about 2% which looks like it's higher than the 1 year, 3 year and 5 year returns of VG's total bond fund as listed on their website.
The popular option is to use a total bond market fund, and you've got several recommendations for that approach.

The best option would be to use a long-term Treasury fund, like Vanguard Long-Term Treasury Index Fund (VLGSX) or the ETF equivalent (VGLT).

The first key to choosing bonds or a bond fund is to match the effective duration of the fund to your investment horizon, and the second key it choose bonds or a bond fund that efficiently diversify your other portfolio holdings. Because you already have a huge amount of equity exposure, replacing stocks with a bond fund containing corporate bonds (which also have equity exposure) isn't terribly efficient.

For an investor at your age, with a 50+ year investment horizon, contemplating a small (10% or so) bond allocation it's obvious to me that long-term Treasuries are the best option. They'll lower the volatility of your portfolio more than other choices while maximizing risk-adjusted return.

Image

https://www.portfoliovisualizer.com/eff ... y&ff3=true
Great chart. Big question is can you do the same chart using data from 1950- 1970? That 20 year period is MORE likely to be representative then the last 40 years. The starting point of interest rates are low and likely to slowly increase at about 2% clip to prevent inflation. Starting at 198'0's to now in a falling interest rate environment is unlikely to show what we will be looking at going forward.

Actually, I think Dr. Bernstein or one of our other writers did the same showing stocks with tbill, 5 year, and long term treasuries over different time points and I believe the time period altered the EF graphs.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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cpan00b
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Re: Bond for a 100% Equity Investor?

Post by cpan00b » Tue Dec 18, 2018 9:18 pm

David Jay wrote:
Tue Dec 18, 2018 3:06 pm

In this case, I would tend towards two funds, an intermediate term fund and a short term fund. The short term fund will have very low volatility so it is always available for rebalancing. The intermediate term fund will be somewhat more sensitive to interest rates but will perform better over the long haul.

I would save the first 5% in Short Term (so it is available first) and the next 5% in Intermediate Term.

I use Vanguard Intermediate Term Bond (Total Bond is fine) and Vanguard Short Term Bond.
Thanks. Is the general concept that the shorter the bond's term is, the less price volatility it will have in value since the interest it bears is more likely to stay consistent (since the underlying bonds are closer to maturity)? But in exchange for less risk, the return rates are lower? And conversely, long term bonds are more likely to see large declines in face value because of more risk/price volatility?

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David Jay
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Re: Bond for a 100% Equity Investor?

Post by David Jay » Tue Dec 18, 2018 9:47 pm

cpan00b wrote:
Tue Dec 18, 2018 9:18 pm
David Jay wrote:
Tue Dec 18, 2018 3:06 pm

In this case, I would tend towards two funds, an intermediate term fund and a short term fund. The short term fund will have very low volatility so it is always available for rebalancing. The intermediate term fund will be somewhat more sensitive to interest rates but will perform better over the long haul.

I would save the first 5% in Short Term (so it is available first) and the next 5% in Intermediate Term.

I use Vanguard Intermediate Term Bond (Total Bond is fine) and Vanguard Short Term Bond.
Thanks. Is the general concept that the shorter the bond's term is, the less price volatility it will have in value since the interest it bears is more likely to stay consistent (since the underlying bonds are closer to maturity)? But in exchange for less risk, the return rates are lower? And conversely, long term bonds are more likely to see large declines in face value because of more risk/price volatility?
You got it!

For example, the Vanguard short term bond fund has not had more than a 1% drop in value that lasted for more than 30 days (I.e it may have dropped 3-4% but recovered to within 1% of original value within 30 days). So it is perfect for rebalancing in turbulent times.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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vineviz
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Re: Bond for a 100% Equity Investor?

Post by vineviz » Wed Dec 19, 2018 8:29 am

staythecourse wrote:
Tue Dec 18, 2018 9:16 pm
Great chart. Big question is can you do the same chart using data from 1950- 1970? That 20 year period is MORE likely to be representative then the last 40 years. The starting point of interest rates are low and likely to slowly increase at about 2% clip to prevent inflation. Starting at 198'0's to now in a falling interest rate environment is unlikely to show what we will be looking at going forward.
This appears to be the common perception among forum participants, but the data don't really bear this out.

It's true that from 1951 to 1981 Treasury rates were generally increasing, but this was also a period when the Federal Reserve was operating under a policy regime which had the effect of actively suppressing the yield on longer term Treasuries. It's important to separate out these two related but distinct phenomena.

Before 1982, 20-year and 30-year Treasuries had yields LESS than the 5-year note about 50% the time, versus just 5% after 1982.

This was a highly artificial situation regardless of whether interest rates were falling or rising, and one which which will almost certain NOT recur in the post-Volcker era unless we experience a period of persistent deflationary pressure.

In short, the relative attractiveness of long versus intermediate bonds depends little on the level of rates and more on the trajectory of inflation (assuming the investment horizon exceeds the duration, as always) .
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch

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JoMoney
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Re: Bond for a 100% Equity Investor?

Post by JoMoney » Wed Dec 19, 2018 9:13 am

vineviz wrote:
Wed Dec 19, 2018 8:29 am
... It's true that from 1951 to 1981 Treasury rates were generally increasing, but this was also a period when the Federal Reserve was operating under a policy regime which had the effect of actively suppressing the yield on longer term Treasuries. It's important to separate out these two related but distinct phenomena...
Are you referring to the Fed's "Operation Twist" ? They did that in recent periods too...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Bond for a 100% Equity Investor?

Post by ruralavalon » Wed Dec 19, 2018 1:19 pm

cpan00b wrote:
Tue Dec 18, 2018 9:10 pm
ruralavalon wrote:
Tue Dec 18, 2018 8:10 pm
What bond funds are offered in your 401k plan?

What is your tax bracket, both federal and state? What State to you pay any State income tax to?
I don't have great bond options in the 401k which is with Fidelity. Here they are listed below along with the expense ratio. I am in the highest tax bracket for both federal and state. I also pay the exorbitant city tax that is NYC tax.

WT G RETIRE INC F35 0.65%
DOUBLELINE CORE FI I (DBLFX) 0.48%
FID CAPITAL & INCOME (FAGIX) 0.67%
NUVEEN INFL-PRO I (FYIPX) 0.72%
In your 401k are you given access to a Fidelillty BrokerageLink? If so, are you charged any feeding you use the BrokerageLink?

Is your taxable account with Vanguard? If the account is at Vanguard then possibilities for bond funds include:
Vanguard New York Long-term Tax-Exempt Admiral Shares (VNYUX); and
Vanguard Intermediate-term Tax-exempt Admiral Shares (VWIUX) .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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ruralavalon
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Re: Bond for a 100% Equity Investor?

Post by ruralavalon » Wed Dec 19, 2018 1:21 pm

cpan00b wrote:
Tue Dec 18, 2018 9:10 pm
ruralavalon wrote:
Tue Dec 18, 2018 8:10 pm
What bond funds are offered in your 401k plan?

What is your tax bracket, both federal and state? What State to you pay any State income tax to?
I don't have great bond options in the 401k which is with Fidelity. Here they are listed below along with the expense ratio. I am in the highest tax bracket for both federal and state. I also pay the exorbitant city tax that is NYC tax.

WT G RETIRE INC F35 0.65%
DOUBLELINE CORE FI I (DBLFX) 0.48%
FID CAPITAL & INCOME (FAGIX) 0.67%
NUVEEN INFL-PRO I (FYIPX) 0.72%
Can you post a link to the fact sheet for "'WT G Retire Inc F35"?

In your 401k are you given access to a Fidelity BrokerageLink? If so, are you charged any fees if you use the BrokerageLink?

Is your taxable account with Vanguard? If the account is at Vanguard then possibilities for bond funds include:
Vanguard New York Long-term Tax-Exempt Admiral Shares (VNYUX); and
Vanguard Intermediate-term Tax-exempt Admiral Shares (VWIUX) .
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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cpan00b
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Re: Bond for a 100% Equity Investor?

Post by cpan00b » Wed Dec 19, 2018 2:13 pm

ruralavalon wrote:
Wed Dec 19, 2018 1:21 pm
cpan00b wrote:
Tue Dec 18, 2018 9:10 pm

I don't have great bond options in the 401k which is with Fidelity. Here they are listed below along with the expense ratio. I am in the highest tax bracket for both federal and state. I also pay the exorbitant city tax that is NYC tax.

WT G RETIRE INC F35 0.65%
DOUBLELINE CORE FI I (DBLFX) 0.48%
FID CAPITAL & INCOME (FAGIX) 0.67%
NUVEEN INFL-PRO I (FYIPX) 0.72%
Can you post a link to the fact sheet for "'WT G Retire Inc F35"?

In your 401k are you given access to a Fidelity BrokerageLink? If so, are you charged any fees if you use the BrokerageLink?

Is your taxable account with Vanguard? If the account is at Vanguard then possibilities for bond funds include:
Vanguard New York Long-term Tax-Exempt Admiral Shares (VNYUX); and
Vanguard Intermediate-term Tax-exempt Admiral Shares (VWIUX) .
Can't post from fidelity as it requires viewers to log in, but see below:
https://www.bloomberg.com/quote/GRIFA35:US
https://www.schwabplan.com/FundDetail/WGI35.pdf

My 401k is very limited so no I am not given access to BrokerageLink. Note that I also hold my roth IRA in VanGuard if that changes your suggestions.

Topic Author
cpan00b
Posts: 68
Joined: Wed May 10, 2017 9:39 pm

Re: Bond for a 100% Equity Investor?

Post by cpan00b » Wed Dec 19, 2018 2:14 pm

David Jay wrote:
Tue Dec 18, 2018 9:47 pm

You got it!

For example, the Vanguard short term bond fund has not had more than a 1% drop in value that lasted for more than 30 days (I.e it may have dropped 3-4% but recovered to within 1% of original value within 30 days). So it is perfect for rebalancing in turbulent times.
Thanks, helpful. I am leaning towards taking the 5% and 5% split approach you mentioned re: short term bond fund and VG core bond fund.

Topic Author
cpan00b
Posts: 68
Joined: Wed May 10, 2017 9:39 pm

Re: Bond for a 100% Equity Investor?

Post by cpan00b » Mon Jan 14, 2019 4:57 pm

ruralavalon wrote:
Wed Dec 19, 2018 1:19 pm
cpan00b wrote:
Tue Dec 18, 2018 9:10 pm
ruralavalon wrote:
Tue Dec 18, 2018 8:10 pm
What bond funds are offered in your 401k plan?

What is your tax bracket, both federal and state? What State to you pay any State income tax to?
I don't have great bond options in the 401k which is with Fidelity. Here they are listed below along with the expense ratio. I am in the highest tax bracket for both federal and state. I also pay the exorbitant city tax that is NYC tax.

WT G RETIRE INC F35 0.65%
DOUBLELINE CORE FI I (DBLFX) 0.48%
FID CAPITAL & INCOME (FAGIX) 0.67%
NUVEEN INFL-PRO I (FYIPX) 0.72%
In your 401k are you given access to a Fidelillty BrokerageLink? If so, are you charged any feeding you use the BrokerageLink?

Is your taxable account with Vanguard? If the account is at Vanguard then possibilities for bond funds include:
Vanguard New York Long-term Tax-Exempt Admiral Shares (VNYUX); and
Vanguard Intermediate-term Tax-exempt Admiral Shares (VWIUX) .
Follow up questions to this post:

1. As you can see above, the bond only options in my 401k are not very desirable with high(relatively speaking) expense ratios. DBLFX is an intermediate-term bond fund and FAGIX is high-yield. Would you pick any of these given my setup as described in the opening post?

2. Alternatively, the 401k does have target date blended funds. The expense ratios for these are generally around 0.4. I could pick one that is target date 2045 and call it a day.

3. Option 3 is to hold tax exempt shares in my taxable brokerage account as suggested by ruralavalon. (Interest income is tax exempt both federally and state/city? Would selling these to rebalance in a taxable account produce a taxable event?)

Which would you do?

Separately, and sorry for the long post, is there a reason to have an e-fund in an online savings account? I noticed that VMFXX (Vanguard money market fund) has an SEC yield of 2.3% currently with an expense ratio of 0.11, making it comparable, if not slightly higher than keeping money in a separate checking account. I am planning on building up a cash holding of maybe 10k (which would be about 5% of my net worth). If I go this route, I might hold bonds at an allocation of only 5% since I'll have cash to supplement and buy up equities in the event of a market drop.

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