Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

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Sandtrap
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Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Sandtrap » Tue Jul 09, 2019 7:51 am

There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
35/65
Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Last edited by Sandtrap on Tue Jul 09, 2019 3:14 pm, edited 2 times in total.
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chisey
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by chisey » Tue Jul 09, 2019 8:16 am

Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?
47% Stable Value @ 3.2%
16% TIPS (VAIPX)
37% intermediate treasuries (FUAMX)

We also have about 10% of our overall portfolio in emerging market bonds but I don't consider that part of our fixed income.
2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .
I find no need to own corporates. If interest rates were higher we'd have everything in ITT-- we only own TIPS because of fund limitations in retirement accounts. As of now, we'd have more in the SV fund if we had more money in the plan that offered it.

The only possible future change is to move back from SV to ITT/TIPS, but interest rates have a long way to go before that makes sense to me. For now, all new contributions go to SV for that reason.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Hector » Tue Jul 09, 2019 10:15 am

Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?
cash/MM/iBond/treasury bills/short term treasury funds
Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .
I prefer risk on equity side. I don't want to loose $$ from bond in nominal term. Treasury is likely to be less down than other types of bonds when I sell bond to buy stock for rebalancing. I think long term bond can be more dangerous than equity in some situation; 1940 to 1980.

It was mostly that way. Recently I am using MM and treasury bills instead of short term treasury. I will move from MM and treasury bills to short term treasury funds and treasury notes once yields for notes are higher than bills. It is hardly going to make much difference, but I prefer to be on shorter duration side during this inverted yield curve environment.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Hector » Tue Jul 09, 2019 10:18 am

chisey wrote:
Tue Jul 09, 2019 8:16 am
Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?
47% Stable Value @ 3.2%
16% TIPS (VAIPX)
37% intermediate treasuries (FUAMX)

We also have about 10% of our overall portfolio in emerging market bonds but I don't consider that part of our fixed income.
2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .
I find no need to own corporates. If interest rates were higher we'd have everything in ITT-- we only own TIPS because of fund limitations in retirement accounts. As of now, we'd have more in the SV fund if we had more money in the plan that offered it.

The only possible future change is to move back from SV to ITT/TIPS, but interest rates have a long way to go before that makes sense to me. For now, all new contributions go to SV for that reason.
Where do you have this stable value? In employer sponsored retirement plan?

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Jefferson » Tue Jul 09, 2019 10:31 am

In Taxable, my bonds are split 50/50:
- VWIUX - Intermediate tax exempt admiral
- VGIT - Intermediate treasuries

In my t401k, my financial advisor has my bonds in 100% corporates
- VCIT
- HIX

I know, I know, on the financial advisor. There’s no management fee; just transaction costs. I’m planning on transferring everything out of there by the end of the year, but that’s going to be complicated.

75% of retirement money is in Taxable
- Taxable is 80/20 stocks/bonds
- t401/ is 93/7

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by dalbright » Tue Jul 09, 2019 10:36 am

I'm vanguard money market since paying higher than t-bills but will alternate depending on how close they are with taxes in mind. I'm also sitting in Pimix (pimco income) multi-sector bond and fxnax fidelity's total us bond. I had some long treasury that I move in and out of but sold it during the recent run up as it seemed overbought. I'm not hearing or seeing any real clear plays on the bond side right now with everything sitting pretty high at this time (stocks and bonds). Pimix would be my slightly riskier play but it does a great job historically of minimizing standard deviation and volatility while still capturing some yield. Pimco does use tactics that aren't as commonly accepted on this board but I think they are a leader in this arena.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by chisey » Tue Jul 09, 2019 10:51 am

Hector wrote:
Tue Jul 09, 2019 10:18 am
Where do you have this stable value? In employer sponsored retirement plan?
Yeah. It's guaranteed at 3.2% through sometime next year.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by MotoTrojan » Tue Jul 09, 2019 10:55 am

100% of my bond holdings are in TMF, a 3x leveraged 20 year treasury fund.

dcabler
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by dcabler » Tue Jul 09, 2019 11:13 am

Twofold split for my investments.
1. "safe" future cash flow consists of TIPs and Ibonds which I will use to provide inflation-adjusted income on top of SS to last from age 70 to 85. SS+this flow will just about take care of basic needs. At 85 I will consider a SPIA.

2. My "regular" portfolio which will bridge before age 70 and provide the extras in life during my retirement. My desire is to have only intermediate treasuries and that's the case for most of my portfolio. Where I can't, such as my current 401K, deferred compensation, and HSA, I use TBM.
Why treasuries? Like many things about investing, it's philosophical: the underlying bonds are backed by the full faith and credit of the US government. Will probably lag slightly behind a TBM approach in performance, but is slightly less correlated to stocks than TBM so potential for a slightly smoother ride for my overall portfolio.
Why intermediate? A while back I looked at either side of the "big hump" of interest rates that peaked in the early 80's. Shorter duration gave better results riding up to the peak and longer duration gave better results riding down the peak as one might expect. Intermediate was good enough and was also good enough in the decades before the hump.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by dalbright » Tue Jul 09, 2019 11:15 am

MotoTrojan wrote:
Tue Jul 09, 2019 10:55 am
100% of my bond holdings are in TMF, a 3x leveraged 20 year treasury fund.
I wish vanguard didn't block leveraged purchases now...

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Sandtrap » Tue Jul 09, 2019 12:16 pm

dcabler wrote:
Tue Jul 09, 2019 11:13 am
Twofold split for my investments.
1. "safe" future cash flow consists of TIPs and Ibonds which I will use to provide inflation-adjusted income on top of SS to last from age 70 to 85. SS+this flow will just about take care of basic needs. At 85 I will consider a SPIA.

2. My "regular" portfolio which will bridge before age 70 and provide the extras in life during my retirement. My desire is to have only intermediate treasuries and that's the case for most of my portfolio. Where I can't, such as my current 401K, deferred compensation, and HSA, I use TBM.
Why treasuries? Like many things about investing, it's philosophical: the underlying bonds are backed by the full faith and credit of the US government. Will probably lag slightly behind a TBM approach in performance, but is slightly less correlated to stocks than TBM so potential for a slightly smoother ride for my overall portfolio.
Why intermediate? A while back I looked at either side of the "big hump" of interest rates that peaked in the early 80's. Shorter duration gave better results riding up to the peak and longer duration gave better results riding down the peak as one might expect. Intermediate was good enough and was also good enough in the decades before the hump.
Sounds like a great strategy.
There are many here that would agree with you regarding the Intermediate Bond approach.

Thanks for posting. Great info!!!
j :happy
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by MotoTrojan » Tue Jul 09, 2019 12:23 pm

dalbright wrote:
Tue Jul 09, 2019 11:15 am
MotoTrojan wrote:
Tue Jul 09, 2019 10:55 am
100% of my bond holdings are in TMF, a 3x leveraged 20 year treasury fund.
I wish vanguard didn't block leveraged purchases now...
To be clear this is part of a portfolio and I would never hold this alone. That portfolio lives at M1 Finance which I am quite fond of now. I think it is a great option especially for hands-off investors as you can setup your desired AA and then automatic contributions will automatically contribute to the underweight asset(s). I still have my core taxable holdings (M1 is my Roth) at Vanguard.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by T-Wrench » Tue Jul 09, 2019 12:25 pm

To answer question 1: 80% CDs/total US bond and 20% high-yield bonds.

To answer question 2:
  • I keep high-yield bonds to diversify across credit. I also have around 30 years to retirement, so I believe that I can take the risk on these bonds and that, because I am reinvesting the interest, including these will increase my overall yield.
  • My marginal rate isn't yet high enough to consider municipal bonds in taxable, so I pursue the best CDs I can find.
  • I don't include international in my bond portion, unlike my equity portion, because I think the risks involved are compensated in the case of stocks and not compensated enough in the case of bonds (currency exchange costs, low yields (I think the higher yields of total international bond occurred when the fund first opened)).
I will consider TIPS as I get older; my understanding is that their real yield can be beaten by other bonds/CDs at this time and that TIPS' low real yield won't help me reach my goals. Total Intermediate Term isn't offered in my workplace retirement accounts, or I would consider that instead of Total Bond; I feel more comfortable with the 50/50 Corporate/Government split than Total Bond's 30/70 split.

Part of my reasoning for these things is that I don't believe there is such a thing as a 'riskless' asset; some things are inherently more risky than others, yes, but others just have different risks, e.g., yes, Treasuries lack default risk, but inflation, interest rate, and reinvestment risks are nonetheless real. I do understand why academics refer to assets as riskless, I just don't think that understanding extends perfectly into the real world (for the same reason that most math models don't include every possible variable of interest).

Sandtrap, thanks for starting the thread.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by ruralavalon » Tue Jul 09, 2019 12:32 pm

Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
10/25/65
Treasuries/Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Our asset is 50/50 equities/fixed income. We have no cash allocation.

Our entire bond allocation is in Vanguard Intermediate-term Bond Index Fund Admiral Shares (VBILX) ER 0.07%. Average effective duration = 6.14 years, average credit quality = A.

I like that fund because it is about 50/50 government/corporate bonds, with no securitized instruments (Mortgage Backed Securities).

I am not planning to change this.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Sandtrap
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Sandtrap » Tue Jul 09, 2019 1:26 pm

ruralavalon wrote:
Tue Jul 09, 2019 12:32 pm
Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
10/25/65
Treasuries/Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Our asset is 50/50 equities/fixed income. We have no cash allocation.

Our entire bond allocation is in Vanguard Intermediate-term Bond Index Fund Admiral Shares (VBILX) ER 0.07%. Average effective duration = 6.14 years, average credit quality = A.

I like that fund because it is about 50/50 government/corporate bonds, with no securitized instruments (Mortgage Backed Securities).

I am not planning to change this.
Great plan.

For some reason I always thought that you were 100% in Vanguard Total Bond.
No idea why?

Thanks.
j
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by ruralavalon » Tue Jul 09, 2019 3:11 pm

Sandtrap wrote:
Tue Jul 09, 2019 1:26 pm
ruralavalon wrote:
Tue Jul 09, 2019 12:32 pm
Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
10/25/65
Treasuries/Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Our asset is 50/50 equities/fixed income. We have no cash allocation.

Our entire bond allocation is in Vanguard Intermediate-term Bond Index Fund Admiral Shares (VBILX) ER 0.07%. Average effective duration = 6.14 years, average credit quality = A.

I like that fund because it is about 50/50 government/corporate bonds, with no securitized instruments (Mortgage Backed Securities).

I am not planning to change this.
Great plan.

For some reason I always thought that you were 100% in Vanguard Total Bond.
No idea why?

Thanks.
j
I like Vanguard Intermediate-term Bond Index Fund Admiral Shares (VBILX) fund because it is about 50/50 government/corporate bonds, with no securitized instruments (Mortgage Backed Securities).

I primarily wanted more in corporate bonds, for a little better return. Also Mr Bogle was recommending and using VBILX, stating that the total bond market fund was too heavily in government bonds.

In contrast Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) is about 47% government bonds, 26% corporate bonds, and 24% securitized instruments (Mortgage Backed Securities).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Dottie57 » Tue Jul 09, 2019 4:10 pm

52% of portfolio in bonds. I am counting only Fidelity pretax and taxable accounts.

3% FJRLX Fidelity Limited term - chosen because I was spooked when interest rates went up. Med quality limited interest
risk
11% FXNAX Fidelity U.S. Bond Index - widely diversified. High quality, medium interest rate risk.
22% TP7E Dodge and Cox Income - Medium quality med risk. Chose it as best bond fund 401k moved to Fidelity.
14% ——- State Street U.S. Bond Index Trust - like better than Dodge andCox in mix. May move more here.
34% Stable Value - Safe and know what the rate is. Similar to CD rates.
16% CDs which are spendable on the way to 70 and SS. Maturity set for beginning of next 4 years.

As I spend down bond assets, my equity should go up. Age 70 AA is 60/40 depending on economic state.
Last edited by Dottie57 on Tue Jul 09, 2019 6:33 pm, edited 2 times in total.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by ruralavalon » Tue Jul 09, 2019 4:18 pm

Dottie57 wrote:
Tue Jul 09, 2019 4:10 pm
52% of portfolio in bonds. I am counting only Fidelity pretax and taxable accounts.

3% FJRLX Fidelity Limited term - chosen because I was spooked when interest rates went up. Med quality limited interest
risk
11% FXNAX Fidelity U.S. Bond Index - widely diversified. High quality, medium interest rate risk.
22% TP7E Dodge and Cox Income - Can’t find a quality/risk box. Chose it as best bond fund 401k moved to Fidelity.
14% ——- State Street U.S. Bond Index Trust - like better than Dodge andCox in mix. May move more here.
34% Stable Value - Safe and know what the rate is. Similar to CD rates.
16% CDs which are spendable on the way yo 70 and SS. Maturity set for beginning of next 4 years.

As I spend down bond assets, my equity should go up. Age 70 AA is 60/40 depending on economic state.
Dodge & Cox Income Fund (DODIX) risk box can be found on Morningstar, quote page, here.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Dottie57 » Tue Jul 09, 2019 4:49 pm

ruralavalon wrote:
Tue Jul 09, 2019 4:18 pm
Dottie57 wrote:
Tue Jul 09, 2019 4:10 pm
52% of portfolio in bonds. I am counting only Fidelity pretax and taxable accounts.

3% FJRLX Fidelity Limited term - chosen because I was spooked when interest rates went up. Med quality limited interest
risk
11% FXNAX Fidelity U.S. Bond Index - widely diversified. High quality, medium interest rate risk.
22% TP7E Dodge and Cox Income - Can’t find a quality/risk box. Chose it as best bond fund 401k moved to Fidelity.
14% ——- State Street U.S. Bond Index Trust - like better than Dodge andCox in mix. May move more here.
34% Stable Value - Safe and know what the rate is. Similar to CD rates.
16% CDs which are spendable on the way yo 70 and SS. Maturity set for beginning of next 4 years.

As I spend down bond assets, my equity should go up. Age 70 AA is 60/40 depending on economic state.
Dodge & Cox Income Fund (DODIX) risk box can be found on Morningstar, quote page, here.
Thank you. Medium quality/ Medium risk for Dodge and Cox Income. Going to move more to State Street

*** I initially looked on the wrong tab. The box was on the Price tab but was looking for it on portfolio tab.
Last edited by Dottie57 on Tue Jul 09, 2019 6:30 pm, edited 2 times in total.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by abuss368 » Tue Jul 09, 2019 6:24 pm

Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
35/65
Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Check out my post from years ago “Bonds - Throw it all on the table”. Many responses and it really provides what I believe is very useful information.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Sandtrap
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Sandtrap » Tue Jul 09, 2019 6:51 pm

abuss368 wrote:
Tue Jul 09, 2019 6:24 pm
Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
35/65
Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Check out my post from years ago “Bonds - Throw it all on the table”. Many responses and it really provides what I believe is very useful information.
“Bonds - Throw it all on the table” thread ("abuss368")
viewtopic.php?f=10&t=131904
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abuss368
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by abuss368 » Tue Jul 09, 2019 6:57 pm

Sandtrap wrote:
Tue Jul 09, 2019 6:51 pm
abuss368 wrote:
Tue Jul 09, 2019 6:24 pm
Sandtrap wrote:
Tue Jul 09, 2019 7:51 am
There's a plethora of threads on diversification of equities, tilts, etc.

But, far less on diversification of fixed, specifically the allocation of the "Bond Portion" of one's portfolio.

With the "possibility" (or not) of continuing low interest rates, and thus bond yields, going forward, we could learn a lot from what others are doing with thier Bond Allocation (or sub allocation in this case).

Thanks everyone for your help.
Your answers and reasoning will be helpful to others starting out or considering a change.

j :D

ps: I'm not sure where REITs fit in this scenario, and it is not a "bond" allocation, so let's leave that out for now to keep things simple. Unless. . . you consider it part of your bond allocation.


QUESTIONS:

1. On the "Bond (fixed)" portion of your portfolio, what allocation of funds do you have?

For example:
"100% Total Bond"
"50/50 Total Bond, Intermediate Term Bond Index Fund"
"35% Investment Grade Corporate Bond -- 65% Total Bond" (VBTLX/VICSX)


2. Why do you have it set up that way? . . . Was it always that way? . . . Are you planning to change it going forward?. . . Why?. . or Why Not?. . .


What I have:
35/65
Int. Term Inv. Grade (VFIDX) / Total Bond (VBTLX
Why: I also have a REIT allocation, and also physical R/E income properties, to offset any volatility I might be adding with a corporate bond fund.
Diversification is a good thing.
Jack Bogle suggested an allocation to this or simlar corporate index fund.
Check out my post from years ago “Bonds - Throw it all on the table”. Many responses and it really provides what I believe is very useful information.
“Bonds - Throw it all on the table” thread ("abuss368")
viewtopic.php?f=10&t=131904
I always liked the responses of that thread. Also did one called “Cash - Throw it all on the table” which was better than expected.
John C. Bogle: Two Fund Portfolio - Total Stock & Total Bond - “Simplicity is the master key to financial success."

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by ladycat » Tue Jul 09, 2019 7:52 pm

I have about 40% of my portfolio in fixed income.
Of that:
42% CDs & Tbills
33% Schwab short-term bond SWSBX and CDs with >1 year maturity.
25% Schwab Aggregate Bond SWAGX

Why - Because I'm still learning and I don't feel fully educated or comfortable with bond funds.
Last year I realized my nearly 90% equity asset allocation was too risky. I rebalanced to roughly 60/40. Due to my very limited knowledge about bond funds, I put all of it in CDs. As the CDs mature, I'm purchasing short-term and aggregate bond index funds.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Tyler Aspect » Tue Jul 09, 2019 9:08 pm

One thing I do in taxable account is to pick BIV over total bond index since BIV has over 50% Treasury holding for California state tax reduction.

One other possibility is that if you have TIPs in taxable account to simulate total bond index with this ratio:

TIPs : 50%
VMBS : 20%
VCIT : 30%
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by tibbitts » Tue Jul 09, 2019 10:41 pm

I have about half my investments in fixed income:

- stable value (okay maybe not "bond")
- gnma
- short term investment grade
- intermediate investment grade
- emerging market
- foreign
- high yield
- floating rate
- EE
- I

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by sergeant » Tue Jul 09, 2019 11:08 pm

40/60, Equities/ Fixed Income. We will slowly glide up to 60/40 over the next couple decades. The glide up is funded by excess from our pensions and the 70k a year the stable value fund provides. We are retired but don't need our portfolio as pensions supply about 3X expenses. If our pensions disappeared fixed income represents well over 20 years expenses.
80% Stable Value at 4.1%
10% Tips
10% TBM
I have mostly avoided anything long term for over a decade because I thought rates have to go up. I have been wrong! :oops:
AA- 20+ Years of Expenses Fixed Income/The remainder in Equities.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Metx » Wed Jul 10, 2019 12:49 am

Bond allocation:

80 % Total Bond
20 % Treasury Notes < 3yrs maturity

Rationale:

The treasuries are there as a bridge to delay SS, the 3 yr term was convenient since yields for longer terms were no better. Total bond is there for "ballast" in the overall portfolio.

I had that 20% slice in a short term fund, but after reading some threads here I realized I could just hold T Notes directly, which appeals to me.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by folkher0 » Wed Jul 10, 2019 11:57 am

"Bonds" to mean just mean low volatility investments. I'm about 80% equitites, 20% "bonds".

My bonds are split about equaly into TIAA Real Estate, TIAA traditional, and Vanguard TBM. None of this is too precise.

You may not call TIAA Real Estate fixed income, but it functions that way in my portfolio.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Broken Man 1999 » Wed Jul 10, 2019 12:12 pm

Overall portfolio is 50% equities & 50% bonds. All bond holdings are tax deferred. All equity holdings are tax deferred.

Bond holdings:

1. US Savings Bonds Series I - 13.5% (paper bonds)
2. Vanguard Short-term Treasury Index fund - 22.7% (IRAs)
3. Vanguard Total Bond Market Index fund/ETF - 29.3% (IRAs, Vanguard Variable Annuity)
4. Vanguard Intermediate-term Treasury Index fund - 34.5% (IRAs)

What I like about our bond holdings:
1. Everything is held in a tax-deferred account.
2. Re-balancing if/when needed will not generate capital gains/losses.
3. So long as Mr Market keeps chugging along, I will not be selling any bond fund holdings for living expenses. I can redirect dividends and continue selling off individual stocks for several months.

What I don't like about our bond holdings:
1. I am not that enamored with our Vanguard Total Bond Market Index fund. I much prefer treasuries. Just personal preference, nothing more.
2. I want to reduce the number of bond funds from three to two.

I am currently taking a deep dive into some earlier bond discussions, bond books, and other sources of info like articles by trusted author(s).

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by AerialWombat » Wed Jul 10, 2019 12:19 pm

I'm broadly diversified in domestic junk. Is that an oxymoron? :)

I'm 30/70 stocks/bonds in securities. Bond percentages:

iShares TR 0-5 YR HIGH YIELD CORP BD ETF (SHYG) - 11%
Vanguard High Yield Corporate (VWEHX) - 8%
Vanguard Wellesley Income Fund (VWINX) - 6%
Fidelity Floating Rate High Income (FFRHX) -3%
Fidelity Capital & Income (FAGIX) - 4%
Vanguard High-Yield Tax-Exempt Fund Admiral (VWALX) - 57%
Groundfloor Loans: 11%

My only real public equity holding is an agency mortgage REIT, and some would argue that is quite bond-like. Also, currently sitting on cash in checking equal to 1/3 of the entire bond portfolio above. It will likely be split between the muni fund and Groundfloor.

Reasoning: I begin my fade away into semi-retirement in just 6-8 months. I can't stand volatility of public equities. I don't have the desire to take risk in public equities, because I have significant business and real estate risk elsewhere.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by retiredjg » Wed Jul 10, 2019 12:27 pm

I have some
  • -G Fund (TSP) and some

    -F Fund (TSP's total bond index) and

    -a smattering of Intermediate Term Investment grade which I happened to get because I needed bonds about the time Jack Bogle suggested more corporates.
I don't know how much I have of any of these other than it's mostly G and F funds. It does not matter to me as they all fall into the bond category and all are good investments. Any more thinking than that is over-thinking for this lazy investor.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by DDubya » Wed Jul 10, 2019 2:21 pm

DW and I are about 43% fixed income in our total portfolio (retirement + non-retirement).
Cash/CDs/iBonds 39%
TIPS (VAIPX): 12%
Total Bond: 16%
Int'l Bond: 7%
Municipal Bonds (VWIUX): 26%
We have this mix in order that the CDs will be our source of a few years of RMDs (we are ages 70/69) in the event of a crash in equity prices and iBonds provide additional tax-deferred space. TIPS because I remain wary of inflation (I began investing in the late 1970s). We own Total Bond and Int'l Bond through holding Life Strategy Funds for broad diversification. Municipal bonds to supplement our RMDs for lifestyle spending (travel and gifts to children and grandchild).
I am content with this allocation to different fixed income instruments and durations.
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Chris K Jones » Wed Jul 10, 2019 2:38 pm

1. I have a 60/40 portfolio. 80 % of fixed income is in Vanguard Intermdiate Term Bond Index (VBILX) and 20% is in Vanguard Intermediate Term Tax Exempt (VWIUX).
2. Why? I wanted intermediate term bonds. I figured they provided the best compromise between returns and interest rate risk. I used to have a more complicated allocation including high yields and corporates, but I want to keep it simple. VBILX has no mortgage obligations and more corporates than Vanguard Total Bond Fund. It was talked up by Mr Bogle. This fund fills my tax advantaged space. I needed more bonds for my 40% fixed income allocation and felt that VWIUX was the best bet. Best wishes to all.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Sandtrap » Wed Jul 10, 2019 3:52 pm

Broken Man 1999 wrote:
Wed Jul 10, 2019 12:12 pm
Overall portfolio is 50% equities & 50% bonds. All bond holdings are tax deferred. All equity holdings are tax deferred.

Bond holdings:

1. US Savings Bonds Series I - 13.5% (paper bonds)
2. Vanguard Short-term Treasury Index fund - 22.7% (IRAs)
3. Vanguard Total Bond Market Index fund/ETF - 29.3% (IRAs, Vanguard Variable Annuity)
4. Vanguard Intermediate-term Treasury Index fund - 34.5% (IRAs)

What I like about our bond holdings:
1. Everything is held in a tax-deferred account.
2. Re-balancing if/when needed will not generate capital gains/losses.
3. So long as Mr Market keeps chugging along, I will not be selling any bond fund holdings for living expenses. I can redirect dividends and continue selling off individual stocks for several months.

What I don't like about our bond holdings:
1. I am not that enamored with our Vanguard Total Bond Market Index fund. I much prefer treasuries. Just personal preference, nothing more.
2. I want to reduce the number of bond funds from three to two.

I am currently taking a deep dive into some earlier bond discussions, bond books, and other sources of info like articles by trusted author(s).

Broken Man 1999
+1
I've evolved partially away from Total Bond Index over a period of time. It used to be so substantial that it might as well be the only bond fund holding. Not so now.

How have those Short Term Treasury Index funds held up for you???

j
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by Sandtrap » Wed Jul 10, 2019 3:55 pm

AerialWombat wrote:
Wed Jul 10, 2019 12:19 pm
I'm broadly diversified in domestic junk. Is that an oxymoron? :)

I'm 30/70 stocks/bonds in securities. Bond percentages:

iShares TR 0-5 YR HIGH YIELD CORP BD ETF (SHYG) - 11%
Vanguard High Yield Corporate (VWEHX) - 8%
Vanguard Wellesley Income Fund (VWINX) - 6%
Fidelity Floating Rate High Income (FFRHX) -3%
Fidelity Capital & Income (FAGIX) - 4%
Vanguard High-Yield Tax-Exempt Fund Admiral (VWALX) - 57%
Groundfloor Loans: 11%

My only real public equity holding is an agency mortgage REIT, and some would argue that is quite bond-like. Also, currently sitting on cash in checking equal to 1/3 of the entire bond portfolio above. It will likely be split between the muni fund and Groundfloor.

Reasoning: I begin my fade away into semi-retirement in just 6-8 months. I can't stand volatility of public equities. I don't have the desire to take risk in public equities, because I have significant business and real estate risk elsewhere.
I had been considering adding this into my bond side allocation over the past year. . . at least.

How has it worked out for you over time?

Yes. It's been said that the mortgage REIT's are more bond like. REIT funds seem to be 2/3 of the way between bonds and equities, maybe more. Interesting "critters".

Interesting fund mix.
Welcome to retirement.
j
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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by BigJohn » Wed Jul 10, 2019 4:37 pm

Some context, age 63 and retired almost 5 years now. Feel I’ve won the game and decided to stop playing by going to a 35/65 stock/bond allocation when I retired (I had been about 60/40). Decisions on bonds was actually much tougher than stocks. I realized years ago that I just don’t believe in the persistence of tilts enough to make that bet so I only use TSM and TISM. Here’s how I deploy my bond allocation.

In taxable I have 100% VG Intermediate Term Tax-Exempt. I used this for years while working and it remains a slight “win” vs taxable bonds given my tax bracket while doing Roth conversions.

In tIRA/Roth I have about 50% VG Short Term Bond Index, 25% VG Intermediate Term TIPS and 25% VG Intermediate Term Bond Index.

I went with IT Bond Index vs TBM for two reasons. First, a relative constant mix of Treasury/Corp bonds vs the market movement of TBM. Second, no mortgage backed securities. However, over the long haul I think the difference between the two will be very minimal but, a choice had to be made.

I went with 50/50 ratio of IT TIPS vs Bond Index because I wanted some inflation insurance. I recognize this costs me some return (all insurance has a cost) but with a high bond allocation and no pension, I view inflation as my single biggest “deep risk”.

Why I have 50% in ST Bond Index is a bit more complicated. When I retired I rolled over my 401k which had a significant stable value allocation. I also took my pension as a lump sum. I considered both of these like a high quality ST bond. So, as a hold even move, I put all those $$ into the ST Bond Index with the intention of migrating to the IT 50/50 split over the first 3-4 years. However, given the shape of the yield curve, I’ve been stalled on that movement for some time. Some might call it market timing but right now I just see no incentive to accept the interest rate risk of moving to longer maturity.

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Re: Bond Side (sub) Allocations. @@ What Do You Have? Why? Why Not?

Post by AerialWombat » Wed Jul 10, 2019 4:41 pm

Sandtrap wrote:
Wed Jul 10, 2019 3:55 pm
I had been considering adding this into my bond side allocation over the past year. . . at least.

How has it worked out for you over time?

Yes. It's been said that the mortgage REIT's are more bond like. REIT funds seem to be 2/3 of the way between bonds and equities, maybe more. Interesting "critters".
I’ve only really been investing in securities for 14 months now. So I don’t have much of an “over time” answer. Vanguard says I’m up almost 10% in taxable since beginning of last year. My taxable account is 100% VWALX. I like the monthly income, and accept the credit and interest rate risks as better for me than the risks associated with equities.

The mREIT (Annaly) has correlated 0.72 with the S&P500 since it went public. It was an excellent recession hedge in 2000 and 2008, and I view it as a safer, heavily diversified version of my highly risky Groundfloor note investing— I own a tiny piece of thousands upon thousands of agency-backed mortgages that are secured by first position liens on real, tangible, physical assets. And an 11% yield is nice. :)

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