pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
On bond funds in general: What about a broadly diversified bond fund? Government and corporate aren't the only choices.
It depends on WHY you are owning those bond funds. If it is for diversification against stocks, just look at 2002 and 2008 to see that corporate bonds don't appreciate nearly as much, and sometimes drop, just when stocks are taken out and shot and/or there is a whiff of financial crisis in the air. Those are the periods where bond and cash diversification is usually most appreciated.
On the model: Long-term bonds is probably not the right asset class to be using in your tests. Use some type of intermediate bond index in your model. And if you still get the same results, it will be interesting.
It could well be that the cash position really helps when you have long bonds, but doesn't help so much when you have intermediate bonds.
I guess if Firecalc had such an option (intermediate term bonds) I would have used it but alas, it does not.
As I recall, government and corporates make up a large part of the bond market, at least Vanguard seems to think so. Unless you are differentiating government bonds from agencies, et al which is not a particularly useful distinction.
This fund is designed to provide broad exposure to U.S. investment grade bonds. Reflecting this goal, the fund invests about 30% in corporate bonds and 70% in U.S. government bonds of all maturities (short-, intermediate-, and long-term issues).
I'm not sure I agree with your last statement, but we'll agree to disagree.
The second test I did is probably more relevant to our discussion as the assets are a mix of a stock index and bond funds which is in line with your thinking, but still seems to have a minimal impact on the success rate, particularly if one makes some sort of mental adjustment for 1% interest on cash vs 0%.