I've been doing more research and getting more comfortable with fixed income investing. I have most of my bond funds liquidated with the balance probably to be done next year (due to tax purposes).
I'm trying to determine my percentage of fixed income that should be in treasuries vs. agencies vs. corporates vs. munis. I'm also trying to determine how diversified my corporates (and to a lesser extent munis) need to be to offset the credit risk of any one issue.
Looking at BND I see 51% in Government Issues, 26% in Corporates and 21% in Securitized. Would securitized be asset back/mortgage backed securities or something else? Would agencies fall into Government Issues or Corporates?
Does Fidelity (or other broker) offer the ability to purchase a basket of corporate bonds to diversify credit risk but then you own the actual bond rather than being managed as a fund? If not, do you think 10-20 corporate issues would be enough for diversification purposes? I guess that would probably depend on credit rating.
The bulk of this post is by wanting to get some corporate bonds incorporated into my holdings but I feel I'd be signficantly elevating the default risk of a single holding which, if I'm not diversified enough, could torpedo the total return of my portfolio. I'm also trying to determine what percentage of my total bond portfolio should be in corporates. If I use a similar 25% as BND and try to have 10-20 any one bond is only 1.25%-2.5% of my total portfolio. This is probably fine from a diversification perspective but feels like a lot of work for not much money invested.
Thanks for all of the thoughts.
I'm trying to determine my percentage of fixed income that should be in treasuries vs. agencies vs. corporates vs. munis. I'm also trying to determine how diversified my corporates (and to a lesser extent munis) need to be to offset the credit risk of any one issue.
Looking at BND I see 51% in Government Issues, 26% in Corporates and 21% in Securitized. Would securitized be asset back/mortgage backed securities or something else? Would agencies fall into Government Issues or Corporates?
Does Fidelity (or other broker) offer the ability to purchase a basket of corporate bonds to diversify credit risk but then you own the actual bond rather than being managed as a fund? If not, do you think 10-20 corporate issues would be enough for diversification purposes? I guess that would probably depend on credit rating.
The bulk of this post is by wanting to get some corporate bonds incorporated into my holdings but I feel I'd be signficantly elevating the default risk of a single holding which, if I'm not diversified enough, could torpedo the total return of my portfolio. I'm also trying to determine what percentage of my total bond portfolio should be in corporates. If I use a similar 25% as BND and try to have 10-20 any one bond is only 1.25%-2.5% of my total portfolio. This is probably fine from a diversification perspective but feels like a lot of work for not much money invested.
Thanks for all of the thoughts.