It's been a year and a half since I FIREd, and only now am I starting to get serious about deciding where to invest my fixed income allocation. When I first retired my home equity was my fixed income allocation, and when I sold the home I just kept it in an ING Direct savings account.
I'm finally getting serious about looking into the various options for the roughly 20-25% of my portfolio that will go into fixed income. Options I'm considering include:
- Building my own CD ladders
- Buying TIPS or Tbills at auction to build a ladder
- Putting most of it in Vanguard Total Bond (VBTLX)
- Just leaving it all in the Vanguard Prime sweep account
I'm leaning towards VBTLX Admiral Shares:
https://personal.vanguard.com/VGApp/...FundIntExt=INT
It has low expense ratio of just .11%, a duration of 4.6 years which roughly matches up with my intention that this serve as 5 years worth of spending money for downmarkets, and I like the flexibility of not tying all that money up into lots of little buckets or rungs.
What I'm not sure about is whether this is as good as a self-built ladder in terms of managing volatility. It seems like a bond fund like this is essentially a ladder behind the scenes, as the fund keeps a range of maturities, and replenishes the longer maturities as the shorter maturities drop off. But in a market where the stock market was declining due to rising interest rates, it seems like the bond fund wouldn't work as well for me, because I would be selling for income at low prices.
I'm curious to hear from others about how they would start a fixed income allocation right now.
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