What would you do with this IRA allocation? Specifically regarding bond funds.

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tominboise

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My IRA allocation is listed below. I have been retired for 4 years, am 65yo, no Pension, will take SS at 70. Currently living on withdraws from a taxable brokerage account. I bought this allocation prior to retirement based on a plan suggested by a financial planner (a one time review - they are not managing this portfolio). It was more complicated but I have been simplifying it over time. For example, there were three international funds - now I am down to one.

Anyway, I am not happy with bond fund performance. I realize I should have sold them off some years ago when the ship started to sink on bond funds but followed the "buy and hold, don't time the market" strategy. I would like to sell off some or all of the intermediate term bond funds and buy actual bonds/cd's.

What are your thoughts on my allocation in this IRA? Note that this is not all of our money. My wife has her own IRA (similar allocation) and we have the aforementioned brokerage account, which is cash and stock funds. Also a small Roth that I do rollovers every year. Those rollovers will increase since I am now on medicare and not managing income to maintain an ACA subsidy.

SymbolTotal Gain/Loss PercentPercent Of Account
FXAIX74.44%22.45%
VTV60.36%12.87%
FSMAX32.15%12.65%
VBR68.05%11.72%
FIPDX-0.31%9.75%
FUAMX-12.66%6.88%
FUMBX-2.60%6.01%
VCSH-4.24%5.88%
VCIT-15.74%5.84%
FTIHX16.09%5.38%
FSKAX-2.00%0.29%
SPAXX**0.27%
 
Skip the bond funds and build yourself a bond ladder with CD’s, treasuries and agency bonds. Right now is a nice time to buy TIPS (In an IRA) for that ladder. 1.6% or more plus inflation is a good bet, IMO. YMMV.

If you are comfortable with more risk toss in some high quality corporate bonds.
 
Your best performing bond fund/Money Market fund was SPAXX, with a total 5 year return of 9.22% according to https://weissratings.com/. I’m not a fan of bond funds, because even before 2022, they were typically averaging less than 2% per year. I’ve been investing in CD’s for more than 40 years, and during that time, was averaging about 3% per year. You can easily buy CD’s at Fidelity, Vanguard and Schwab. Since you own SPAXX, I assume you have an account at Fidelity. I would consider selling your bond funds. I checked today at Fidelity call protected CD’s and they have 4.2% 1 year and 4.1% 2, 3, 4 and 5 year CDs available and all are at FDIC banks. You can check the health of the banks at https://www.depositaccounts.com/
 
Al18 said:
Your best performing bond fund/Money Market fund was SPAXX, with a total 5 year return of 9.22% according to https://weissratings.com/. I’m not a fan of bond funds, because even before 2022, they were typically averaging less than 2% per year. I’ve been investing in CD’s for more than 40 years, and during that time, was averaging about 3% per year. You can easily buy CD’s at Fidelity, Vanguard and Schwab. Since you own SPAXX, I assume you have an account at Fidelity. I would consider selling your bond funds. I checked today at Fidelity call protected CD’s and they have 4.2% 1 year and 4.1% 2, 3, 4 and 5 year CDs available and all are at FDIC banks. You can check the health of the banks at https://www.depositaccounts.com/
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If FDIC insured does health of a bank matter?
 
It does for me. Would you invest in a bank that was 2 years old, based in another country?
 
Waaay too many funds, especially considering that you have other accounts that you're not showing us.

IMO you should really be looking at all your holdings together, as @disneysteve suggests. It would also be helpful if you show the fund names; not all of us have secret ticker decoder rings.
 
That allocation is way to complicated for me. I'd sell everything and put the stock allocation in VTI, and run a bond ladder so that I could rebalance when the rungs of the ladder mature.
 
OldShooter said:
Waaay too many funds, especially considering that you have other accounts that you're not showing us.

IMO you should really be looking at all your holdings together, as @disneysteve suggests. It would also be helpful if you show the fund names; not all of us have secret ticker decoder rings.
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I'll put together a consolidated list of all our investments and include the fund names. I started unloading some of the intermediate bond funds this morning and bought a couple CD's with the proceeds.
 
It’s your call, but I wouldn’t worry about the number of funds unless you want to consolidate. I have a lot more funds - I’m happy with my holdings. If you want to look for savings, focus on the funds that have the highest fund expenses - ie greater than 0.5%
 
Sometimes I think I should get a one time review but seeing how many funds OP ended up with is startling. I would be very unhappy with so many funds. I wonder what was the rationale to have 3 international funds? I think it is good for OP to simplify. I’m not gonna look up all those symbols but I’m guesding there is a ton of overlap.

Edit: I looked a bit closer. So many red flags that I would ask the FA for a refund. 5 or 6 of the funds have negative returns. I guess those are bond funds? Some of them have tiny allocations. 5% in a fund is meaningless unless its a money market or cash.
 
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Al18 said:
I highly disagree with disneysteve’s answers.
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Can you explain why? If a bank fails, which is a fairly rare occurrence, FDIC steps in and as long as you're under the limit, you don't lose a penny. At most, there's a day or two where you can't access your money, but that's it.

Plus, if you look at bank failures in the past couple of years, many were large well-established banks so those aren't necessarily at any less risk. As long as your money is insured, it really doesn't matter what bank it's in.

Republic First was one of two banks that failed last year. They had been in business since 1985 and had 93 offices in 11 states.
 
It's in your best interest to go slow. Examine everything you can about the original funds and why chosen. Be cautious with recommendations.
 
Al18 said:
It does for me. Would you invest in a bank that was 2 years old, based in another country?
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Well to begin with you are not investing IN a bank... you're lending them money. And if it was 2 years old, based in another country and FDIC insured, then yes, I would.

It might help if you explained why you wouldn't. Worst case the issuer fails, usually on a Friday evening and the FDIC reopens the bank on Monday morning.
 
tominboise said:
am 65yo, ...
Anyway, I am not happy with bond fund performance. ...
What are your thoughts on my allocation in this IRA?
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I'm no expert, but it looks pretty good to me. It's a 65/35 AA, which is a bit aggressive at age 65, but may be appropriate depending on your personal level of risk comfort.

All the funds I checked looked to be good low cost funds, so that is excellent.

I didn't check the 30 day sec yields except I noticed VCIT's was 5.23% which sounds good to me (but I don't really know how bond funds work, do they distribute money to your account each month? Do you have it set to auto-reinvest?).

It looks like you have 60% in US Equities, split 58% large cap, 22% mid cap, 20% small cap. I'm not sure exactly how that compares to Total Market, but it sounds like it is approximately that, and I suppose that having separate funds instead of using a total market fund gives you more control over cap gain/loss harvesting. OTOH, that probably makes no difference at all in an IRA.

I personally prefer more large cap, but from what I've seen posted on these boards, there is virtually no difference historically between being all in S&P500 or all in total market.

And looks like only 5% in Foreign Large Blend. Yours has done better than my foreign fund, I'm very dissatisfied with mine.

With the caveat that I know nothing really, the bond funds look nice, you've got 10% in TIPS, 7% in 10 year treasuries, 6% in Intermediate Corporate bonds, 6% in short term treasuries, and 6% in short term Corporate bonds. That sounds okay to me, but I'm clueless on what is the best duration spread.

If you buy bonds themselves you need to have enough money to properly diversify, the Fidelity website said it would take at least $350,000. I have no idea if that is true. When I talked to one of their Fixed Income advisors, he said they generally invest bonds 40% in treasuries, 35% in Corporate, and 25% in Agency bonds.
 
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I didn't know that FDIC covered bank failures outside the USA. Are you guys sure about that? I do see FDIC may cover deposit made in US branches of foreign banks but will not cover foreign branches of US banks. It is a bit confusing. Care to claify?
 
CRLLS said:
I didn't know that FDIC covered bank failures outside the USA. Are you guys sure about that? I do see FDIC may cover deposit made in US branches of foreign banks but will not cover foreign branches of US banks. It is a bit confusing. Care to claify?
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We’re not talking about accounts outside the US. We’re talking about banks in the US that are foreign-owned. TD bank is Canadian, for example. Bank Hapoalim is Israeli. Numerous other examples.
 
tominboise said:
I started unloading some of the intermediate bond funds this morning and bought a couple CD's with the proceeds.
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I'd go a wee bit slower with your decisions, did you compare the yield that the bond fund was paying to the CD interest rate? It seems to me that corporate bond rates are maybe rising for the intermediate range, so you might be selling a fund that pays 5% and is expected to go up higher, to get a CD that pays less. Though you will have the comfort of knowing the principal is secured versus the variable fund price.
 
disneysteve said:
We’re not talking about accounts outside the US. We’re talking about banks in the US that are foreign-owned. TD bank is Canadian, for example. Bank Hapoalim is Israeli. Numerous other examples.
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Got it. I wasn't sure how it was meant earlier.
 
UpQuark said:
I'd go a wee bit slower with your decisions, did you compare the yield that the bond fund was paying to the CD interest rate? It seems to me that corporate bond rates are maybe rising for the intermediate range, so you might be selling a fund that pays 5% and is expected to go up higher, to get a CD that pays less. Though you will have the comfort of knowing the principal is secured versus the variable fund price.
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That's the catch... with individual bonds and CDs you have more control and can just use income and maturity proceeds for cash needs rather than sell at a loss or gain. You have more control.

At Schwab, a predefined 5 year Treasury ladder yields 4.46% about the same as the YTM on BND and BND is longer duration so more interest rate risk (might be benefit, who knows but irrelevant for a HTM fixed income investor). I'd ease out of bond funds and just do a ladder. And IME you can do better than the Schwab predefined ladder by just picking bonds or CDs for each ladder rung. Also, if corporate bonds spreads ever widen enough to compensate you for the additional credit risk, expand the portfolio with a corporate bond ladder as well.

Using BND as an example:
1736862603398.png

and distribution yield is 4.47%
1736862736427.png

1736863126262.png
 
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