Bogle wiki seems to think ibonds make sense to bridge the gap to social security as they are taxed as regular income when redeemed. I'm assuming this is how you see them in your fixed income portfolio. And also I guess it makes sense when you run out of room in tax sheltered account.wetgear wrote: ↑Mon May 03, 2021 2:21 pmIt does add some complexity but I personally think Treasury Direct is pretty easy to navigate so it's not significant complexity IMO. iBonds and EE Bonds both have some features you won't find in other investments (differed fed tax and no state tax) and they have attractive rates (EE bonds @ >20 years) in comparison to what else can be currently purchased so I find them to be an important part of a diversified fixed income portion of my AA. If you have the means and the room in your fixed income portion of your AA I think buying the max of each yearly usually makes sense.DesertInvestor wrote: ↑Sat May 01, 2021 7:23 pmI have way more in cash than I need so emergency fund probably needs to be cut down.wetgear wrote: ↑Fri Apr 30, 2021 3:59 pm Why not have a healthy emergency fund in cash, buy all the available iBonds (starting on Monday they will be paying much better than TIPS) each year and the rest in Total Bond? You're probably too young to go so hard on TIPS, let your equity allocation help protect you from inflation.
ibonds is a good idea, but its such a small amount each year not sure its worth complexity?
Bond Portfolio ideas
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Re: Bond Portfolio ideas
Re: Bond Portfolio ideas
DesertInvestor wrote: ↑Tue May 04, 2021 3:13 pmYeah bridging the gap to SS is one of the reasons. I also needed more room for bonds in my portfolio outside of the limited room I have in my 401k and didn't want to go too hard on munis. The third reason is sort of a roll your own pension where if you buy the max ibonds and EE bonds every year a married couple will get 40k (upon EE maturity) + 20k inflation protected each year.Bogle wiki seems to think ibonds make sense to bridge the gap to social security as they are taxed as regular income when redeemed. I'm assuming this is how you see them in your fixed income portfolio. And also I guess it makes sense when you run out of room in tax sheltered account.
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Re: Bond Portfolio ideas
The way I see it is it’s a way to get yield and avoid the interest rate risk of municipal bonds?
You can still contribute the max to both EE bonds and ibonds, so it should be 20k total per individual investor?
You can still contribute the max to both EE bonds and ibonds, so it should be 20k total per individual investor?
Re: Bond Portfolio ideas
Have only invested in bonds the last couple of years (age 48)...still learning. Until now, I have been BND 80% and BNDX 20%. I maintain my existing BND / BNDX for ballast and rebalancing. Given the current environment, new monies are now directed toward STABLE VALUE (2% yield).
TIPS /IBONDS / EE BONDS - just not enamored with the additional complexity and perceived hassle. Are people making strategic investments in these or being more tactical? If interest rates continue to rise beyond current, will people simply sell at certain levels and reinvest at higher interest rates (today's "attractive rates" are tomorrow's "meh"?)
LTT - when I started investing in bonds, I decided I had missed the fun and didn't want to chase performance. I believe LTTs could be in my longer term future...but currently not worth the price of admission for me at current rates and perceived interest rate risk.
TIPS /IBONDS / EE BONDS - just not enamored with the additional complexity and perceived hassle. Are people making strategic investments in these or being more tactical? If interest rates continue to rise beyond current, will people simply sell at certain levels and reinvest at higher interest rates (today's "attractive rates" are tomorrow's "meh"?)
LTT - when I started investing in bonds, I decided I had missed the fun and didn't want to chase performance. I believe LTTs could be in my longer term future...but currently not worth the price of admission for me at current rates and perceived interest rate risk.
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Re: Bond Portfolio ideas
Here is my current Fixed Income Allocation (50% of overall financial assets)
57% SSgA Short Term US Govt/Credit Bond (401k)
25% HYSA Cash (Taxable) Half @ HM Bradley at 3.5% and the rest at Marcus @ 0.6%
12% VIPIX - Vanguard Inflation-Protected (401k)
5% I-Bonds
1% VBIRX
57% SSgA Short Term US Govt/Credit Bond (401k)
25% HYSA Cash (Taxable) Half @ HM Bradley at 3.5% and the rest at Marcus @ 0.6%
12% VIPIX - Vanguard Inflation-Protected (401k)
5% I-Bonds
1% VBIRX
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Re: Bond Portfolio ideas
Nice article. I have generally simplified to Total Bond and it has worked well. I have family and friends living from dividends (including Total bond) each month. It works and will continue to work.DesertInvestor wrote: ↑Fri May 07, 2021 5:44 pm https://advisors.vanguard.com/insights/ ... itsofbonds
Nice article put out by vanguard.
Tony
John C. Bogle: “Simplicity is the master key to financial success."
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Re: Bond Portfolio ideas
Still struggling with how this is similar to stock market and prices reflect expected rate rises. But if there is a rate rise, bond prices won't go down? Its baked into price already and won't affect current bond funds? I don't know if that is true.
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Re: Bond Portfolio ideas
Thanks for the link.DesertInvestor wrote: ↑Fri May 07, 2021 5:44 pm https://advisors.vanguard.com/insights/ ... itsofbonds
Nice article put out by vanguard.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
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Re: Bond Portfolio ideas
When you say “stable value,” what exactly do you mean? I’m a bit of a beginner and have a hard time wrapping my head around certain lingo and bonds in general.JimInIllinois wrote: ↑Fri Apr 30, 2021 8:30 pm I can't see any reason to hold cash when you have access to a stable value fund. Stable value has a much higher return (for good funds, today) with no volatility, so basically a free lunch even without FDIC insurance.
See also https://www.bogleheads.org/wiki/Placing ... ed_account
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Re: Bond Portfolio ideas
A stable value fund is frequently offered in a 401k or similar institutional retirement account. It is typically backed by insurance company contracts sort of like MYGAs which are not FDIC insured but relatively safe and the account holders' principal does not fluctuate. The advantage compared to a money market fund is they offer much better interest yields, usually 2-3% better.RetiOpening wrote: ↑Fri Feb 04, 2022 1:43 pmWhen you say “stable value,” what exactly do you mean? I’m a bit of a beginner and have a hard time wrapping my head around certain lingo and bonds in general.JimInIllinois wrote: ↑Fri Apr 30, 2021 8:30 pm I can't see any reason to hold cash when you have access to a stable value fund. Stable value has a much higher return (for good funds, today) with no volatility, so basically a free lunch even without FDIC insurance.
See also https://www.bogleheads.org/wiki/Placing ... ed_account
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Re: Bond Portfolio ideas
RetiOpeningRetiOpening wrote: ↑Fri Feb 04, 2022 1:43 pmWhen you say “stable value,” what exactly do you mean? I’m a bit of a beginner and have a hard time wrapping my head around certain lingo and bonds in general.JimInIllinois wrote: ↑Fri Apr 30, 2021 8:30 pm I can't see any reason to hold cash when you have access to a stable value fund. Stable value has a much higher return (for good funds, today) with no volatility, so basically a free lunch even without FDIC insurance.
See also https://www.bogleheads.org/wiki/Placing ... ed_account
See the wiki page that describes stable value funds.
https://www.bogleheads.org/wiki/Stable_value_fund
Regards,
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Re: Bond Portfolio ideas
TIPS would outperform nominal Treasuries with unexpected inflation. They protect against inflation all the time whether inflation is expected or unexpected. I agree they are somewhat overrated and there is a lot of interest right now that smacks of market timing but I don't think it is fair to say they are for only unexpected inflation. If the market expects 7% inflation, and inflation is 7%, TIPS will return 7%.RetiredCSProf wrote: ↑Fri Apr 30, 2021 12:13 pm I do not understand the BH fascination with TIPS, which represent a very small portion of all bonds. TIPS are for unexpected inflation; it sounds like your concern is with expected inflation.
How will inflation affect you? If retired and relying on income from your bond portfolio (e.g., no pension) then inflation may be a concern.
Why do you include "cash" in your bond AA? To me, a bond portfolio of 1/3 total bond, 1/3 intermediate TIPS, and 1/3 cash is actually:
1/2 total bond
1/2 intermediate TIPS
I think it is important to ask what risks the investor is seeking to protect against when it comes to the bond allocation. Usually the first answer that comes to mind is market risk and volatility. Market risk is typically deflationary so you would not want negative return from TIPS in that situation. IMO the majority of the bond portfolio should be intermediate Treasuries or total bond market.
If the investor wishes some amount to protect against inflation, they should realize that TIPS are not optimal for the primary objective. In terms of reducing drawdown and maximizing risk adjusted return, Treasuries have done best, followed by total bond and TIPS last.
Portfolio 1 = 60/40 with Total bond
2 = 60/40 with Intermediate Treasury
3 = 60/40 with TIPS
https://imgur.com/a/mSL82eE