Please Review My New Bond Asset Allocation

[Cheesehead]

We are 2 or 3 years from retiring and just met with a hourly CFP, his AA is 50/50 and here is what he suggests I allocate for the Bond portion of my portfolio:

25% Inflation Protected TIPS Fund
25% Treasuries such as Vanguard Total Bond Index
25% Corporate such as Investment Grade Bond Fund
25% High Yield Corporate

He may have suggested those because we impressed upon him that we like low fees. I listen to Bob Brinker weekly and subscribe to his newsletter, his AA is 50/50, what he suggests for the Bond portion of a portfolio for people our age is:

20% Fidelity Floating Rate High Income
20% DoubleLine Low Duration Bond
10% Osterweis Strategic Income Fund.

However, two of those have fees around .7% and one is at .9%. To complicate things I have about 10% of our nest egg in a Fixed Income Annuity for 4 years at 1.8%, another 3% in I Bonds, and 9% in CDs which will come due in 1 year at which time I can add to our AA. The Stock portion is in Total Stock, Total International and Small Cap Index.

So, what do you think? I am leaning towards the options suggested by the CFP. This is making my brain hurt so I am also considering just putting most everything in Wellington and quit trying to figure out AA!

Thanks for your learned opinion.

 

[Ready]

The bond funds chosen by your CFP are certainly very basic, low cost vanilla funds that you will find in many portfolios. I don't think you can go wrong with those. I don't see any municipal bonds in there, so I'm assuming you have all of this money in tax sheltered accounts.

I would definitely go with the CFP's recommendations over Bob Brinkers. Paying .7% in fees on low yielding bonds makes no sense at all.

 

[galeno]

50% of your portfolio will be in volatile equities and 12.5% will be in volatile junk bonds. If you are OK with 62.5% of your portfolio in volatile asset classes then I think you are right on.

Are you prepared to lose 32% of the value of your port's value? If yes, then you got excellent advise.

Personally I prefer equities over junk bonds for the risky part of our portfolio . But that's akin to preferring coffee vs tea for your AM beverage.

 

[haha]

I listen to Bob Brinker weekly and subscribe to his newsletter, his AA is 50/50, what he suggests for the Bond portion of a portfolio for people our age is:

20% Fidelity Floating Rate High Income
20% DoubleLine Low Duration Bond
10% Osterweis Strategic Income Fund.

However, two of those have fees around .7% and one is at .9%.

Doubleline low duration(DBLSX) is one I own. I think you are mistaken about its expense ratio. The investor shares have an ER of 0.49 net, I think 2 basis points higher gross (I doubt that will ever see the light of day) Most recent duration is 0.94, and 30 day yield is 1.56%. In the last 12 months its high low was 10.12, high 10.25 so it is very stable given that the last 12 months contained some real bond market movement. I have listened to every presentation management has given for 2 years or more, and I like the way they operate. They are not an index fund, so Boglehead diehards would likely send you elsewhere. They publish a lot of information about holdings, so you can see whether you would feel comfortable. Remember that you can find 1 year CDs around 1%, so giving up absolute safety and accepting modest interest rate risk gives you an extra 55 to 65 bp.

I also own and like DBLTX, the Doubleline Total Return Bond Fund Investor Class. Even though it has lost NAV since my investment about 2 years ago, I am nevertheless way ahead of the game, and far ahead of riskless assets. It has a longer duration, and more credit assets than DBLSX, so it is more exposed than Low Duration to credit and also interest rate change.

I also have short term CDs and savings accounts.

All this is easy to find at your broker's website, or other online sources and I would recommend understanding whatever you buy so you will know what to expect under various scenarios.

Ha

 

[Cheesehead]

Yes you are correct, DBLSX expense ratio is .48, I got that one wrong. Thanks