What's Your Non-Equity Portfolio Look Like?

[Major Tom]

Non-equity = 36% of my portfolio.

32% Vanguard Total Bond Market Index Fund Admiral Shares
4% Cash (savings account)

Looking at some of the other entries here I wonder if I'm oversimplifying, but I really want to keep it as simple as possible. The long-term target is for a 60/35/5 allocation. I plan to re-balance if anything gets much more than 5% out of whack, but not more than once a year.

 

[bUU]

The stable value fund in our 401K returns only 1.68% for the past 3 years. I heard that other SV funds are doing a lot better (e.g., 3+%). Is that true?

This is the closest our 401k offers:

 

[Tadpole]

 

[jon-nyc]

Here's mine. I also have some private equity and REITS, some don't categorize them as equity but I left them out anyway.

Also, I have an extra large cash allocation temporarily because it includes a special tax reserve of ~200k or so (cap gains windfall, i know, first world problems). It wouldn't normally be so large.

 

[galeno]

05.0% Cash
57.5% 5yr CD ladder
25.0% PIMCO Total Income fund
12.5% Schwab equity dividend ETF

To

10% Cash
40% 4yr CD ladder
25% i-Shares intermediate term TBM ETF
25% i-Shares intermediate term corp bond ETF

As CDs mature eventually

12.5% Cash
37.5% i-Shares intermediate term TBM ETF
37.5% i-Shares intermediate term corp bond ETF
12.5% i-Shares global TIPS ETF

 

[panhead]

OK, I'll bite:

12% cash (Ally)
67% tbm (tax deferred)
21% Vng intermediate term tax exempt (taxable)

Bond/fi is 43% of my liquid portfolio (excluding rental RE)

Duration on both of the bond funds is 5 years(ish). I'm eyes wide open on what could happen if we have a quick rise in interest rates, but I'm still working, so I'm ok with the risk.

Edit to add: I'm planning on building up the cash portion this year as I have to cash in an inherited annuity this year after 5 years of deferral. My plan is to build up a cash buffer large enough to pay off my principle residence, and hopefully at the end of the year, there will be a safe investment to stick this money into that pays about what my mortgage rate is (3.125%). Yes, I am aware of the penfed 5 year CDs.

 

[ESRwannabe]

For non-equity, I own various REITs, vanguard's junk bond fund, and in my 401k vanguard's target retirement income fund, which has total us and foreign bond market index funds in it.

My 2014 Roth IRA contribution went into vanguard's junk bond fund. The rest of my Roth IRA is split between vanguard's us and foreign REIT indexes. Next year I may add vanguard's emerging market bond fund to my Roth IRA.

I felt like I had put as much into REITs as I wanted to for right now. So I wanted to put the 2014 Roth contribution into something that takes advantage of the tax protection and was decently priced. I'm not seeing any exceptionally good deals on anything. The junk bond fund seems descent enough. The bonds in the portfolio are not very junky and the duration is low. So I don't expect any interest rise to hit it too hard, and I don't think there will be many if any defaults on the loans.

I think the emerging markets bond fund is also a descent buy right now for my Roth. I may pick that one up next year.

My 401k is 100% vanguard's target retirement income fund and will probably stay that way. It was 100% total bond market index for a few years.

In my taxable account I have thought about adding MLPs but the tax complexity has kept me away so far. I'll probably buy some eventually. I don't think it would be that hard to deal with, I use turbotax.

I've also got a lot of cash in my taxable account. That's where all of my money has been going, except for 2014 Roth contribution, for the last 6 months or so. I plan to keep adding to cash until after taxes are done this year. I'm going to have a large tax bill this year.

All of my equity investments, outside the small allocation in the 401k target retirement income fund, are in my taxable account.

 

[bison74]

Our non-equity portion consists of:
Total bond market 72.1%
Short term investment grade 18.4%
Money market 6.1%
Bank savings account 3.4%
We don't plan on using any of our Total Bond Market holdings anytime soon. Should be longer than the duration of the fund (5.5 yrs). Hopefully time & dividend reinvestment will pay off for us.

 

[Greg V]

My total portfolio Asset Allocation is 50/50 Equity/Fixed Income

The 50% FI portion has the following breakdown (in % of FI portion, not total portfolio)

TSP G Fund 38%
Fidelity Floating Rate High Income Fund (FFRHX) 25%
Doubleline Low Duration Bond Fund (DLSNX) 15%
Fidelity Investment Grade Bond Fund (FBNDX) 10%
TSP F Fund 10%
Cash 2%

 

[haha]

I can't comment on whether they are currently undervalued as some have had nice runs in the last few years. Personally, I would look at companies that have pipeline operations in the Eagle Ford development in south Texas as the regulatory climate there is vary good.

I also have NSH, since the lows in 2008. If it's good enough for Mr. Greehey, it's good enough for me.

I agree, these are totally different from bonds. I consider them high dividend equity, with exposure to refinancing problems when money is hard to get. I do like it that a GP like NSH benefits from NS selling more shares, since we can be sure that NS will go on selling shares until doomsday.

I just hope that Eagle Ford wells don't deplete too rapidly.

Ha

 

[Ready]

To me one of the problem of TBM is that it is composition has really changed since 2008 when the Fed went on it is buying spree. It is only 23% corporate and the rest is government (90% US) or agency debt. Fully 30% of the assets are in long bonds 20-30+ year issues. Anyway given the low current interest rates and the prospect of rising interest none of these seem like great assets to own.

The BND current yield is 2.5% and the average duration is 5.5 years so even a 50 basis point rise in interest rates will result in small loss. I think PenFed CD, stable value funds etc. all seem like better investments.

+1

I keep asking myself why I have money in VG TBM when I could lock in 3% with PenFed. If rates rise, I can always pay the one year penalty and buy into TBM at lower NAV prices and with a higher yield, so it seems like a win win. I just haven't figured out how to sell the money in my VG IRA account and move it into a PenFed IRA, and make it all happen before PenFed yanks the rates back down. Has anyone successfully done this yet?

 

[jazz4cash]

The stable value fund in our 401K returns only 1.68% for the past 3 years. I heard that other SV funds are doing a lot better (e.g., 3+%). Is that true?

The SV fund in our 401K has returned 2.03% for 1YR and 2.67% for 5YR but i do not use it.

I keep my ex-employer's 401k open primarily for the SV fund.........

Performance
AS OF 11/30/2013
1 Yr + 2.46% 3 Yr +2.89% 5 Yr +3.09% 10 Yr +4.10%

This is ~50% of my fixed allocation. The rest is CD's.

 

[jazz4cash]

+1

I keep asking myself why I have money in VG TBM when I could lock in 3% with PenFed. If rates rise, I can always pay the one year penalty and buy into TBM at lower NAV prices and with a higher yield, so it seems like a win win. I just haven't figured out how to sell the money in my VG IRA account and move it into a PenFed IRA, and make it all happen before PenFed yanks the rates back down. Has anyone successfully done this yet?

I think several posters have moved funds to Penfed...there is a long thread on it. It takes just a bit longer if you do not have already have an account with Penfed. You can instruct Penfed to initiate the transfer as others have done, but it takes a bit of hand-holding as Penfed is a bit old fashioned. I contacted Fidelity and requested a check made payable to Penfed and marked "Rollover IRA". It took 5 days for me to receive the check. I live 15 min from a Penfed branch and it took 15 min to complete the transaction. It looks like the rate will be good through the end of the month, but in reality it could be yanked at any time.

 

[audreyh1]

Of the 47% of my portfolio AA that is in fixed income, I have approximately:

6.5% in tax-free Money Market
5% in IBonds
3.5% in 5yr CDs at 3%
1% in GNMA fund
8% in muni bond funds
14% in short-term bond index
62% in various intermediate well-diversified bond funds

 

[Ready]

I think several posters have moved funds to Penfed...there is a long thread on it. It takes just a bit longer if you do not have already have an account with Penfed. You can instruct Penfed to initiate the transfer as others have done, but it takes a bit of hand-holding as Penfed is a bit old fashioned. I contacted Fidelity and requested a check made payable to Penfed and marked "Rollover IRA". It took 5 days for me to receive the check. I live 15 min from a Penfed branch and it took 15 min to complete the transaction. It looks like the rate will be good through the end of the month, but in reality it could be yanked at any time.

I have a PenFed account and a CD in a taxable account with them. I tried to set up an IRA transfer online only to discover there is no online option to do so. The manual check method will work, but I continue to worry about pulling money out of TBM where I will have some losses, and then finding that PenFed no longer offers the 3% rate by the time I get the manual check in my hands, and now I've incurred the losses associated with selling TBM and don't have a good place to put it.

I also have a bunch of CDs with Ally and Discover, all maturing either end of this year of middle of next year. They all pay slightly more than 3% (about 3.2-3.6%). Part of me wants to cash them all in and lock them up with PenFed at 3% for another five years, but I'd have to pay a 60 day interest penalty (not too bad), and accept lower returns for the next 12-18 months to do so. And if interest rates are at least 3% in the next 12-18 months anyway, I will have done all this for nothing. So I continue to ponder it all without taking any action...somewhat frustrating.

 

[REWahoo]

Of the 55% of my portfolio AA that is in fixed income, I have approximately:

3% in tax-free Money Market
14% in 5yr CDs at 3%
3% in GNMA fund
18% in short-term bond fund
62% in bond funds within Wellington and Wellesley

 

[Cobra9777]

My overall AA is 45% stock, 35% bonds, 15% real estate, and 5% cash.

The cash portion is mainly money market and bank savings.

The real estate consists of two rental houses and an REIT ETF.

The bond portion breaks down like this:

US inv-grade corp: 32%
US high-yield corp: 30%
International corp: 12%
International govt: 8%
US treasuries: 10%
Municipal: 8%

 

[obgyn65]

To answer the OP's question, my non equity portfolio is about 98% in munis and CDs.

 

[aja8888]

I just hope that Eagle Ford wells don't deplete too rapidly.

Ha

Those EF wells are coming in very prolifically as I have been at some that are producing 2,000 barrels per day and leveling off at around 900 BPD. My work with one major has me seeing a development plan of 4,000 wells over the next 10 years. The other producers are planning for similar development. It's not going to end anytime soon. New pipelines are being built to bring the crude oil and natural gas to market in the Gulf (and Mexico).

A little know (or understood) event is that the Permian Basin (West Texas) has been coming back very strong. Since it's development in the 1920's, many wells have been drilled and are depleted. But those were shallow, vertical wells and today's technology has new completions at depths in multiples of the older wells in different, untapped formations. The rebirth of the Permian Basin may be certainly bigger than the new Eagle Ford, and maybe even the U.S. portion of the Bakken in the Dakotas. We are talking oil here, not natural gas.

It's a new world out there in the oil/gas business and there is lots of new opportunities. You can credit technology advancements in drilling (deeper depths and horizontal laterals) for most of these production improvements.

 

[Spanky]

I keep my ex-employer's 401k open primarily for the SV fund.........

Performance
AS OF 11/30/2013
1 Yr + 2.46% 3 Yr +2.89% 5 Yr +3.09% 10 Yr +4.10%

This is ~50% of my fixed allocation. The rest is CD's.

Are you satisfied with these returns for the fixed-income of your portfolio? These returns are hardly keeping up with inflation.

 

[Spanky]

It's a new world out there in the oil/gas business and there is lots of new opportunities. You can credit technology advancements in drilling (deeper depths and horizontal laterals) for most of these production improvements.

Which stocks should we buy to capture these opportunities?

 

[jflynn4]

In my non-equity, I have about 80% in individual long term corporate bonds that I acquired during the mass downturn a few years ago. The average maturity is in the late 2020's (with a couple going out to 2040) and an average coupon of just under 7% non-callable. They were all acquired at a significant discount to face.

I'm not terribly concerned at principal loss since they all appear to be solid companies for the long haul and I'm perfectly happy with the 7% annual income level. I just wish I'd bought more.

The remaining 20% sits in typical ultra safe accounts (bank CD and savings). Due to Obamacare, I need to keep my taxable income at a specific level so planning for non-taxable money is of a pretty high importance.

 

[aja8888]

Which stocks should we buy to capture these opportunities?

I'm probably a better engineer than I am a person who can recommend good stocks. So I can't give financial advice, but can say that pipeline companies like Kinder Morgan, Enterprise Products, Magellan Midstream and others are positioned well and have a lot of good projects in the planning stages. Their security prices do not closely follow energy prices as they get paid to transport someone else's product. Some pipeline companies have gotten into gas to liquids plants and terminals to sell liquids (EPD has).

You should research these companies and also focus on majors like Marathon, Chevron, Exxon, Anadarko, etc as they are quite busy working these newer regions. However, crude oil producers stock prices seem to fluctuate with the price of crude, so only venture here when they are at low points.

ETF's are safer as you get a basket of the stocks, like the Alerian for MLPs and the energy ETFs.

 

[nun]

I keep asking myself why I have money in VG TBM when I could lock in 3% with PenFed. If rates rise, I can always pay the one year penalty and buy into TBM at lower NAV prices and with a higher yield, so it seems like a win win. I just haven't figured out how to sell the money in my VG IRA account and move it into a PenFed IRA, and make it all happen before PenFed yanks the rates back down. Has anyone successfully done this yet?

My 457 plan Stable Value is paying 2.6%, but has a 0.4% fee....still 2.2% is good these days given that it isn't locked up. I also have a chunk of money in TIAA-Traditional that is locked up (it's an annuity), but that has a guaranteed minimum interest rate of 3%, is currently returning 3.75% and has averaged 4.3% annually for the past 22 years. When I retire I can either use the balance to buy an income annuity or simply take money out at regular intervals. In that case it's more like a 10 year CD.

https://www.tiaa-cref.org/public/products-services/retirement/employer-sponsored/option

 

[Ready]

I called the Vanguard Fixed Income desk this morning just to see if they could offer me a good argument for keeping my money in VG TBM rather than a PenFed 3% CD. He acknowledged that the 3% rate is an outlier relative to what other banks are offering, but as long as that rate is available, there is not much reason to choose TBM over the CD. I kept rephrasing the question to see if he could poke any holes in my logic, but he seemed content to acknowledge that I was looking at this the right way and that the CD at 3% is simply a better strategy than TBM. Given that TBM has interest rate risk, it should be paying a premium over the safety of a CD. Since it is not, it simply isn't the best choice for fixed income at this time.

At least he was honest about it. He offered to transfer me to the concierge desk to help me do the transfer of funds from my IRA to Pen Fed.