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Old 04-30-2016, 02:27 PM   #21
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Is there a diversified Bond fund that is actually closer to a "total bond"
fund that I could hold efficiently in my Vanguard fund.
Take a peek @ Vanguard Intermediate-Term Bond Idx fund. Contains both Corporate as well as G bonds (50/50). Admiral ER just dropped to 0.09%.
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Old 04-30-2016, 07:31 PM   #22
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Meb Faber points out the largest asset class, and the most underowned, is non -US debt.

GMO in their 7 year asset class return projections show only EM debt, at 1.7%, has a positive return projection. US bonds -1.4%, Intl developed -3.4%.

Doesn't seem like a good time for bonds. OTOH, the equity return projections aren't much better.

I couldn't find where Vanguard has any non US fixed income offerings.

I've started buying small amounts of a couple CEF EM debt funds.

With our, hopefully, soon to be received home sale proceeds, hello Ally, Discover and whatever online savings accounts yielding less than 1%. Whoopee! I'm officially an old fart retiree.
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Old 04-30-2016, 07:39 PM   #23
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I couldn't find where Vanguard has any non US fixed income offerings.
Is this what you are looking for? I don't own any of it but noticed it in passing some time back.

https://personal.vanguard.com/us/fun...FundIntExt=INT
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Old 04-30-2016, 08:05 PM   #24
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Originally Posted by gcgang View Post
Meb Faber points out the largest asset class, and the most underowned, is non -US debt.

GMO in their 7 year asset class return projections show only EM debt, at 1.7%, has a positive return projection. US bonds -1.4%, Intl developed -3.4%.

Doesn't seem like a good time for bonds. OTOH, the equity return projections aren't much better.

I couldn't find where Vanguard has any non US fixed income offerings.

I've started buying small amounts of a couple CEF EM debt funds.

With our, hopefully, soon to be received home sale proceeds, hello Ally, Discover and whatever online savings accounts yielding less than 1%. Whoopee! I'm officially an old fart retiree.
If you looking to bonds to help buffer your portfolio when equities take a dive, you probably don't want emerging market debt.
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Old 04-30-2016, 08:25 PM   #25
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Is this what you are looking for? I don't own any of it but noticed it in passing some time back.

https://personal.vanguard.com/us/fun...FundIntExt=INT
Thanks. BNDX = ETF.

On the other comment, What kind of correlation is there between US equity and EM debt? I'd tend to agree that it would be pretty high, but don't know.
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Old 04-30-2016, 10:03 PM   #26
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Thanks. BNDX = ETF.

On the other comment, What kind of correlation is there between US equity and EM debt? I'd tend to agree that it would be pretty high, but don't know.
When US equity markets go south, risky debt tends to get thrown out the window, because people rush to "quality", and emerging market debt is often dumped just like high yield. They are perceived as lower credit quality and therefore riskier, and when the investment public is avoiding "risky" assets they tend to avoid these bond asset classes.

Someone just has to be clear on why they are buying an asset class.

The OP stated he was looking for bonds to offset his equity investments, so he wants the kinds of bonds that act as a safe haven when stocks do poorly.
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Old 04-30-2016, 10:38 PM   #27
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Can I tag onto this thread to ask about my Fidelity bond portfolio? I am about 60/35/5 with the 35% in bonds split between:

FTBFX - Total Bond 80%
FAGIX - Capital and Income 10%
FFRHX - Short term junk 5%
FJRLX - Limited term bond 5%

I have had FAGIX for many years and, although not adding to the position, I haven't taken any out. Both FFRHX and FJRLX were added in last couple of years to shorten my duration. I think this may have been a bad idea as short term rates are likely to rise with Fed (at some point) and a flattening yield curve may mean my short duration funds actually perform worse than the intermediate funds.

So, my questions: Is the approximately 5% of my total portfolio in junk too much? Even yet more basically, with FTBFX do I even need any of the other bond funds? Finally, should i get out of the shorter term funds until we are later in the rate rising environment?

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Old 05-01-2016, 06:13 AM   #28
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Can I tag onto this thread to ask about my Fidelity bond portfolio? ...
No.
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Old 05-01-2016, 06:17 AM   #29
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Just kidding Marc. While I don't know much about the Fidelity funds, I do hold some high yield... I use the Guggenheim target maturity high yield maturing in 2017, 2018 and 2019 and consider it just part of my overall diversified portfolio.

My target is 5% of my overall portfolio, 16% of my bond portfolio.
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Old 05-01-2016, 07:10 AM   #30
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Thanks all for the contributions. I've got another question.

In the "flight to quality" scenario, would both the price and the yield of riskier bonds drop or just the price?

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Old 05-01-2016, 07:15 AM   #31
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Thanks all for the contributions. I've got another question.

In the "flight to quality" scenario, would both the price and the yield of riskier bonds drop or just the price?

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Old 05-01-2016, 07:16 AM   #32
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As the price drops, the yield increases because the coupon remains the same. (Assuming no defaults). That really doesn't help you if you already are holding the bond (or the bond fund).


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Old 05-01-2016, 07:21 AM   #33
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FFRHX is 5% of your 40% bond side, so only .0175 of your total portfolio.

FAGIX is 10% of your 40% bond side, so only .0400 of your total portfolio. The fund itself is .7000 junk, not 100%. This results in .028 of your total portfolio.

You have at least 4.5% junk in total portfolio.

You could look at the other funds and what is in them, also.
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Old 05-01-2016, 07:27 AM   #34
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So, the dividend amount would remain about the same? It would be a higher % of a lower value?
If this is correct, what would be wrong with "buy & hold" like we do with stocks. Is it not recommend because it will take bonds longer to rebound than it takes stocks?

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Old 05-01-2016, 07:47 AM   #35
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So, the dividend amount would remain about the same? It would be a higher % of a lower value?
If this is correct, what would be wrong with "buy & hold" like we do with stocks. Is it not recommend because it will take bonds longer to rebound than it takes stocks?

Thanks,
Murf
It's not that there's anything wrong with holding higher risk bonds or holding them for a long time. Audreyh1's point is to understand why you want to own those bonds in the first place.

Bonds in a portfolio typically provide a source of stability. They also add positive returns that are negatively correlated with stocks. Holding assets that are not correlated with each other increases a portfolio's return relative to it's volatility.

High quality bonds give you both things. They're stable in downturns and are somewhat negatively correlated with stocks (they rise when stocks fall and fall when stocks rise).

Low quality bonds give you less of both. They're less stable and tend to have positive correlation with stocks (they rise when stocks rise and fall when stocks fall).

So Audreyh1's question is why own low quality bonds instead of just owning more stocks? It's a good question.
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Old 05-01-2016, 07:52 AM   #36
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Yes, it is a good question. I'm trying to get my head wrapped around all this. Bonds have always been harder for me to understand.

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Old 05-01-2016, 08:33 AM   #37
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To further complicate things one might also ask "why do you want to own high quality bonds at their current price and yield?"

As mentioned above, one reason to own high quality bonds is because they provide stability. The second reason is because they tend to rise when stocks fall. But at current prices their ability to rise any further is severely limited. So that second reason doesn't apply to the same degree as it historically has.

Take, for example, the Vanguard Intermediate Term Treasury fund. It has a yield of 1.24% and a duration of 5.3 years.

If the stock market tanks we'd expect interest rates to fall. But how much can they fall from 1.24%? 100bp? That would translate into a 5% principal gain on the fund. That's not bad but it's about the limit of their ability to offset stock declines.

And how much can rates rise form 1.24%? 200bp, 300bp or more? That would translate into principal losses of 10%, 15%, or more, respectively.

That asymmetry of risk where upside is limited while the downside is not makes bonds a whole lot less valuable in a portfolio than they've been historically. Therefore one of the two reasons we own bonds is no longer very persuasive.

That leaves stability as the main reason to own bonds today. But I can get more stability from bank CDs and at higher yields too.

So maybe the best fixed income choice today isn't a class of bonds at all.
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Old 05-01-2016, 09:36 AM   #38
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I should probably start a new thread but, If I wanted CD's in our IRA's that are held at Vanguard am I able to purchase CD's from sources other than Vanguard? Where would I learn about that. I looked around Vanguard some but I may be missing it.

Thanks!
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Old 05-01-2016, 09:51 AM   #39
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I should probably start a new thread but, If I wanted CD's in our IRA's that are held at Vanguard am I able to purchase CD's from sources other than Vanguard? Where would I learn about that. I looked around Vanguard some but I may be missing it.
I think you'd have to move your IRA to the bank where you want to open the CD.
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Old 05-01-2016, 10:03 AM   #40
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Thanks Gone4Good, could you explain how a Vanguard brokered CD be different from a regular CD.

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