What's Your Non-Equity Portfolio Look Like?

[Ready]

Quote:

Originally Posted by clifp To me one of the problem of TBM is that it is composition has really changed since 2008 when the Fed went on it is buying spree. It is only 23% corporate and the rest is government (90% US) or agency debt. Fully 30% of the assets are in long bonds 20-30+ year issues. Anyway given the low current interest rates and the prospect of rising interest none of these seem like great assets to own. The BND current yield is 2.5% and the average duration is 5.5 years so even a 50 basis point rise in interest rates will result in small loss. I think PenFed CD, stable value funds etc. all seem like better investments.

+1

I keep asking myself why I have money in VG TBM when I could lock in 3% with PenFed. If rates rise, I can always pay the one year penalty and buy into TBM at lower NAV prices and with a higher yield, so it seems like a win win. I just haven't figured out how to sell the money in my VG IRA account and move it into a PenFed IRA, and make it all happen before PenFed yanks the rates back down. Has anyone successfully done this yet?

[jazz4cash]

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Originally Posted by Spanky The stable value fund in our 401K returns only 1.68% for the past 3 years. I heard that other SV funds are doing a lot better (e.g., 3+%). Is that true?

Quote:

Originally Posted by Lucantes The SV fund in our 401K has returned 2.03% for 1YR and 2.67% for 5YR but i do not use it.

I keep my ex-employer's 401k open primarily for the SV fund.........

Performance
AS OF 11/30/2013
1 Yr + 2.46% 3 Yr +2.89% 5 Yr +3.09% 10 Yr +4.10%

This is ~50% of my fixed allocation. The rest is CD's.

[jazz4cash]

Quote:

Originally Posted by Ready +1 I keep asking myself why I have money in VG TBM when I could lock in 3% with PenFed. If rates rise, I can always pay the one year penalty and buy into TBM at lower NAV prices and with a higher yield, so it seems like a win win. I just haven't figured out how to sell the money in my VG IRA account and move it into a PenFed IRA, and make it all happen before PenFed yanks the rates back down. Has anyone successfully done this yet?

I think several posters have moved funds to Penfed...there is a long thread on it. It takes just a bit longer if you do not have already have an account with Penfed. You can instruct Penfed to initiate the transfer as others have done, but it takes a bit of hand-holding as Penfed is a bit old fashioned. I contacted Fidelity and requested a check made payable to Penfed and marked "Rollover IRA". It took 5 days for me to receive the check. I live 15 min from a Penfed branch and it took 15 min to complete the transaction. It looks like the rate will be good through the end of the month, but in reality it could be yanked at any time.

[audreyh1]

Of the 47% of my portfolio AA that is in fixed income, I have approximately:

6.5% in tax-free Money Market
5% in IBonds
3.5% in 5yr CDs at 3%
1% in GNMA fund
8% in muni bond funds
14% in short-term bond index
62% in various intermediate well-diversified bond funds

[Ready]

Quote:

Originally Posted by jazz4cash I think several posters have moved funds to Penfed...there is a long thread on it. It takes just a bit longer if you do not have already have an account with Penfed. You can instruct Penfed to initiate the transfer as others have done, but it takes a bit of hand-holding as Penfed is a bit old fashioned. I contacted Fidelity and requested a check made payable to Penfed and marked "Rollover IRA". It took 5 days for me to receive the check. I live 15 min from a Penfed branch and it took 15 min to complete the transaction. It looks like the rate will be good through the end of the month, but in reality it could be yanked at any time.

I have a PenFed account and a CD in a taxable account with them. I tried to set up an IRA transfer online only to discover there is no online option to do so. The manual check method will work, but I continue to worry about pulling money out of TBM where I will have some losses, and then finding that PenFed no longer offers the 3% rate by the time I get the manual check in my hands, and now I've incurred the losses associated with selling TBM and don't have a good place to put it.

I also have a bunch of CDs with Ally and Discover, all maturing either end of this year of middle of next year. They all pay slightly more than 3% (about 3.2-3.6%). Part of me wants to cash them all in and lock them up with PenFed at 3% for another five years, but I'd have to pay a 60 day interest penalty (not too bad), and accept lower returns for the next 12-18 months to do so. And if interest rates are at least 3% in the next 12-18 months anyway, I will have done all this for nothing. So I continue to ponder it all without taking any action...somewhat frustrating.

[REWahoo]

Of the 55% of my portfolio AA that is in fixed income, I have approximately:

3% in tax-free Money Market
14% in 5yr CDs at 3%
3% in GNMA fund
18% in short-term bond fund
62% in bond funds within Wellington and Wellesley

[Cobra9777]

My overall AA is 45% stock, 35% bonds, 15% real estate, and 5% cash.

The cash portion is mainly money market and bank savings.

The real estate consists of two rental houses and an REIT ETF.

The bond portion breaks down like this:

US inv-grade corp: 32%
US high-yield corp: 30%
International corp: 12%
International govt: 8%
US treasuries: 10%
Municipal: 8%

[obgyn65]

To answer the OP's question, my non equity portfolio is about 98% in munis and CDs.

[aja8888]

Quote:

Originally Posted by haha I just hope that Eagle Ford wells don't deplete too rapidly. Ha

Those EF wells are coming in very prolifically as I have been at some that are producing 2,000 barrels per day and leveling off at around 900 BPD. My work with one major has me seeing a development plan of 4,000 wells over the next 10 years. The other producers are planning for similar development. It's not going to end anytime soon. New pipelines are being built to bring the crude oil and natural gas to market in the Gulf (and Mexico).

A little know (or understood) event is that the Permian Basin (West Texas) has been coming back very strong. Since it's development in the 1920's, many wells have been drilled and are depleted. But those were shallow, vertical wells and today's technology has new completions at depths in multiples of the older wells in different, untapped formations. The rebirth of the Permian Basin may be certainly bigger than the new Eagle Ford, and maybe even the U.S. portion of the Bakken in the Dakotas. We are talking oil here, not natural gas.

It's a new world out there in the oil/gas business and there is lots of new opportunities. You can credit technology advancements in drilling (deeper depths and horizontal laterals) for most of these production improvements.

[Spanky]

Quote:

Originally Posted by jazz4cash I keep my ex-employer's 401k open primarily for the SV fund......... Performance AS OF 11/30/2013 1 Yr + 2.46% 3 Yr +2.89% 5 Yr +3.09% 10 Yr +4.10% This is ~50% of my fixed allocation. The rest is CD's.

Are you satisfied with these returns for the fixed-income of your portfolio? These returns are hardly keeping up with inflation.

[Spanky]

Quote:

It's a new world out there in the oil/gas business and there is lots of new opportunities. You can credit technology advancements in drilling (deeper depths and horizontal laterals) for most of these production improvements.

Which stocks should we buy to capture these opportunities?

[jflynn4]

In my non-equity, I have about 80% in individual long term corporate bonds that I acquired during the mass downturn a few years ago. The average maturity is in the late 2020's (with a couple going out to 2040) and an average coupon of just under 7% non-callable. They were all acquired at a significant discount to face.

I'm not terribly concerned at principal loss since they all appear to be solid companies for the long haul and I'm perfectly happy with the 7% annual income level. I just wish I'd bought more.

The remaining 20% sits in typical ultra safe accounts (bank CD and savings). Due to Obamacare, I need to keep my taxable income at a specific level so planning for non-taxable money is of a pretty high importance.

[aja8888]

Quote:

Originally Posted by Spanky Which stocks should we buy to capture these opportunities?

I'm probably a better engineer than I am a person who can recommend good stocks. So I can't give financial advice, but can say that pipeline companies like Kinder Morgan, Enterprise Products, Magellan Midstream and others are positioned well and have a lot of good projects in the planning stages. Their security prices do not closely follow energy prices as they get paid to transport someone else's product. Some pipeline companies have gotten into gas to liquids plants and terminals to sell liquids (EPD has).

You should research these companies and also focus on majors like Marathon, Chevron, Exxon, Anadarko, etc as they are quite busy working these newer regions. However, crude oil producers stock prices seem to fluctuate with the price of crude, so only venture here when they are at low points.

ETF's are safer as you get a basket of the stocks, like the Alerian for MLPs and the energy ETFs.

[nun]

Quote:

Originally Posted by Ready I keep asking myself why I have money in VG TBM when I could lock in 3% with PenFed. If rates rise, I can always pay the one year penalty and buy into TBM at lower NAV prices and with a higher yield, so it seems like a win win. I just haven't figured out how to sell the money in my VG IRA account and move it into a PenFed IRA, and make it all happen before PenFed yanks the rates back down. Has anyone successfully done this yet?

My 457 plan Stable Value is paying 2.6%, but has a 0.4% fee....still 2.2% is good these days given that it isn't locked up. I also have a chunk of money in TIAA-Traditional that is locked up (it's an annuity), but that has a guaranteed minimum interest rate of 3%, is currently returning 3.75% and has averaged 4.3% annually for the past 22 years. When I retire I can either use the balance to buy an income annuity or simply take money out at regular intervals. In that case it's more like a 10 year CD.

https://www.tiaa-cref.org/public/pro...onsored/option

[Ready]

I called the Vanguard Fixed Income desk this morning just to see if they could offer me a good argument for keeping my money in VG TBM rather than a PenFed 3% CD. He acknowledged that the 3% rate is an outlier relative to what other banks are offering, but as long as that rate is available, there is not much reason to choose TBM over the CD. I kept rephrasing the question to see if he could poke any holes in my logic, but he seemed content to acknowledge that I was looking at this the right way and that the CD at 3% is simply a better strategy than TBM. Given that TBM has interest rate risk, it should be paying a premium over the safety of a CD. Since it is not, it simply isn't the best choice for fixed income at this time.

At least he was honest about it. He offered to transfer me to the concierge desk to help me do the transfer of funds from my IRA to Pen Fed.

[aja8888]

Quote:

Originally Posted by Ready At least he was honest about it. He offered to transfer me to the concierge desk to help me do the transfer of funds from my IRA to Pen Fed.

I transferred IRA funds to Penfed and opened an IRA. That took a week. Then I ordered 3% certificates on 1/2/14. They have not been issued yet due to the huge backlog of certificate applications in the Omaha office. Last I was told was I am 265th in line, but will be OK as they have committed the funds from my account.

[brewer12345]

Quote:

Originally Posted by Ready I called the Vanguard Fixed Income desk this morning just to see if they could offer me a good argument for keeping my money in VG TBM rather than a PenFed 3% CD. He acknowledged that the 3% rate is an outlier relative to what other banks are offering, but as long as that rate is available, there is not much reason to choose TBM over the CD. I kept rephrasing the question to see if he could poke any holes in my logic, but he seemed content to acknowledge that I was looking at this the right way and that the CD at 3% is simply a better strategy than TBM. Given that TBM has interest rate risk, it should be paying a premium over the safety of a CD. Since it is not, it simply isn't the best choice for fixed income at this time. At least he was honest about it. He offered to transfer me to the concierge desk to help me do the transfer of funds from my IRA to Pen Fed.

I am amazed that they were willing to concede the point and even help you move the money. They get a huge gold star just for that.

[Options]

Quote:

Originally Posted by Midpack With all the understandable angst about no good choices for fixed income or cash, despite lots of bits and pieces of info, I wonder what our non-equity portfolios all look like - percentages in various bond, funds, cash, etc ...

I have no "understandable angst" about any aspect of my PF as I have an ISP and have no plans to change it based on external noise. Others much smarter than me have stated that changing one's AA/composition based on noise is dating it, not marrying it. PF composition should change about once every 10 years, or as a result of major life changes. Still others smarter than me have stated that all predictions are, again, noise. No one is smarter than the market, ever.

Quote:

Originally Posted by figner I'm surprised not many people are listing a Total Bond fund among their holdings in this thread. It may not be optimal, especially in today's interest rate environment, but as a long term holding on autopilot it seems fine. My non-equity portion is 50% TBM and 50% TIPs fund. Their purpose is for diversification/non-correlation with equities - it's ok if they have some losses. I've held them for years and plan to just rebalance as necessary. Anyone see issues with this?

What I'm surprised at is all the postings on this forum where people thought they were smarter than the market, later turned out not to be, and then talk about "hindsight". Your thinking is spot on, if you look at the rationale behind the lazy portfolios.

Quote:

Originally Posted by Spanky Is the TIPs fund short-term? I heard that short-term is more appropriate if the prospect for higher inflation is likely. Futher, short-term is lower risk despite possible lower return than the longer-term TIPS in the long run.

If you hear something on the street, put it back. Better to buy a lotto ticket. Nothing should ever be short term, unless you intend to spend it in the next 1-3 years. Otherwise, you're speculating.

Quote:

Originally Posted by clifp To me one of the problem of TBM is that it is composition has really changed since 2008 when the Fed went on it is buying spree. It is only 23% corporate and the rest is government (90% US) or agency debt. Fully 30% of the assets are in long bonds 20-30+ year issues. Anyway given the low current interest rates and the prospect of rising interest none of these seem like great assets to own. The BND current yield is 2.5% and the average duration is 5.5 years so even a 50 basis point rise in interest rates will result in small loss. I think PenFed CD, stable value funds etc. all seem like better investments.

Threads on the BH site discuss this as well. Again, all predictions are noise. Beware confirmation bias, recency bias, and overconfidence. There's too much of it here for my comfort level. 2008 left lots of folks swimming naked, and no, BOGLE has not discounted the TBM fund.

[Spanky]

Quote:

BOGLE has not discounted the TBM fund.

He did say that the TBM index should be changed.

[jazz4cash]

Quote:

Originally Posted by Ready I called the Vanguard Fixed Income desk this morning just to see if they could offer me a good argument for keeping my money in VG TBM rather than a PenFed 3% CD. He acknowledged that the 3% rate is an outlier relative to what other banks are offering, but as long as that rate is available, there is not much reason to choose TBM over the CD. I kept rephrasing the question to see if he could poke any holes in my logic, but he seemed content to acknowledge that I was looking at this the right way and that the CD at 3% is simply a better strategy than TBM. Given that TBM has interest rate risk, it should be paying a premium over the safety of a CD. Since it is not, it simply isn't the best choice for fixed income at this time. At least he was honest about it. He offered to transfer me to the concierge desk to help me do the transfer of funds from my IRA to Pen Fed.

That's good to hear but not surprising. I had a very similar experience with Fidelity when I moved funds last year to a credit union CD. This time they looked at my profile and said "I see you've done this before, so you probably understand what you're doing..and we can't match that rate <more or less>".