Choice for fixed income portion of portfolio

[Bart523]

I'm new to this forum and have been reading it for a few months. There is a lot of interesting advice on portfolio diversification. I have very little in my retirment portfolios in the way of fixed income investments and I need to diversify. I am going to be rebalancing soon and would like to end up with 25-30% fixed income investments. I have a rollover ira and roth ira at Fidelity and I have an employer sponsored 403b which I would like to keep, but rollover 90% of it to Vanguard in an ira.

If I go with bond fund(s) at Vanguard to make my fixed income portion, which fund(s) would be the best one(s)?

 

[brewer12345]

Risk tolerance? Investment horizon? Portfolio composition? Are you living off the portfolio or still working?

 

[Bart523]

My risk tolerance is fairly high and my investment horizon for this fixed income portion would be long term. I'm still working but would like to retire from full-time work in a couple of years. My portfolio (about 250K) has about 80% individual stocks and stock mutual funds and the rest is in a money market paying about 5%. A family inheritance of about 350K will be added to the mix over the next couple of years when everything gets settled.

 

[brewer12345]

For your bond portfolio, I think VG Total Bond Market Index, VG TIPS, and Vanguard High Yield in a 40/40/20 percent mox would probably do it.

 

[Bart523]

Thanks for the suggestions.

 

[FinanceDude]

For your bond portfolio, I think VG Total Bond Market Index, VG TIPS, and Vanguard High Yield  in a 40/40/20 percent mox would probably do it.

Good choices..........I'd take a look at muni funds if you're in a 28% or higher bracket. The muni market hasn't had the trials of the general bond market.........

 

[Spanky]

In addition to high yield, TIPS, total bond market, add short-term bonds also.

 

[mathjak107]

i recently bought an un-traded reit for part of my fixed portion...kind of a bond on steroids...it pays 8% interest and you share in profits if any at the end of 5-7 years when the reit is sold off.....

 

[brewer12345]

i recently bought an un-traded reit for part of my fixed portion...kind of a bond on steroids...it pays  8% interest and you share in profits if any at the end of 5-7 years when the reit is sold off.....

Yeah, but this isn't fixed income. It is an equity exposure.

 

[astromeria]

mathjak, would you share the name of that untraded REIT? Is it available to the rest of us? IIRC you invest with Fidelity. I have a rollover IRA w/Fido--can any Fido investor get it? Do you need a full-service broker to get it? (Sorry--I realize you might not be able to answer these questions!)

I have some uninvested cash in my husband's rollover IRA and one of our taxable accts that should be used for fixed income. I can't seem to bring myself to get into bond funds (except VWELX in an IRA), which I know isn't entirely rational. I feel more comfortable with REITs, individually or in a fund--I've been a satisfied owner of VGSIX and ICF (REIT funds) in different accts, and AVB (Avalon Bay), whcih has been my best investment (and, frustratratingly, my smallest!) in my husband's rollover IRA. I'd like to buy I-Bonds with some of the taxable $$, but now doesn't seem the right time.

 

[brewer12345]

Astromeria, how about TIPS? There is an auction of 5 year TIPS coming up in October, and many brokerages will let you participate in treasury auctions for free.

 

[mathjak107]

Yeah, but this isn't fixed income.  It is an equity exposure.

actually it pretty much is...your buy out is at a minimum of what you paid to buy in..the per share price never varies as it dosnt trade...the dividend isnt written in stone but historically they have only raised the dividend...when the property is sold you receive your orig amount plus as a dividend anything over and above.....

 

[mathjak107]

mathjak, would you share the name of that untraded REIT? Is it available to the rest of us?  IIRC you invest with Fidelity. I have a rollover IRA w/Fido--can any Fido investor get it? Do you need a full-service broker to get it? (Sorry--I realize you might not be able to answer these questions!)

I have some uninvested cash in my husband's rollover IRA and one of our taxable accts that should be used for fixed income. I can't seem to bring myself to get into bond funds (except  VWELX in an IRA), which I know isn't entirely rational. I feel more comfortable with REITs, individually or in a fund--I've been a satisfied owner of VGSIX and ICF (REIT funds) in different accts, and AVB (Avalon Bay), whcih has been my best investment (and, frustratratingly, my smallest!) in my husband's rollover IRA. I'd like to buy I-Bonds with some of the taxable $$, but now doesn't seem the right time.

its called the apple hospitality reit...its sold thru david lerner assoc...they just started apple 7...they intend to raise 1 billion dollars and then they close it to anymore people...they buy only extended stay hotels and turn them over to hilton and marriott to manage and fly their name flag...the first apple reit was taken and merged a few years back with a public one called cornerstone.investors saw about a 30% gain i think but dont quote me as i dont remember for sure...apple 2 is being sold right now after only 6 years and investors should get a nice windfall as well as having got 7-8 % over the last 6 years.....before i committ more money i want to see how apple 2 investors are paid off...dont forget these unlisted reits arent very transparent....but heck ill take 8% for the next 7 years...theres a tax advantage too as reits are only taxed on 90% of the income...

 

[mathjak107]

i didnt want to make the last message to long...
so you buy in now at 11.00 per share....the per share price is fixed.you need to figure 7 years or so of time in the pool....you can sell earlier and your shares are thrown into the pool to be sold to investors who reinvest their dividends but they dont guarantee the 11 a share......its an 8% sales charge which is about right for buying into private real estate these days.this charge covers expenses,closing costs and operations..i dont know any real estate i can buy without closing costs..dont forget we arent talking a publicly traded reit which trades like a stock...

 

[wabmester]

its an 8% sales charge....

It's your money, but I wouldn't touch it.   That's an outrageous upfront load.   And they artifically juice the yield via return of capital.   And looking at their reports, I couldn't easily calculate their expense ratio.

Sounds a lot like a new issue of a closed-end fund, and those are rarely good deals (for the investor, anyway).

 

[mathjak107]

yes wab its not very transparent....but after speaking to quite a few people about it who have been in it since the beginning it seemed pretty strait forward....the few that were liquidated were paid off as expected with a nice gain as well.....unlisted reits are very different from funds...an 8% load on a fund is crazy...a private reit is more like a partnership...you cant buy any real estate in a partnership with out closing costs...so even figuring 7% for the next few years after subtracting the load,they also pay you 8% on the total orig amount even though they too the sales charge out....a fund dosnt do that it seems like a bond on steriods as well as inflation protection...bonds drop in times of inflation,,,real estate tends to rise....compared to tips ill take my chances this way...besides it aids stability to my portfolio by not varying on those 100 minus days on the dow.....