Bond Fund Allocation

[Spanky]

Should one invest in mulitple bond funds to develop a diversifed bond portfolio or simply just one or two funds?

1. Let's suppose we want a single bond fund. Which of the following would be pick?

Total Bond Index
Short-term corporate
Intermediate bond - Corporate
Intermediate bond - Treasury
TIPS

2. What would be suggest for a more sophisticated one?

 

[Alf Alfa]

Spanky Posted on: Today at 12:30pm
Should one invest in mulitple bond funds to develop a diversifed bond portfolio or simply just one or two funds?

1. Let's suppose we want a single bond fund. Which of the following would be pick?

Total Bond Index
Short-term corporate
Intermediate bond - Corporate
Intermediate bond - Treasury
TIPS

2. What would be suggest for a more sophisticated one?

Single fund aproach: Intermediate Bond Treasury

Some protection against interest rate risk with not-so-long average maturities.

Somewhat lower pay-out than corporates but then again they're Governments and have zero risk

Sophisticated approach: I don't have one. I like to keep thing simple.

 

[charlie]

Hi Spanky,

If you are in the accumulation phase and want a
bond fund to dampen overall portfolio volatility
and to use for rebalancing then I would use Short
Term Investment Grade.

OTOH, if you need income you might consider
one of the intermediate term funds ..... I prefer
Intermediate Term Bond Index or GNMA. Some
don't like GNMAs but Vanguard's fund has a good
track record.

Vanguard uses Total Bond Market in most of their
balanced funds (LifeStrategy, Target Retirement and
Balanced Index) but I prefer a mix of Inflation
Protection (1/4), Intermediate Term Bond Index (1/4)
and Short Term Investment Grade (1/2) in my 60/40
"coffeehouse" IRA. This covers the short, intermediate
and long term with good inflation protection. I use
the Short Term Investment grade fund for IRA
withdrawals and to rebalance the other funds.


Cheers,

Charlie

 

[Spanky]

Charlie,

Thanks. I think it is a great idea to include TIPS.

My bond allocation is:

TIPS Intermediate Short-Term
22.59% 43.80% 33.62%


I might increase the short-term portion.

Spanky

P.S. Are there any big fans for adding foreigh bond funds?