Where are you putting your fixed income/ bond investments?

[mathjak107]

it is one of my choices if and when rates and inflation start to kick up

[freebird5825]

Bond and mixed funds, percentages = (bonds + cash) in overall portfolio...

VWALX 41% (used as TE income generator)
VWINX 8%
VWITX 4%
VMLTX 2%
VBIAX 2% (Roth)
DODIX 1% (Roth)
I bonds 1%

AA = 41/59, stocks/(bonds+cash)

[tuixiu]

100% stable value fund, pulling in 1.8% last time I checked.

[tuixiu]

Quote:

Originally Posted by freebird5825 Bond and mixed funds, percentages = (bonds + cash) in overall portfolio... VWALX 41% (used as TE income generator) VWINX 8% VWITX 4% VMLTX 2% VBIAX 2% (Roth) DODIX 1% (Roth) I bonds 1% AA = 41/59, stocks/(bonds+cash)

That is some serious slicing and dicing man!

[audreyh1]

Quote:

Originally Posted by Don46 Which funds do you use? I suppose your strategy is such that you can draw on cash first, then the short term high quality, and let the intermediate term bonds ride the market without having to sell when things are down?

Yes - I have a ladder, as it were, but that's really more for duration diversification. It only matters if bonds are down in which case I might be drawing from stocks anyway. It works for rebalancing as well. If stocks are down, then whichever of the cash, short-term bond funds, or long-term bond funds is up the most get used for rebalancing. It won't necessarily be cash first - it totally depends on what each asset class has done in the prior year.

DODIX is my core intermediate bond fund. I have some additional intermediate fixed income diversification with MWTRX, FSICX, FGNMX, and FTABX. My short-term is all in VBISX.

[freebird5825]

Quote:

Originally Posted by tuixiu That is some serious slicing and dicing man!

It's actually woman in my case.

Some of it is leftover from the days before I came to this forum and got a bit smarter at things.

The big chunk in VWALX is intentional. I had 8 years between FIRE and being eligible for my own FERS pension, so I decided to crank up that fund even more after I FIREd in 2007. Love those 30 day TE dividends.
I can also write a check if I had a huge "right now" expense to cover.

Once I turn 59.5, I will do something with the 2 funds in the Roth.

In the meantime, I am building up the shorter duration TE bond funds to get better diversification.

[audreyh1]

Quote:

Originally Posted by freebird5825 It's actually woman in my case. Some of it is leftover from the days before I came to this forum and got a bit smarter at things. The big chunk in VWALX is intentional. I had 8 years between FIRE and being eligible for my own FERS pension, so I decided to crank up that fund even more after I FIREd in 2007. Love those 30 day TE dividends. I can also write a check if I had a huge "right now" expense to cover. Once I turn 59.5, I will do something with the 2 funds in the Roth. In the meantime, I am building up the shorter duration TE bond funds to get better diversification.

I guess you don't mind the occasional roller coaster ride with that fund!

[MichaelB]

We have very little tax deferred accounts, so our fixed income is tax-exempt funds. About half in Vanguard intermediate term TE (vwiux) and the other half evenly split between Fidelity TE (ftabx) and some individual muni bonds I picked up between '08 - '10 when they were on fire-sale. To diversify a bit I just moved 5% our our allocation from fixed income to DBC. With a yield below 2% I figure the opportunity cost is pretty low, and if rates do rise over the next year or two I would expect commodities to follow suit.

[pb4uski]

I wonder sometimes whether my concerns on interest rate risk might be misplaced in that higher interest rates would likely be associated with a recovering economy so in theory, fixed income losses from rising interest rates might be offset (or more than offset) by equity appreciation.

[2B]

Quote:

Originally Posted by Options With all due respect, this is rather dangerous advice. Vanguard came out with a recent paper pointing to the pitfalls of this kind of thinking. Truth is, thinking on proper placement of proper fixed income placement is all over the map, with debates on total bond vs. Short term bond versus tips versus no tips versus I bonds versus international bonds versus no international bonds. In the end, and I forget who to attribute this to, but "nobody know nothin'." These debates are just that, simply debates. The enemy to tying to find the perfect investment or portfolio is the search for the perfect one. Attesting to this is Fidelity's very recent study demonstrating the most successful PF's with their institution were inactive as they belonged to people who were deceased. The key is to pick an allocation you're comfortable with staying with.

I saw their paper. If I remember it correctly, it simply showed that if you put your money into their total bond fund and left it their all of the principle was made whole after some period of time (~10 years?). I asked the Vanguard CFP if the total bond fund held their bonds to maturity. I never received a yes or no answer. I was shown their paper.

I have asked many times for someone to show me a spread sheet of how the bond fund that doesn't hold to maturity will exceed the value of an equivalent portfolio of individual bonds that will eventually be redeemed at par. So far, I'm still waiting.

Not wanting to be ugly but I suspect I am. Vanguard has a large business interest in selling bond mutual funds.

Much of the total bond fund's holdings are government bonds. CD rates of comparable maturities have a higher yield. They are theoretically just as safe if you stay under the $250,000 FDIC limit from individual banks. If my CD ladder is set to have the same average maturity, it will have a better yield. I also know that all of my principle will come back to me some day no matter how far up interest rates go if I don't sell.

Bond funds are low effort. CD ladders aren't for everyone. I'm waiting for the threads that will pop up here if 10 year treasuries go to 10%.

[freebird5825]

Quote:

Originally Posted by audreyh1 I guess you don't mind the occasional roller coaster ride with that fund!

Not at all. Historically, when it dipped, I bought more.

Right now I am only reinvesting dividends in VWALX. Sometimes I direct the dividends into my brokerage sweep fund for several months to accumulate some dry powder to invest at a favorable time.

[mathjak107]

Quote:

Originally Posted by pb4uski I wonder sometimes whether my concerns on interest rate risk might be misplaced in that higher interest rates would likely be associated with a recovering economy so in theory, fixed income losses from rising interest rates might be offset (or more than offset) by equity appreciation.

if the economy gets better ,equities should do better but why drag them down with a weight if rates rise.? cash and equities would even be a better choice.

in fact you would likely give up less now missing out on the higher bond rates then you would give back when we turn the corner.

a 40 year bond bull market has made folks think they have to sit static in bonds,

there are far better choices if rates and inflation kick up.

i would switch to TIPS, FLOATING RATE FUNDS ,REIT INCOME AND SOME COMMODITY FUNDS with my conventional bond budget.

it woulsd make no sense sitting in conventional bond funds .

[mathjak107]

Quote:

Originally Posted by 2B I saw their paper. If I remember it correctly, it simply showed that if you put your money into their total bond fund and left it their all of the principle was made whole after some period of time (~10 years?). I asked the Vanguard CFP if the total bond fund held their bonds to maturity. I never received a yes or no answer. I was shown their paper. I have asked many times for someone to show me a spread sheet of how the bond fund that doesn't hold to maturity will exceed the value of an equivalent portfolio of individual bonds that will eventually be redeemed at par. So far, I'm still waiting. Not wanting to be ugly but I suspect I am. Vanguard has a large business interest in selling bond mutual funds. Much of the total bond fund's holdings are government bonds. CD rates of comparable maturities have a higher yield. They are theoretically just as safe if you stay under the $250,000 FDIC limit from individual banks. If my CD ladder is set to have the same average maturity, it will have a better yield. I also know that all of my principle will come back to me some day no matter how far up interest rates go if I don't sell. Bond funds are low effort. CD ladders aren't for everyone. I'm waiting for the threads that will pop up here if 10 year treasuries go to 10%.

credit ratings of holdings in the total bond fund would likely make the above very hard to count on. staying for the duration of a fund only really works with treasuries and gov't bonds. once credit downgrades happen values are not just based on interest rates.

usually though you will remain behind the curve in practice as rates go up .

[audreyh1]

Quote:

Originally Posted by freebird5825 Not at all. Historically, when it dipped, I bought more. Right now I am only reinvesting dividends in VWALX. Sometimes I direct the dividends into my brokerage sweep fund for several months to accumulate some dry powder to invest at a favorable time.

Good for you!

[pb4uski]

Quote:

Originally Posted by mathjak107 if the economy gets better ,equities should do better but why drag them down with a weight if rates rise.? cash and equities would even be a better choice. in fact you would likely give up less now missing out on the higher bond rates then you would give back when we turn the corner. a 40 year bond bull market has made folks think they have to sit static in bonds, there are far better choices if rates and inflation kick up. i would switch to TIPS, FLOATING RATE FUNDS ,REIT INCOME AND SOME COMMODITY FUNDS with my conventional bond budget. it woulsd make no sense sitting in conventional bond funds .

I actually agree with you and have no conventional bond funds in my fixed income allocation.

I'm ~25% in Penfed 5 year CDs earning 3%, 15% in a 0.9% online savings account, 36% in target maturity bond funds maturing in 2017 to 2020 in lieu of a CD ladder, 17% in international and emerging market bond funds and 3% of whole life insurance cash value that is earning ~4% with the remainder in Merger Fund (which I view as a fixed income substitute because it isn't correlated to equities).

I just sometimes wonder if the complexity compared to a one-stop diversified bond fund is worth the effort. I have certainly given up some return this year since conventional bond funds have done well this year, but I don't really have many regrets.

[audreyh1]

I don't think long-term interest rates are going up next year. They might even keep going down.

I think short-term interest rates might go up a little.

From this point of view my intermediate-term bond funds shouldn't experience much pain next year, and my 7-yr duration muni bond fund might even appreciate. Although the latter (FTABX) may be fully valued right now. Funny how munis sometimes suddenly fall drastically out of favor and then later become wildly popular.

[mathjak107]

Quote:

Originally Posted by pb4uski I actually agree with you and have no conventional bond funds in my fixed income allocation. I'm ~25% in Penfed 5 year CDs earning 3%, 15% in a 0.9% online savings account, 36% in target maturity bond funds maturing in 2017 to 2020 in lieu of a CD ladder, 17% in international and emerging market bond funds and 3% of whole life insurance cash value that is earning ~4% with the remainder in Merger Fund (which I view as a fixed income substitute because it isn't correlated to equities). I just sometimes wonder if the complexity compared to a one-stop diversified bond fund is worth the effort. I have certainly given up some return this year since conventional bond funds have done well this year, but I don;t really have many regrets.

as of now i have lots of bond funds but that will change at some point, still to early yet .

[gcgang]

http://money.usnews.com/funds/mutual...ond-fund/fbnrx

A top bond fund manager believes EM debt should be emphasized.


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[Birchwood]

As a retiree, my whole asset is divided in three "buckets"
1. Cash mainly CDs to live on.
2. Fixed income, which should be bond funds but now turning more cash.
3. Equity- stocks and mutual funds.
I am finding that 2 and 3 are now moving back and forth and are not exactly where I want it.
For my retirement fund, they are in Wellington, Wellesley, and Intermediate term bond fund and a little cash to invest when there is a correction.
In other account I also have muni funds, short term BF and Hybrid.
I think a small amount should be in US treasury only for stability.

[W2R]

I haven't changed my AA since I first devised my financial plan some years ago. Here is my bond/fixed AA, in order of amounts:

1. I have more fixed income/bond investments in the TSP "G Fund" than anywhere else. It yields a long term rate, but is still guaranteed to never drop in share price. Access to the "G Fund" was part of my benefits package as a federal employee.

2. The next highest portion of my fixed income/bond investments is in Wellesley (VWIAX).

3. Then comes Total Bond Market Index (VBTLX), and

4. cash.

In retirement, I get equal monthly payments from the TSP "G Fund" and this is part of what I live on. Since I know the value will never drop, it is pretty easy to figure out how much I can withdraw and never run out, as well as how much the RMDs will be. In four years I will be 70+1/2, and will be subject to RMDs so I will be withdrawing from it for at least part of my living expenses, for life.

Wellesley also provides a nice dividend for living expenses and Wellington Management (that manages Wellesley) has had a longer and better track record than I have.