Choosing a Bond Fund for 401k

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Topic Author
JustAnotherInvestor
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Joined: Sun Jan 10, 2021 1:39 pm

Choosing a Bond Fund for 401k

Post by JustAnotherInvestor »

Good Morning!

I was hoping to get some advice on what fund to choose for my 401k. My overall asset allocation is 70/30 and because of RSU appreciation, a significant portion of funds is currently in taxable such that if the entire 401k were in bonds, I would still have around 200k for bonds in taxable. In reading the WIKI, the optimal location for the bond portion is in tax advantage accounts.

Unfortunately the 401k does not give me access to a total bond fund, in fact two of the funds don't even have a ticker so I've been a bit reluctant to use them and have just come the target date fund that is roughly 70/30.

Below is the list of funds. My question is, given these options, would it make sense to use one of the earlier target date funds, FFGFX or FFGZE that have a high concentration of bonds in the 401k and look at municipal bonds in taxable given that I'm in the 35% tax bracket? Thanks!

Name/Inception Date Gross Expense Ratio** 
FID FDM IDX 2005 (FFGFX)   0.08%
FID FDM IDX 2010 (FFWTX)   0.08%
FID FDM IDX 2015 (FIWFX)   0.08%
FID FDM IDX 2020 (FIWTX)   0.08%
FID FDM IDX 2025 (FFEDX)   0.08%
FID FDM IDX 2030 (FFEGX)   0.08%
FID FDM IDX INC (FFGZX)   0.08%
PIMCO STABLE INC 2 0.51%
CORE PLUS BOND R1 0.29%
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retired@50
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Location: Living in the U.S.A.

Re: Choosing a Bond Fund for 401k

Post by retired@50 »

JustAnotherInvestor wrote: Sun May 02, 2021 11:11 am
FID FDM IDX INC (FFGZX)   0.08%
In your situation, I'd use this one...^^^^^

Regards,
This is one person's opinion. Nothing more.
Topic Author
JustAnotherInvestor
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Joined: Sun Jan 10, 2021 1:39 pm

Re: Choosing a Bond Fund for 401k

Post by JustAnotherInvestor »

retired@50 wrote: Sun May 02, 2021 11:19 am
JustAnotherInvestor wrote: Sun May 02, 2021 11:11 am
FID FDM IDX INC (FFGZX)   0.08%
In your situation, I'd use this one...^^^^^

Regards,
Thanks for responding retired@50! That's the direction I was leaning towards as well.
sycamore
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Re: Choosing a Bond Fund for 401k

Post by sycamore »

Do you have any details on the stable value fund? I sometimes see posts on Bogleheads that stable value funds can be a great option for one's fixed income holdings. Is the "PIMCO STABLE INC 2" a stable value fund (I'm not sure if it's just a marketing name)? And does it have a reasonable guaranteed payout after fees, i.e., is it competitive with a "total bond" fund SEC yield? If so, that might be a worthwhile option for you.
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ruralavalon
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Re: Choosing a Bond Fund for 401k

Post by ruralavalon »

The funds without ticker symbols are probably Collective Investment Trusts (CITS). CITS are often good investment choices.

Can you post links to the fact sheet for each of these funds?
PIMCO STABLE INC 2 0.51%
CORE PLUS BOND R1 0.29%

What state you pay state income taxes to? What is your tax bracket for state income taxes? (I am wondering if there might be a state specific, tax-exempt bond fund you might consider in a taxable account.)
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
Topic Author
JustAnotherInvestor
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Joined: Sun Jan 10, 2021 1:39 pm

Re: Choosing a Bond Fund for 401k

Post by JustAnotherInvestor »

sycamore wrote: Sun May 02, 2021 12:26 pm Do you have any details on the stable value fund? I sometimes see posts on Bogleheads that stable value funds can be a great option for one's fixed income holdings. Is the "PIMCO STABLE INC 2" a stable value fund (I'm not sure if it's just a marketing name)? And does it have a reasonable guaranteed payout after fees, i.e., is it competitive with a "total bond" fund SEC yield? If so, that might be a worthwhile option for you.
Unfortunately I don't have a whole lot of information about it what the stable value is made of. The plan does provide some data on returns though. Thanks!

Pimco Fds 11/01/2024 92.89%
Pimco Fds 08/01/2022 4.85%

Quarter-End Average Annual Total Returns
1 yr. 1.77%
3 yr. 1.90%
5 yr. 1.78%
Life 1.24%
Topic Author
JustAnotherInvestor
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Joined: Sun Jan 10, 2021 1:39 pm

Re: Choosing a Bond Fund for 401k

Post by JustAnotherInvestor »

ruralavalon wrote: Sun May 02, 2021 4:39 pm The funds without ticker symbols are probably Collective Investment Trusts (CITS). CITS are often good investment choices.

Can you post links to the fact sheet for each of these funds?
PIMCO STABLE INC 2 0.51%
CORE PLUS BOND R1 0.29%

What state you pay state income taxes to? What is your tax bracket for state income taxes? (I am wondering if there might be a state specific, tax-exempt bond fund you might consider in a taxable account.)
Unfortunately, I'm not finding a way to post a link that does not require a login to Fidelity but I did get some more info (below). Is this helpful?

I live in Texas and don't have to pay state income tax, only property tax. Thanks!

Here's some info on the Stable Value.

Objective
The Fund seeks to provide current income in excess of money market investments and reduce the risk of principal loss over time.
Strategy
The Fund is an actively managed, diversified investment strategy which invests primarily in investment grade fixed income investments including, but not limited to, U.S. government securities, corporate bonds, mortgage-backed securities, asset-backed securities, and derivative instruments, including futures and swaps. The average duration of the Fund's investments will vary over time, but is typically expected to be between two and three years.

Other Fund investments may include a variety of stable value investment contracts issued by insurance companies, banks, and other financial institutions, which are intended to help reduce principal volatility of, while providing steady income from, any associated Fund fixed income investments. The Fund may also invest in cash or other liquid investments, such as a money market strategy or short-term investment fund ("STIF"), to help meet participant liquidity needs.

Here's the info on core bond.

Objective
The Fund seeks total return.
Strategy
The Fund invests solely in units of the PGIM Total Return Fund which invests at least 80% of its investable assets in bonds. The Fund's investment subadviser allocates assets among different debt securities, including US Government securities, mortgage-related and asset-backed securities, corporate debt securities and foreign securities. The fund seeks to outperform the Bloomberg Barclays US Aggregate Bond Index (Benchmark).
Risk
In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible. Additional risk information for this product may be found in the prospectus or other product materials, if available.
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ruralavalon
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Re: Choosing a Bond Fund for 401k

Post by ruralavalon »

PIMCO STABLE INC 2 0.51%, what interest rate is currently being paid on this fund? Is the rate guaranteed?

CORE PLUS BOND R1 0.29% (PGIM Total Return Fund, PDBAX???) how has the fund performance compared to the benchmark? Which fund company is the fund's "sub-advisor". What is the fund's reported effective duration? What is the fund's reported credit quality? What is the portfolio make up (e.g. % government bonds, % corporate bonds, % securitized)?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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