VBMFX

[smooch]

We are seriously overweighted in equities in our portfolio, so I am going to move some into bonds. Does anyone have an opinion on VBMFX - Total Bond Market Index? Vanguard lists it under its intermediate term bond funds. Next I'll be looking to move some into a short term bond fund. This is current 403B money that I'll be moving.

We have about 6% of our portfolio in a long term bond fund with ML, but I see that Bernstein advises against that (can't find the page right now). Should we not hold any long term bonds?

 

[Spanky]

An intermediate term bond is fine. Many gurus prefer short-term to minimize risks

 

[WilliamG]

As Spanky says, some gurus say you don't get paid enuf for the extra risk beyond short term when investing in bonds.  They say the main reason for bonds is the diversification benefit and the ability to avoid selling stocks (like when you are retired and in the distribution phase and have to get your spending money somewhere!) in a down market. 

Since we have a 50/50 equity vs non-equity allocation, we split the non-equity between short and intermediate and like the additional income that can provide.  The Total Bond Market Index is a good choice for adding a single intermediate fund.  We use Vanguard High Yield Corp and GNMA because we are actually spending the income. 

An alternative to consider for your short term choice rather than a short term bond fund is a 5 year ladder of CDs.

 

[wildcat]

[quoteAn intermediate term bond is fine.]
I thought Vanguard Total Bond was mostly intermediate weighted but I haven't had my coffee yet

 

[TromboneAl]

I'd recommend looking at the Growth of $10,000 graph on the performance page for one of the bond funds, and adding the other types of bond funds to the graph. You'll get a very good feeling for how the different bond duration funds have behaved in the past.

I recently converted my long term corporate to the Intermediate Term Bond Index and also have a lot in the GNMA.

Fundadvice.com has a good discussion on choosing bond duration buried in the articles. I think they also recommend short term.