Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
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Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
Dear Bogleheads,
The two bond choices in my 403(b) are:
DODIX (Dodge & Cox Income Fund Class I, ER .41)
PARRX (PIMCO Real Return Fund Administrative Class, ER .72)
Question:
Does anyone think one is better than the other?
I don't have any bonds in my portfolio yet, and I'm not sure now is a good time to be adding any, but I'm curious to know your opinion.
Thanks for your thoughts!
-Horse Badorties
The two bond choices in my 403(b) are:
DODIX (Dodge & Cox Income Fund Class I, ER .41)
PARRX (PIMCO Real Return Fund Administrative Class, ER .72)
Question:
Does anyone think one is better than the other?
I don't have any bonds in my portfolio yet, and I'm not sure now is a good time to be adding any, but I'm curious to know your opinion.
Thanks for your thoughts!
-Horse Badorties
Last edited by Horse Badorties on Fri Jun 24, 2022 4:01 pm, edited 2 times in total.
- retired@50
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Re: Bond question: DODIX (Dodge & Cox Income) or PARXX (PIMCO Real Return)
I'd use the Dodge & Cox fund, for sure.Horse Badorties wrote: ↑Fri Jun 24, 2022 12:57 pm DODIX (Dodge & Cox Income Fund Class I, ER .41)
Question:
Does anyone think one is better than the other?
Incidentally, the ticker on the other fund is actually PARRX, not PARXX.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
Thanks, retired@50. Fixed!
Why DODIX?
Why DODIX?
- retired@50
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
Lower expense ratio. Lower standard deviation of returns.
Basically, it behaves like you'd expect a bond fund to behave.
I suppose if you're actually seeking an inflation protected bond fund, then using the PIMCO fund may be your only choice in this plan, but I think inflation protected bond funds are more appropriate for investors in the 60-65 years old (and above) range.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I understand you are a captive employee but to have only those two choices and to have them at those ERs is just really bad. But this is often the fate of people in bad 403 plans. I don't think 403s very often have a brokerage link that would do better.
I would hate to spend .72% to mess around with an active fund attempt to hold TIPS. Probably best pick DODIX unless real return is a priority for you.
I hold only TIPS in my 401k but it is SWRSX at 0.05% ER.
I would hate to spend .72% to mess around with an active fund attempt to hold TIPS. Probably best pick DODIX unless real return is a priority for you.
I hold only TIPS in my 401k but it is SWRSX at 0.05% ER.
Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I would skip bonds in your 403 plan and buy them in an IRA or Roth you open. If you need more bonds than you can buy in an IRA or Roth, then and only then would I start buying them in the 403.
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I agree completely. Those fees will eat up any real return. I'd also consider EE bonds or I bonds over those horrible bond fund choices. Also, if eligible an HSA may be a fine place to hold some bonds.
I view those funds offered in the plan as giving you a lot of the risk of holding a bond fund without the benefit.
- ruralavalon
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I suggest using Dodge & Cox Income Fund Class I (DODIX) ER 0.41%. The expense ratio is not high.
Dodge & Cox is an excellent fund company, rated number 1 by Morningstar. "Be Thankful That You Don't Compete Against Vanguard", link. "After reading this column, Morningstar’s Russ Kinnel informed me that Jack Bogle told him that Dodge & Cox was his favorite fund family. “My God, they’re boring,” said Bogle. You can’t ask for a higher fund-family compliment than that."
Also Morningstar The Best Fund Companies and Their Ratings. "[O]nly five firms . . . have met our lofty standards for a High Parent rating: American Funds, DFA, Dodge & Cox, T. Rowe Price, and Vanguard."
Although actively managed DODIX is a good diversified (18% government bonds, 35% corporate bonds, 39% securitized), intermediate-term (effective duration = 5.0 years), investment-grade (average credit rating = A+) bond fund, with a below average expense ratio.
The performance of DODIX has compared well to a total bond market index fund. Portfolio Visualizer, 1989-2022. The performance shown is after expenses.
Dodge & Cox is an excellent fund company, rated number 1 by Morningstar. "Be Thankful That You Don't Compete Against Vanguard", link. "After reading this column, Morningstar’s Russ Kinnel informed me that Jack Bogle told him that Dodge & Cox was his favorite fund family. “My God, they’re boring,” said Bogle. You can’t ask for a higher fund-family compliment than that."
Also Morningstar The Best Fund Companies and Their Ratings. "[O]nly five firms . . . have met our lofty standards for a High Parent rating: American Funds, DFA, Dodge & Cox, T. Rowe Price, and Vanguard."
Although actively managed DODIX is a good diversified (18% government bonds, 35% corporate bonds, 39% securitized), intermediate-term (effective duration = 5.0 years), investment-grade (average credit rating = A+) bond fund, with a below average expense ratio.
The performance of DODIX has compared well to a total bond market index fund. Portfolio Visualizer, 1989-2022. The performance shown is after expenses.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I've owned DODIX for many years and am big fan. Like others have noted above they are well respected and highly rated. (Morningstar Gold 4 stars). Diversified, low volatility and category beating returns.
I had to look up PARRX. Looks like it competes in the inflation protection space (the name reference to "real return" fits). Morningstar rates it Neutral 3 stars.
These two funds have different objectives.
Many Bogleheads recommend splitting fixed income allocations between nominal and inflation protected holdings, which would describe these two. Perhaps that would be a good choice for you - 50/50 each. Although, if you have a high equity allocation, say greater than 60%, many would say that would negate the need for inflation protection in fixed income holdings.
(I am not a financial advisor but rather just some guy on the internet).
l2r
I had to look up PARRX. Looks like it competes in the inflation protection space (the name reference to "real return" fits). Morningstar rates it Neutral 3 stars.
These two funds have different objectives.
Many Bogleheads recommend splitting fixed income allocations between nominal and inflation protected holdings, which would describe these two. Perhaps that would be a good choice for you - 50/50 each. Although, if you have a high equity allocation, say greater than 60%, many would say that would negate the need for inflation protection in fixed income holdings.
(I am not a financial advisor but rather just some guy on the internet).
l2r
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
Thanks, everybody. This was helpful.
Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I'd use the Dodge and Cox Income because of the lower cost.
I'd also look to see if there is a stable value fund (guaranteed income fund) available and what it is paying. Sometimes a combination of stable value and a more expensive fund can work well and bring the cost down some.
I'd also look to see if there is a stable value fund (guaranteed income fund) available and what it is paying. Sometimes a combination of stable value and a more expensive fund can work well and bring the cost down some.
Link to Asking Portfolio Questions
Re: Bond question: DODIX (Dodge & Cox Income) or PARXX (PIMCO Real Return)
Agree.retired@50 wrote: ↑Fri Jun 24, 2022 1:38 pmI'd use the Dodge & Cox fund, for sure.Horse Badorties wrote: ↑Fri Jun 24, 2022 12:57 pm DODIX (Dodge & Cox Income Fund Class I, ER .41)
Question:
Does anyone think one is better than the other?
Incidentally, the ticker on the other fund is actually PARRX, not PARXX.
Regards,
I had the Dodge and Cox Income for years in my 401k. Good , stable fund. I was happy during the GFC - it did fine.
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
Why wouldn't most investors want some TIPS in portfolio? I'm thinking of going the David Swenson route with 30%-50% in intermediate tips.retired@50 wrote: ↑Fri Jun 24, 2022 7:01 pmLower expense ratio. Lower standard deviation of returns.
Basically, it behaves like you'd expect a bond fund to behave.
I suppose if you're actually seeking an inflation protected bond fund, then using the PIMCO fund may be your only choice in this plan, but I think inflation protected bond funds are more appropriate for investors in the 60-65 years old (and above) range.
Regards,
- retired@50
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I try to be careful with phrasing, especially when using the word "most". I've not read what Swenson has to say about TIPS. Do you have a link, or was it in a book, if so, what title?DesertInvestor wrote: ↑Wed Jan 03, 2024 4:57 pmWhy wouldn't most investors want some TIPS in portfolio? I'm thinking of going the David Swenson route with 30%-50% in intermediate tips.retired@50 wrote: ↑Fri Jun 24, 2022 7:01 pmLower expense ratio. Lower standard deviation of returns.
Basically, it behaves like you'd expect a bond fund to behave.
I suppose if you're actually seeking an inflation protected bond fund, then using the PIMCO fund may be your only choice in this plan, but I think inflation protected bond funds are more appropriate for investors in the 60-65 years old (and above) range.
Regards,
I think any investor with 60% - 70% (or more) in stock (index funds) has inflation protection built in, by holding a high percentage in stock. Stocks have typically done pretty well over the medium to long term in inflationary times.
Christine Benz and William Bernstein discuss the inflation topic in this article (actually a transcript of a podcast).
https://www.morningstar.com/financial-a ... -investing
As for your particular circumstances (age unknown), I suspect if you hold 45% - 50% (or more) in bonds, then adding some TIPS may be a fine idea.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
https://jonluskin.com/should-i-invest-i ... ties-tips/
Nice article on the topic of when to include TIPS.
https://www.optimizedportfolio.com/davi ... -portfolio
David Swenson portfolio, basically 15% TIPS and 15% intermediate treasuries (what I'm considering). Also the white coat investor does his portfolio in the same fashion.
Its been interesting reading about this and seeing how the lower amount of stock is what triggers inclusion in portfolios and vanguard target date funds ect. I always wondered when and how to include a tips fund. I guess its mostly determined by going below 80% stock or so and losing the inflation protection of equities by doing so.
Nice article on the topic of when to include TIPS.
https://www.optimizedportfolio.com/davi ... -portfolio
David Swenson portfolio, basically 15% TIPS and 15% intermediate treasuries (what I'm considering). Also the white coat investor does his portfolio in the same fashion.
Its been interesting reading about this and seeing how the lower amount of stock is what triggers inclusion in portfolios and vanguard target date funds ect. I always wondered when and how to include a tips fund. I guess its mostly determined by going below 80% stock or so and losing the inflation protection of equities by doing so.
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
This is the best interview Bernstein has done lately, thanks. I've heard it but good to read it again. His new edition is excellent, may even read it again.retired@50 wrote: ↑Wed Jan 03, 2024 5:29 pmI try to be careful with phrasing, especially when using the word "most". I've not read what Swenson has to say about TIPS. Do you have a link, or was it in a book, if so, what title?DesertInvestor wrote: ↑Wed Jan 03, 2024 4:57 pmWhy wouldn't most investors want some TIPS in portfolio? I'm thinking of going the David Swenson route with 30%-50% in intermediate tips.retired@50 wrote: ↑Fri Jun 24, 2022 7:01 pmLower expense ratio. Lower standard deviation of returns.
Basically, it behaves like you'd expect a bond fund to behave.
I suppose if you're actually seeking an inflation protected bond fund, then using the PIMCO fund may be your only choice in this plan, but I think inflation protected bond funds are more appropriate for investors in the 60-65 years old (and above) range.
Regards,
I think any investor with 60% - 70% (or more) in stock (index funds) has inflation protection built in, by holding a high percentage in stock. Stocks have typically done pretty well over the medium to long term in inflationary times.
Christine Benz and William Bernstein discuss the inflation topic in this article (actually a transcript of a podcast).
https://www.morningstar.com/financial-a ... -investing
As for your particular circumstances (age unknown), I suspect if you hold 45% - 50% (or more) in bonds, then adding some TIPS may be a fine idea.
Regards,
- retired@50
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
Thanks for the links.DesertInvestor wrote: ↑Thu Jan 04, 2024 10:33 am https://jonluskin.com/should-i-invest-i ... ties-tips/
Nice article on the topic of when to include TIPS.
https://www.optimizedportfolio.com/davi ... -portfolio
David Swenson portfolio, basically 15% TIPS and 15% intermediate treasuries (what I'm considering). Also the white coat investor does his portfolio in the same fashion.
Its been interesting reading about this and seeing how the lower amount of stock is what triggers inclusion in portfolios and vanguard target date funds ect. I always wondered when and how to include a tips fund. I guess its mostly determined by going below 80% stock or so and losing the inflation protection of equities by doing so.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
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Re: Bond question: DODIX (Dodge & Cox Income) or PARRX (PIMCO Real Return)
I'm mid-forties btw. Still working...a lot. I have far too much cash at the moment but hope to get to 70% stock for the long term. Currently 50% stock and organizing permanent fixed income portion of portfolio. I'm at financial independence, but don't plan on retiring for at least 10-15 years.retired@50 wrote: ↑Wed Jan 03, 2024 5:29 pmI try to be careful with phrasing, especially when using the word "most". I've not read what Swenson has to say about TIPS. Do you have a link, or was it in a book, if so, what title?DesertInvestor wrote: ↑Wed Jan 03, 2024 4:57 pmWhy wouldn't most investors want some TIPS in portfolio? I'm thinking of going the David Swenson route with 30%-50% in intermediate tips.retired@50 wrote: ↑Fri Jun 24, 2022 7:01 pmLower expense ratio. Lower standard deviation of returns.
Basically, it behaves like you'd expect a bond fund to behave.
I suppose if you're actually seeking an inflation protected bond fund, then using the PIMCO fund may be your only choice in this plan, but I think inflation protected bond funds are more appropriate for investors in the 60-65 years old (and above) range.
Regards,
I think any investor with 60% - 70% (or more) in stock (index funds) has inflation protection built in, by holding a high percentage in stock. Stocks have typically done pretty well over the medium to long term in inflationary times.
Christine Benz and William Bernstein discuss the inflation topic in this article (actually a transcript of a podcast).
https://www.morningstar.com/financial-a ... -investing
As for your particular circumstances (age unknown), I suspect if you hold 45% - 50% (or more) in bonds, then adding some TIPS may be a fine idea.
Regards,