Total Bond Mkt Index vs PIMCO Total Return Inst/Stable Value

[Dude]

Hi all,
I could use some help deciding what to do about the bond allocation in my 401(k), which will be 10% of total (other 90% in stock funds). I have the following choices:

Stable Value Fund
1) Fixed Income Fund, ER 0.24%

The Fixed Income Fund has the following underlying securities:
US Treasury, Agency, Suprannational 25-65%
AAA Corporate Bonds (including AAA rated asset backed securities) 10-25%
AA Corporate Bonds 5-25%
A Corporate Bonds 5-25%
BBB Corporate Bonds 0-25%
Mortgage Backed Securities 10-30%
High Yield/Emerging Market Bonds 0-5%


Bond Funds
1) Barclays Global Investors (BGI) US Debt Index Fund F, ER 0.10%
(Seeks to match Lehman Brothers Aggregate Bond Index, similar to Vanguard VBTLX Admiral Shares)

2) PIMCO Total Return Fund Institutional Class, PTTRX, ER 0.43%, 257% Turnover Rate

3) Evergreen International Bond Fund Institutional Class, ESICX, ER 0.74%, 196% Turnover Rate

Paul Merriman gives advice for my company's 401k plan at fundadvice.com, he says put 50% in PIMCO Total Return and 50% in Fixed Income Fund. He gives no rationale. Why do you think he would chose these two funds?

Vanguard's TR funds hold Total Bond Market Index, which would be my BGI index fund with the super low 0.10% ER.

I'm in the accumulation stage with 30 years to go until "normal" retirement age, with a 90% stock/10% bond allocation.

Not sure what to do about my bonds. What should my considerations be? Which fund(s) would you use? Any advice appreciated.

Thanks,
Dude 8)

[chinaco]

DW has PTTRX in her 401k for the bond allocation. However, it is the only bond choice.

If there was an index bond fund available, she would put her fixed allocation in the lower cost index fund.

[Dude]

Thanks for sharing your thoughts. It's hard to pass on the 0.10% ER index fund. I just wish I understood why Merriman would not chose the index fund, but instead go with PIMCO Total Return/Fixed Income combo. Maybe performance chasing. I think I'll e-mail him and ask. Thanks.

[saluki9]

Originally Posted by Dude

Thanks for sharing your thoughts. It's hard to pass on the 0.10% ER index fund. I just wish I understood why Merriman would not chose the index fund, but instead go with PIMCO Total Return/Fixed Income combo. Maybe performance chasing. I think I'll e-mail him and ask. Thanks.

Perhaps it might have something to do that it has one of the most successful fixed income managers in the history of finance, but I might be guessing

PIMCO total return is one of the few active funds that I see a lot of indexers use. He may be a nutball, but Bill Gross knows his bonds.

[brewer12345]

Originally Posted by saluki9

PIMCO total return is one of the few active funds that I see a lot of indexers use. He may be a nutball, but Bill Gross knows his bonds.

Nutball like a fox...

[yakers]

Originally Posted by brewer12345

Nutball like a fox...

Yep, the guy says some really strange things and then doesn't do anything he says but whatever he actually does seems to work pretty well.

[Dude]

Thanks. Considering going 50/50 between the PIMCO and BGI index funds.

[packrat44]

I moved 25% of my DW's 403b funds into PTTRX many years ago due to its performance.