What counts toward the bond allocation?

[joesxm]

I have been reviewing my bond allocation driven by what I learned here about the need to think of the total return on bonds and not to consider cash to be bonds.

I used to consider everything not a stock or a stock mutual fund to be in the bond allocation. Now I am wondering about some items.

Series I Savings Bonds - These almost seem like a tax-deferred CD. Should I consider these as bonds rather than cash?

6-month CD - I currently have this in the bond part of my spreadsheet, but I think it is really more like cash?

Bond Funds - Some seem to be holding a very large percentage in cash. Should I worry about this or just consider the whole fund as bonds?

Money Market Fund - obviously cash.

This gets me wondering what the defining feature of a bond is that makes it a bond rather than cash.

It seems to me that it is the time-frame and the ability to sell the bond to someone else before maturity if the interest rate drops and makes the bond more valuable.

However, it seems to me that if you held an individual bond to maturity there would be no "capital gain" value and total return would be only based on the dividends. It that case would there be any difference between a 5-year bond and a 5-year CD aside from the possibility that the bond might pay dividends while maturing but the CD might pay all at the end?

Two more quick questions.

If I buy some REIT should I consider that part of my 40% bond allocation? I realize that it is a different asset class, but I guess I am asking that if one of my classes needs to be reduced by 2% for the REIT does bond make more sense than equity?

I am trying to keep all of my bond funds in retirement accounts, but I do not have enough in them compared to my taxable account to hold the entire 40%. If I had to choose between bond fund or REIT, which should I keep in the taxable account? Or should I not be buying any REIT if there is no room in the tax-deferred account to hold it?

Thanks.