Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Bond slice
Old 06-24-2010, 11:02 PM   #1
Full time employment: Posting here.
 
Join Date: Feb 2008
Posts: 920
Bond slice

Comrades, I need to know what to put the generic bond portion of my portfolio in, you know the part where the slice of the pie says "bonds" in a different color. Right now it's in Vanguard total bond index, is this best? I've been considering the TIPS fund they have as well, given current (and seemingly forever) low inflation environment does it have any advantage of the big bond fund?

Note: I'm not going to buy individual bonds or TIPS at auction, I'm not denying it has merit I'm just far more likely to open a beer than deal with it.

Input appreciated as always, you guys know your shitake and I always appreciate the advice. In return I offer a really cool picture of a leopard fleeing a lion that manged to get up it's tree branch in Africa:

__________________

__________________
tuixiu is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 06-25-2010, 06:54 AM   #2
Recycles dryer sheets
 
Join Date: Jan 2010
Posts: 174
"I'm just far more likely to open a beer than deal with it"

Domestic or Imported ? That may impact your asset allocation
__________________

__________________
jwkde is offline   Reply With Quote
Old 06-25-2010, 07:03 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
I think the tot bond index is hard to beat as a default choice. I reach a bit for return with alternatives, but you won't go far wrong with the tot index.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 06-25-2010, 08:26 AM   #4
Full time employment: Posting here.
 
Join Date: Feb 2008
Posts: 920
Likely domestic, although I saw at the local Asian market they had Singha on sale. That's a problem in itself though for some reason Singha never tastes as good in my living room as when coming from a big bottle over some green chicken curry in Thailand. It's like some feeble attempt to capture being there when I ain't. Maybe I'll put on a red shirt and light some tires on fire to feel more legit.

But I digress.

Thanks for the wisdom brewer, that's what I expected. Would there be any advantage to the TIPS fund in certain situations or certain people's financial profiles? I'm definitely not one of those people with 16 asset classes where they are reallocating their energry ETF because it went over 2.5% of net worth during annual rebalance but I'd be willing to have two funds in the bond slice especially if they could both be had in Vanguard.

Thanks again.
__________________
tuixiu is offline   Reply With Quote
Old 06-25-2010, 09:20 AM   #5
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
I second brewers advice. You could add TIPS...or not.

DD
__________________
At 54% of FIRE target
DblDoc is offline   Reply With Quote
Old 06-25-2010, 09:33 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
brewer12345's Avatar
 
Join Date: Mar 2003
Posts: 16,391
Quote:
Originally Posted by tiuxiu View Post
Thanks for the wisdom brewer, that's what I expected. Would there be any advantage to the TIPS fund in certain situations or certain people's financial profiles? I'm definitely not one of those people with 16 asset classes where they are reallocating their energry ETF because it went over 2.5% of net worth during annual rebalance but I'd be willing to have two funds in the bond slice especially if they could both be had in Vanguard.

Thanks again.
I think TIPS an be a nice diversifier, but they are mostly a way to mitigate inflation risk which you can do other ways as well. So thus far I have used commodities/commodity producer equities, but if TIPS yields became more attractive I might buy some.
__________________
"There are three kinds of men. The one that learns by reading. The few who learn by observation. The rest have to pee on the electric fence for themselves."



- Will Rogers
brewer12345 is offline   Reply With Quote
Old 06-25-2010, 09:44 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Using a model from the internets, I calculated the correlation of my portfolio back in January '10. The only holding, besides cash, with a negative correlation was the total bond market fund in my 401k.
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 06-25-2010, 10:03 AM   #8
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Some, like Larry Swedroe, suggest sticking to Treasuries (including those from other governments) for the bond portion and staying at intermediate or shorter terms. The idea is that the bond portion of your portfolio is supposed to minimize risk and have as little correlation to the equity position as possible. Read one of his books - you should be able to find it in the library.

Ellis may have a similar take, but I can't recall with certainty.

Having said that, my portfolio doesn't mirror Larry's suggestions. Most of my bond portion is in ST Corp (VFSUX) though I'm dollar cost averaging about 10% into the intermediate treasury (VFITX). I also have 5% in TIPS (VAIPX)
__________________
walkinwood is offline   Reply With Quote
Old 06-25-2010, 07:45 PM   #9
Recycles dryer sheets
 
Join Date: Jun 2008
Posts: 63
I like Pimco total return bond fund. Had the Vanguard total bond index and switched over to Pimco. Pimco returns beat the crap out of vg even though the ER is higher.
__________________
tsturbo is offline   Reply With Quote
Old 06-25-2010, 08:08 PM   #10
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,094
Quote:
Originally Posted by tsturbo View Post
Pimco returns beat the crap out of vg even though the ER is higher.
You left out this part:
Quote:
Past performance is not a guarantee of future results. Investment returns and principal value will fluctuate, so that investors' shares, when sold, may be worth more or less than their original cost. Current performance may be lower or higher than performance going forward.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-25-2010, 08:19 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by tsturbo View Post
I like Pimco total return bond fund. Had the Vanguard total bond index and switched over to Pimco. Pimco returns beat the crap out of vg even though the ER is higher.
There seems to be fair performance difference from the institutional PIMCO Total Return fund and the PIMCO Total Return for individual investor. I am not sure if it is the higher expenses or slightly different managers. I think if you have the option for PIMCO in 401K I take that one based on Bill Gross's long and successful track record otherwise Vanguard Total Bond is hard to beat.

In the past, I'd have recommended the Vanguard GNMA but with so much uncertainty in the market I am not sure that make sense. It is my main bond found though.
__________________
clifp is offline   Reply With Quote
Old 06-25-2010, 08:41 PM   #12
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
Quote:
Originally Posted by tiuxiu View Post
Comrades, I need to know what to put the generic bond portion of my portfolio in, you know the part where the slice of the pie says "bonds" in a different color. Right now it's in Vanguard total bond index, is this best? I've been considering the TIPS fund they have as well, given current (and seemingly forever) low inflation environment does it have any advantage of the big bond fund?

Note: I'm not going to buy individual bonds or TIPS at auction, I'm not denying it has merit I'm just far more likely to open a beer than deal with it.

Input appreciated as always, you guys know your shitake and I always appreciate the advice. In return I offer a really cool picture of a leopard fleeing a lion that manged to get up it's tree branch in Africa:

It is a really cool pic!
Thanks for the bond info, too.

Free to canoe
__________________
Free To Canoe is offline   Reply With Quote
Old 06-25-2010, 09:23 PM   #13
Recycles dryer sheets
 
Join Date: Jun 2008
Posts: 63
Quote:
Originally Posted by REWahoo View Post
You left out this part:
Whatever. I love vanguard, but when I have the option to choose between the two in my company 401 and pimco is about 2x the return than vg, who wouldn't do pimco?

Well, you probably wouldn't.
__________________
tsturbo is offline   Reply With Quote
Old 06-25-2010, 10:02 PM   #14
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,094
Quote:
Originally Posted by tsturbo View Post
I love vanguard, but when I have the option to choose between the two in my company 401 and pimco is about 2x the return than vg, who wouldn't do pimco?

Well, you probably wouldn't.
Actually I'd probably split my bond allocation between the two in order to spread my risk. That's only because past performance doesn't guarantee future results.
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 06-26-2010, 07:39 AM   #15
Full time employment: Posting here.
 
Join Date: Dec 2006
Location: chicago burbs
Posts: 559
Quote:
Originally Posted by REWahoo View Post
Actually I'd probably split my bond allocation between the two in order to spread my risk. That's only because past performance doesn't guarantee future results.

That's exactly what we do in my 401k and for the same reason.
__________________
golfnut is offline   Reply With Quote
Old 06-26-2010, 09:04 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
My bond portion - 40% - is split between:

TIP - 10% (TIP fund)
LQD - 10% (corporate)
HYG - 10% (junk, er, uh, high-yield)
IEI - 5% (in-house equivalent to IEI total bond market)
SHV - 5% (short-term treasuries)
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 06-26-2010, 12:14 PM   #17
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
Quote:
Originally Posted by tsturbo View Post
Whatever. I love vanguard, but when I have the option to choose between the two in my company 401 and pimco is about 2x the return than vg, who wouldn't do pimco?

Well, you probably wouldn't.
First you are comparing apples to oranges - they have very different investing strategies - and second I don't see where PIMCO has double the return. Over the last ten years VBMFX has returned 6.25% and PTTAX has returned 7.37% - and that ignores the big difference in the ER's of the two funds.

DD
__________________
At 54% of FIRE target
DblDoc is offline   Reply With Quote
Old 06-26-2010, 06:44 PM   #18
Recycles dryer sheets
 
Join Date: Jun 2008
Posts: 63
Quote:
Originally Posted by DblDoc View Post
First you are comparing apples to oranges - they have very different investing strategies - and second I don't see where PIMCO has double the return. Over the last ten years VBMFX has returned 6.25% and PTTAX has returned 7.37% - and that ignores the big difference in the ER's of the two funds.

DD
Yes, you are correct, I was looking at the 1, 3 & 5 year returns. Through my Company 401k I am fortunate enough to have both the Pimco total Return and the Vanguard total bond index fund. The VG expense ratio is very low, .20 or less, while the Pimco is .65, based upon this, do you feel the slightly lower returns of the VG fund is a better choice because of the lower expense ratio?
__________________
tsturbo is offline   Reply With Quote
Old 06-26-2010, 06:48 PM   #19
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Quote:
Originally Posted by brewer12345 View Post
I think the tot bond index is hard to beat as a default choice. I reach a bit for return with alternatives, but you won't go far wrong with the tot index.
No expert here, but I agree that total bond index is a fine place.

However, be aware that it is 35% in GNMA and similar, and you may not like that. That was the reason I switched to Vgd intermediate bond index. I'll keep my RE exposure in the REIT fund.

Just something to consider.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 06-26-2010, 08:33 PM   #20
Thinks s/he gets paid by the post
DblDoc's Avatar
 
Join Date: Aug 2007
Posts: 1,224
Quote:
Originally Posted by tsturbo View Post
Yes, you are correct, I was looking at the 1, 3 & 5 year returns. Through my Company 401k I am fortunate enough to have both the Pimco total Return and the Vanguard total bond index fund. The VG expense ratio is very low, .20 or less, while the Pimco is .65, based upon this, do you feel the slightly lower returns of the VG fund is a better choice because of the lower expense ratio?
The ER is one factor - it is much more critical in a bond fund than a stock fund given the (usually) lower returns. More importantly is the active management and what they are investing in. VBMTX is an index fund only invested in domestic bonds, PTTAX is actively managed (albeit by Bill Gross who some feel is a bond guru) and contains foreign bonds as well. I follow Larry Swedroe's advice about taking risk in the equity portion of my portfolio and emphasize short/intermediate term gov't securities (and TIPs) in the bond portion. It served me well 2008-2009 as they were the only asset class that remained negatively correlated to equities with the worldwide "flight to quality". Now if my 40x plan had only PTTAX as a choice I wouldn't lose too much sleep over it - there are many far worse bond funds out there one could be stuck with.

DD
__________________

__________________
At 54% of FIRE target
DblDoc is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
All-in-One Stock Funds or Slice and Dice Approach chinaco FIRE and Money 12 11-28-2008 11:50 AM
Un-slice and un-dice Rich_by_the_Bay FIRE and Money 31 05-09-2007 09:10 AM
do you slice and dice in taxable accts? figner FIRE and Money 4 04-13-2007 12:34 PM
Target retirement vs slice and dice donheff FIRE and Money 38 02-01-2007 07:14 PM
Is Slice and Dice approach overrated Spanky FIRE and Money 4 02-22-2006 05:19 PM

 

 
All times are GMT -6. The time now is 02:39 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.