Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Bond funds advice needed
Old 03-18-2008, 12:37 PM   #1
Posts: n/a
Bond funds advice needed

I was wondering if I should take some of my emergency funds from Vanguard Prime Money Market Fund and also switch some money from Vanguard TIPS Fund and put the money from both funds into Vanguard Interim Bond Index Fund.

I also own Loomis Sayles Bond Return Fund & Vanguard Short Term Index Fund.
  Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-18-2008, 03:01 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
Join Date: May 2006
Location: west coast, hi there!
Posts: 7,223
Currently I'm in Vanguard short term bond index and also Vanguard short term investment grade funds (VTSTX) in the ratio of 2:1. The yield spread between VTSTX and short term treasury (VFSIX) is very high, 2.4%. This is higher then at the start of the Iraq war (2.2%) and after Sept 11 atttack (1.8%). My current plan is to move fully into VTSTX (or VFSUX admiral class) as the corporate sector starts clearing up i.e. stocks move higher. Such a tactic worked out OK in 2003.

I'd stay short term until TIPS start to trade at average historic levels. The average historic real return for intermediate bonds is 2.3%, but note that now 5yr TIPS are at 0.15 percent!

Anyway that's my current strategy which will probably be good for the next 6mo to 2yrs or so. If anyone sees flaws in this approach I'd like to hear the counter arguments.
Lsbcal is offline   Reply With Quote
Old 03-19-2008, 03:15 PM   #3
Posts: n/a
Any other opinions?
  Reply With Quote
Old 03-19-2008, 04:00 PM   #4
Thinks s/he gets paid by the post
DblDoc's Avatar
Join Date: Aug 2007
Posts: 1,224
My bonds are for stable diversification. TIP's, short and intermediate term treasuries. Working like they are supposed to the last few months, not chasing performance, thats for my diversified equities.

DblDoc is offline   Reply With Quote
Old 03-19-2008, 06:00 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2005
Posts: 10,226
Originally Posted by Tiger View Post
Any other opinions?
I sold my VIPSX (TIPS) and bought Vanguard investment-grade short-term (VFSUX) and Vanguard GNMA (VFIIX, average duration 2-3 years). So with the intermediate bond fund in my 401(k), I'm 44% short term and 56% intermediate term nowadays. All in tax-deferred. These are my emergency fund ... I have no separate emergency fund to speak of.
LOL! is offline   Reply With Quote
Old 03-20-2008, 09:15 AM   #6
Thinks s/he gets paid by the post
jIMOh's Avatar
Join Date: Apr 2007
Location: west bloomfield MI
Posts: 2,218
I would not move an EF to a bond fund. When rates go up the bonds will drop.

I would keep cash in cash if it's an EF and not chase yield.
Light travels faster than sound. That is why some people appear bright until you hear them speak. One person's stupidity is another person's job security.
jIMOh is offline   Reply With Quote
Old 03-20-2008, 09:51 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
Join Date: May 2006
Location: west coast, hi there!
Posts: 7,223
While puzzling about what "EF" meant I realized that the OP was talking about emergency funds ... yikes. I agree that ER funds meant for very short term needs should not be put into investments with interest rate, credit, or other bond risks.

That said, if you have money that will not be used for a few years then it's perfectly OK to consider a bond fund matched to that duration. So for EF funds you might need tomorrow the duration is zero and stick with good money market funds.

If your duration is maybe 2 years then here is how the Vanguard short term investment grade VFSTX fund performed over a few years back when rates went low. Note the first figure is the fund's yield at the start of the year and the second figure is the fund's total return for that year:
2002  5.1%  5.2%
2003  3.8%  4.2%
2004  3.0%  2.1%
2005  3.3%  2.3%
2006  4.5%  5.0%
For 2003-2006 the short term treasury fund underperformed this fund.
Lsbcal is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Advice needed Savant FIRE and Money 25 10-26-2007 12:28 AM
Target Retirement Funds: Bond Funds vs Actual Bonds? Gearhead Jim FIRE and Money 11 10-23-2007 11:39 AM
How many bond funds are needed? redduck FIRE and Money 7 02-12-2007 06:37 PM
advice needed ironman FIRE and Money 4 01-28-2007 09:35 PM

» Quick Links

All times are GMT -6. The time now is 08:41 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.