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VBMFX as the bond portion of your portfolio?
Old 10-05-2004, 10:28 AM   #1
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VBMFX as the bond portion of your portfolio?

I'm thinking about buying into Vangards Total Market Index Fund (VBMFX). I'm ~90% equities and plan to diversify into fixed income to bring the equity portion down to 50% over the next 6 years. The expence ratio is .22% (pretty low) and it seems to be fairly diversified. Does anyone know of a diversified bond fund with a lower expence ratio? What else would you buy to compliment this fund? Foreign Bond Funds?
What are the +'s and -'s of holding bond funds as opposed to bonds?
Thanks for any advice.

K. B. Sharkstooth
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Re: VBMFX as the bond portion of your portfolio?
Old 10-05-2004, 03:31 PM   #2
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Re: VBMFX as the bond portion of your portfolio?

i would look more into individual bonds and ladder if neccessary. bond funds usually have high fees and will not offer you as mch return as individual bonds. muni's are nice if you're in the high tax bracket, otherwise you can buy into many corporate debts through brokerages. otherwise something if you have large dollar amount to invest, you can actually buy home mortgages... you've got a lot of options, but a bond index fund probably isn't your best bet.

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Re: VBMFX as the bond portion of your portfolio?
Old 10-06-2004, 04:33 PM   #3
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Re: VBMFX as the bond portion of your portfolio?

I have to disagree somewhat on the individual bonds. Spreads and commissions can be quite high on corporates, munis, and mortgages. Much higher than Vanguard's low fees. Since the bond market is mostly institutional, it's really hard for an individual investor to tell if they're getting screwed or not - not nearly as much transparency in bonds as in stocks. Personally, I'd rather use funds for these. Treasuries really don't need any issuer diversification, and you can buy them directly from the Treasury for free.

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Re: VBMFX as the bond portion of your portfolio?
Old 10-07-2004, 12:42 PM   #4
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Re: VBMFX as the bond portion of your portfolio?

I suggest that you look at either Vanguard Intermediate-Term Bond Index (VBIIX) or Intermediate-Term Corporate fund (VFICX).

TBF is basically an intermediate fund (5-10 yr average maturity) but it has about 35% GNMA and 34% US GOV.

For me, this is a bit too much government (69%).

If you want only corporate, you have a choice, but if you just want to get away from GNMA try the I-T bond Ix.
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