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Well, we are in our late, late 30's and early 40's.
We have 75%+ in equities.
Aren't we supposed to have some in bond funds at this point?
How do you have the other 25% invested? It doesn't *have* to be in bonds per se. That's just the common type of allocation.
First decide if you want to stay at 75% equities. If yes, great. If no, adjust up or down to get to the place you want.
Then consider using a combo of funds for the portion you want to keep more conservative:
- income funds
- treasury inflation protection funds (TIPS)
- short term bond funds (generally 2 to 5 yrs duration)
- long term bond fund (TLT)
OR
if you want to make it really simple, use a fund like Vanguard Wellington (60/40) equity exposure to bond exposure or the even more conservative Vanguard Wellesley fund (40/60).
How do you have the other 25% invested? It doesn't *have* to be in bonds per se. That's just the common type of allocation.
First decide if you want to stay at 75% equities. If yes, great. If no, adjust up or down to get to the place you want.
Then consider using a combo of funds for the portion you want to keep more conservative:
- income funds
- treasury inflation protection funds (TIPS)
- short term bond funds (generally 2 to 5 yrs duration)
- long term bond fund (TLT)
OR
if you want to make it really simple, use a fund like Vanguard Wellington (60/40) equity exposure to bond exposure or the even more conservative Vanguard Wellesley fund (40/60).
VTABX 5% (IRA)
VIPSX 5% (IRA)
VBTIX 15% (401k)
What other asset classes would you recommend other than bonds?
Well, we are in our late, late 30's and early 40's.
We have 75%+ in equities.
Aren't we supposed to have some in bond funds at this point?
I'm just kind of going along with Boglehead recommendations here.
are you supposed to have bonds at this point ? only for short term money needs ,otherwise no . there is no financial logic to having bonds otherwise . you may have a mental reason if your pucker factor is low .
but otherwise if it is long term money , using bonds to mitigate temporary dips and permanently reducing long term returns has zero logic
are you supposed to have bonds at this point ? only for short term money needs ,otherwise no . there is no financial logic to having bonds otherwise . you may have a mental reason if your pucker factor is low .
but otherwise if it is long term money , using bonds to mitigate temporary dips and permanently reducing long term returns has zero logic
Okay. Let me push back a little and ask, why then, do standard allocation models (think Boglehead) always include bond funds. And not just a small percentage of them, but at our ages, somewhere between 15-40% bond funds?
I just hate to think that I've been following advice of books, podcasters (many, not all.. there certainly are a few that don't do any bonds) and I'll end up wrong. I've read at least a dozen books and I've tried to follow the methodology. As presented the advice seemed sound so I applied it.
But yeah, I'll tell you. Two of those bond funds are losing monies. Not a lot.. we're talking like a couple hundred dollars.. and they are total index funds too. I understand the theory of bonds and how they work when stocks fall, but at the same time it *feels* wrong to put more money into something that is barely keeping up with the purchase price.
to be honest i stopped spending time on bogleheads along time ago . many are still entrenched in old school thinking .
what time frame is the planning for ? if it is not all long term money then bonds are a good idea . but if it is still money in the accumulation stage and still not needed for 15 years bonds are an added weight for no reason .
bond funds can be down a bit if rates rise but the idea is things usually reverse on a dime when stocks crap the bed . then high quality bonds tend to rise .
think about it . bonds are used as a source of short term money for spending . if not then the short term dips are meaningless so mitigating them and permanently hurting your long term gains is illogical .
perhaps you want to take that back to the bogleheads .
with rates rising i prefer a go anywhere bond fund like fidelity strategic income . of course a mix of assorted bond funds would be best . i would not put the entire bond budget in one bond fund . betting the ranch on just a total bond fund in my opinion is the wrong thing to do now . they are far to interest rate sensitive and they are anything but total . they lack many of the less interest rate sensitive components . .
I like that fund, but many might find it a bit too risky/volatile. Even though it has good long term returns, it often doesn't hold up that well when stocks go down, so not really a good diversifier.
as i said , that should not be your only bond fund . couple it with a total bond fund and some short term bond funds and you have a nice comprehensive package .
fsicx is much less interest rate sensitive than a total bond fund and in view of the stronger economy it is likely the less risky choice . at different parts of the interest rate cycle risk changes .
when rates rise the more sensitive to rates a bond fund is the bigger the risk . the stronger the economy the less economic risk and credit risk there is .
no bond funds should be forever . bonds are one area where buy and die only works until it doesn't . unlike markets which have short recovery times most of the time , interest rates can take decades to cycle .
I am rebalancing. I have monies in our Vanguard IRAs and I want to put them in bond funds. I have few already, but I don't want to use them.. one is an international and another is TIPS. I feel like I have enough of both of those.
What's a good, basic, bond fund? The kind one would use if they were just doing a simple boglehead portfolio I think is what I'm looking for.
It's true, there really isn't a perfect bond fund as Lottamoxie has said.
However, there are some good broad based bond funds out there that don't get too aggressive.
One of my top picks would be Dodge & Cox Income (DODIX). It's not exciting, but it has consistently above average returns. Holds up decently when stocks are down, so it's a good diversifier. It has a low expense ratio of .43%.
Another that I like would be--Baird Core Plus Bond (BCOIX). The good thing about this fund is that you get the cheap .30% expense ratio with a balance of $25,000 or more. That's low for an actively managed bond fund. It also has top notch long term returns (top 10% for latest 10 & 15 year periods). The only thing that worries me is this fund is pretty sensitive to increases in interest rates. So far, interest rate increases haven't hurt the fund (it was ranked in the 18th percentile in returns last year), but that doesn't mean it can't happen in the future.
Last edited by mysticaltyger; 01-06-2018 at 02:20 PM..
i would never recommend one broad based bond fund today . i am not convinced any one fund is the way to go with bonds . even dodix has far to many holes in the areas that today can add better performance with just a tiny bit more risk .
almost 30% is in long term bonds which are highly rate sensitive . just the thing we are trying to reduce exposure to .
my own model i follow has reduced anything interest rate sensitive like a total bond fund would be and added other areas like emerging market , some high yield , international , etc . to it . the model also shortened up the short end a lot as short term bond funds have been getting hit hard with the short term rate increases . so it pays to stay even shorter .
to be honest i stopped spending time on bogleheads along time ago . many are still entrenched in old school thinking .
what time frame is the planning for ? if it is not all long term money then bonds are a good idea . but if it is still money in the accumulation stage and still not needed for 15 years bonds are an added weight for no reason .
bond funds can be down a bit if rates rise but the idea is things usually reverse on a dime when stocks crap the bed . then high quality bonds tend to rise .
think about it . bonds are used as a source of short term money for spending . if not then the short term dips are meaningless so mitigating them and permanently hurting your long term gains is illogical .
perhaps you want to take that back to the bogleheads .
Just playing Devil's advocate.
What about the transfer of stock funds to bonds when markets appear high (currently?)? I see this used as reasoning by many. They claim taking 10-20% of stock funds that have had great gains and transition that to bonds when markets appear high, only to re-enter that 10-20% of money in bonds back to stocks on a dip. This mitigates loss potential, helps lock in some gains of high grossing funds and promotes a better return on investment when re-entered into the market on a dip.
I'm currently 32 years old and sit 95/5 in ratio, however.
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