Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

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Topic Author
sw5318
Posts: 12
Joined: Tue Jan 29, 2019 5:51 pm

Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by sw5318 »

Hello!
-Currently in early thirties.
-Portfolio $300k
-Asset Allocation: 90% equities/10% Bonds
Currently the $30k bond investment is in the 401k invested in VBTLX (Vanguard Total Bond Market Index Fund)

Questions:
1) I discovered TIPS from this forum recently and they appear to provide significantly more return than VBTLX. Should I liquidate the VBTLX position and replace them with TIPS instead?
2) Assuming the answer to question 1 is yes, what retirement vehicle should I buy the TIPS in? 401k, Roth IRA, Traditional IRA, Taxable are all available options.

Doing more research on TIPS as I just recently discovered them, but hoping the forum would have some advice for me. Thank you in advance!
mikejuss
Posts: 2833
Joined: Tue Jun 23, 2020 1:36 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by mikejuss »

Do nothing. Stay the course. VBTLX (in, ideally, a 401[k]) is fine.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
Topic Author
sw5318
Posts: 12
Joined: Tue Jan 29, 2019 5:51 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by sw5318 »

mikejuss wrote: Sat Dec 04, 2021 9:37 pm Do nothing. Stay the course. VBTLX (in, ideally, a 401[k]) is fine.
Sounds good! Thank you for the reply! I only recently added bonds to the portfolio, so not 100% confident I picked the correct retirement vehicle/bond fund, but it sounds like VBTLX in the 401k is fine. Thanks again!
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by ivgrivchuck »

sw5318 wrote: Sat Dec 04, 2021 9:34 pm Hello!
-Currently in early thirties.
-Portfolio $300k
-Asset Allocation: 90% equities/10% Bonds
Currently the $30k bond investment is in the 401k invested in VBTLX (Vanguard Total Bond Market Index Fund)

Questions:
1) I discovered TIPS from this forum recently and they appear to provide significantly more return than VBTLX. Should I liquidate the VBTLX position and replace them with TIPS instead?
2) Assuming the answer to question 1 is yes, what retirement vehicle should I buy the TIPS in? 401k, Roth IRA, Traditional IRA, Taxable are all available options.

Doing more research on TIPS as I just recently discovered them, but hoping the forum would have some advice for me. Thank you in advance!
I-bonds are currently paying 7.2%. You can buy $10k now and $10k in January. $5k from tax return. They are currently TIPS on steroids.

I believe they might be an ideal match for your portfolio.

Other than that for a young investor I see no need to switch from VBTLX to TIPS, the difference is insignificant.
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
mikejuss
Posts: 2833
Joined: Tue Jun 23, 2020 1:36 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by mikejuss »

sw5318 wrote: Sat Dec 04, 2021 9:45 pm
mikejuss wrote: Sat Dec 04, 2021 9:37 pm Do nothing. Stay the course. VBTLX (in, ideally, a 401[k]) is fine.
Sounds good! Thank you for the reply! I only recently added bonds to the portfolio, so not 100% confident I picked the correct retirement vehicle/bond fund, but it sounds like VBTLX in the 401k is fine. Thanks again!
You'll be fine; don't overthink it.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
Topic Author
sw5318
Posts: 12
Joined: Tue Jan 29, 2019 5:51 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by sw5318 »

ivgrivchuck wrote: Sat Dec 04, 2021 9:46 pm
sw5318 wrote: Sat Dec 04, 2021 9:34 pm Hello!
-Currently in early thirties.
-Portfolio $300k
-Asset Allocation: 90% equities/10% Bonds
Currently the $30k bond investment is in the 401k invested in VBTLX (Vanguard Total Bond Market Index Fund)

Questions:
1) I discovered TIPS from this forum recently and they appear to provide significantly more return than VBTLX. Should I liquidate the VBTLX position and replace them with TIPS instead?
2) Assuming the answer to question 1 is yes, what retirement vehicle should I buy the TIPS in? 401k, Roth IRA, Traditional IRA, Taxable are all available options.

Doing more research on TIPS as I just recently discovered them, but hoping the forum would have some advice for me. Thank you in advance!
I-bonds are currently paying 7.2%. You can buy $10k now and $10k in January. $5k from tax return. They are currently TIPS on steroids.

I believe they might be an ideal match for your portfolio.

Other than that for a young investor I see no need to switch from VBTLX to TIPS, the difference is insignificant.
I actually thought TIPS and I-bonds were the same thing. Haha... But it sounds like they are actually different?

And yes, the 7.2% interest rate I-bonds are paying is what inspired me to create this thread. I just feel extremely uniformed on the bond side of the equation vs. equities, so I wanted to make sure I wasn't investing in an inferior product with VLBTX. Probably just going to stick w/ the VBLTX for the simplicity and my general lack of understanding on the I-bond. Thank you for your reply!
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by ivgrivchuck »

sw5318 wrote: Sat Dec 04, 2021 10:20 pm
ivgrivchuck wrote: Sat Dec 04, 2021 9:46 pm
sw5318 wrote: Sat Dec 04, 2021 9:34 pm Hello!
-Currently in early thirties.
-Portfolio $300k
-Asset Allocation: 90% equities/10% Bonds
Currently the $30k bond investment is in the 401k invested in VBTLX (Vanguard Total Bond Market Index Fund)

Questions:
1) I discovered TIPS from this forum recently and they appear to provide significantly more return than VBTLX. Should I liquidate the VBTLX position and replace them with TIPS instead?
2) Assuming the answer to question 1 is yes, what retirement vehicle should I buy the TIPS in? 401k, Roth IRA, Traditional IRA, Taxable are all available options.

Doing more research on TIPS as I just recently discovered them, but hoping the forum would have some advice for me. Thank you in advance!
I-bonds are currently paying 7.2%. You can buy $10k now and $10k in January. $5k from tax return. They are currently TIPS on steroids.

I believe they might be an ideal match for your portfolio.

Other than that for a young investor I see no need to switch from VBTLX to TIPS, the difference is insignificant.
I actually thought TIPS and I-bonds were the same thing. Haha... But it sounds like they are actually different?

And yes, the 7.2% interest rate I-bonds are paying is what inspired me to create this thread. I just feel extremely uniformed on the bond side of the equation vs. equities, so I wanted to make sure I wasn't investing in an inferior product with VLBTX. Probably just going to stick w/ the VBLTX for the simplicity and my general lack of understanding on the I-bond. Thank you for your reply!
If you want extreme simplicity then VBTLX is the right choice.
I-bonds are probably the optimal choice.
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
mikejuss
Posts: 2833
Joined: Tue Jun 23, 2020 1:36 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by mikejuss »

ivgrivchuck wrote: Sat Dec 04, 2021 10:24 pm
sw5318 wrote: Sat Dec 04, 2021 10:20 pm
ivgrivchuck wrote: Sat Dec 04, 2021 9:46 pm
sw5318 wrote: Sat Dec 04, 2021 9:34 pm Hello!
-Currently in early thirties.
-Portfolio $300k
-Asset Allocation: 90% equities/10% Bonds
Currently the $30k bond investment is in the 401k invested in VBTLX (Vanguard Total Bond Market Index Fund)

Questions:
1) I discovered TIPS from this forum recently and they appear to provide significantly more return than VBTLX. Should I liquidate the VBTLX position and replace them with TIPS instead?
2) Assuming the answer to question 1 is yes, what retirement vehicle should I buy the TIPS in? 401k, Roth IRA, Traditional IRA, Taxable are all available options.

Doing more research on TIPS as I just recently discovered them, but hoping the forum would have some advice for me. Thank you in advance!
I-bonds are currently paying 7.2%. You can buy $10k now and $10k in January. $5k from tax return. They are currently TIPS on steroids.

I believe they might be an ideal match for your portfolio.

Other than that for a young investor I see no need to switch from VBTLX to TIPS, the difference is insignificant.
I actually thought TIPS and I-bonds were the same thing. Haha... But it sounds like they are actually different?

And yes, the 7.2% interest rate I-bonds are paying is what inspired me to create this thread. I just feel extremely uniformed on the bond side of the equation vs. equities, so I wanted to make sure I wasn't investing in an inferior product with VLBTX. Probably just going to stick w/ the VBLTX for the simplicity and my general lack of understanding on the I-bond. Thank you for your reply!
If you want extreme simplicity then VBTLX is the right choice.
I-bonds are probably the optimal choice.
My own take: there will be a minimal difference in return between iBonds and VBTLX over a several-decades period.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by ivgrivchuck »

mikejuss wrote: Sat Dec 04, 2021 10:28 pm
ivgrivchuck wrote: Sat Dec 04, 2021 10:24 pm
sw5318 wrote: Sat Dec 04, 2021 10:20 pm
ivgrivchuck wrote: Sat Dec 04, 2021 9:46 pm
sw5318 wrote: Sat Dec 04, 2021 9:34 pm Hello!
-Currently in early thirties.
-Portfolio $300k
-Asset Allocation: 90% equities/10% Bonds
Currently the $30k bond investment is in the 401k invested in VBTLX (Vanguard Total Bond Market Index Fund)

Questions:
1) I discovered TIPS from this forum recently and they appear to provide significantly more return than VBTLX. Should I liquidate the VBTLX position and replace them with TIPS instead?
2) Assuming the answer to question 1 is yes, what retirement vehicle should I buy the TIPS in? 401k, Roth IRA, Traditional IRA, Taxable are all available options.

Doing more research on TIPS as I just recently discovered them, but hoping the forum would have some advice for me. Thank you in advance!
I-bonds are currently paying 7.2%. You can buy $10k now and $10k in January. $5k from tax return. They are currently TIPS on steroids.

I believe they might be an ideal match for your portfolio.

Other than that for a young investor I see no need to switch from VBTLX to TIPS, the difference is insignificant.
I actually thought TIPS and I-bonds were the same thing. Haha... But it sounds like they are actually different?

And yes, the 7.2% interest rate I-bonds are paying is what inspired me to create this thread. I just feel extremely uniformed on the bond side of the equation vs. equities, so I wanted to make sure I wasn't investing in an inferior product with VLBTX. Probably just going to stick w/ the VBLTX for the simplicity and my general lack of understanding on the I-bond. Thank you for your reply!
If you want extreme simplicity then VBTLX is the right choice.
I-bonds are probably the optimal choice.
My own take: there will be a minimal difference in return between iBonds and VBTLX over a several-decades period.
VBTLX is expected to return more than i-bonds in the very long term since it has more risk than i-bonds.
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
mikejuss
Posts: 2833
Joined: Tue Jun 23, 2020 1:36 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by mikejuss »

ivgrivchuck wrote: Sat Dec 04, 2021 10:50 pm
mikejuss wrote: Sat Dec 04, 2021 10:28 pm
ivgrivchuck wrote: Sat Dec 04, 2021 10:24 pm
sw5318 wrote: Sat Dec 04, 2021 10:20 pm
ivgrivchuck wrote: Sat Dec 04, 2021 9:46 pm

I-bonds are currently paying 7.2%. You can buy $10k now and $10k in January. $5k from tax return. They are currently TIPS on steroids.

I believe they might be an ideal match for your portfolio.

Other than that for a young investor I see no need to switch from VBTLX to TIPS, the difference is insignificant.
I actually thought TIPS and I-bonds were the same thing. Haha... But it sounds like they are actually different?

And yes, the 7.2% interest rate I-bonds are paying is what inspired me to create this thread. I just feel extremely uniformed on the bond side of the equation vs. equities, so I wanted to make sure I wasn't investing in an inferior product with VLBTX. Probably just going to stick w/ the VBLTX for the simplicity and my general lack of understanding on the I-bond. Thank you for your reply!
If you want extreme simplicity then VBTLX is the right choice.
I-bonds are probably the optimal choice.
My own take: there will be a minimal difference in return between iBonds and VBTLX over a several-decades period.
VBTLX is expected to return more than i-bonds in the very long term since it has more risk than i-bonds.
So the people on this board who are drunk on iBonds need a shot of ice water. :beer
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
ivgrivchuck
Posts: 1672
Joined: Sun Sep 27, 2020 6:20 pm

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by ivgrivchuck »

mikejuss wrote: Sat Dec 04, 2021 10:58 pm
ivgrivchuck wrote: Sat Dec 04, 2021 10:50 pm VBTLX is expected to return more than i-bonds in the very long term since it has more risk than i-bonds.
So the people on this board who are drunk on iBonds need a shot of ice water. :beer
Not so fast. The fact that asset A has a higher expected return than asset B in the very long term doesn't directly mean that asset A is a better investment than asset B. Otherwise 100% UPRO would be the only logical investment option :beer
25% VTI | 25% VXUS | 12.5% AVUV | 10% AVDV | 2.5% VWO | 25% BND/SCHR/SCHP
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by dbr »

You are not going to magically enhance your wealth, your retirement income, or anything else trying to play games that you picked a total bond fund, a TIPS fund, or put everything in I bonds. It is perfectly reasonable to hold any of those or perhaps to hold maybe half your fixed income TIPS and half in nominal bonds. Naturally fixed income tends to be better held in tax protected accounts except that I bond interest is tax deferred for 30 years. If that 30 years hits at a time when you have a high tax rate you can have also paid off the taxes along the way.

Disclaimer: I hold half of fixed income in intermediate Treasuries and half in intermediate TIPS. That doesn't mean anyone else should.
Robot Monster
Posts: 4215
Joined: Sun May 05, 2019 11:23 am

Re: Bond Question: Substitute VBTLX (Vanguard Total Bond Market Index) for TIPS?

Post by Robot Monster »

mikejuss wrote: Sat Dec 04, 2021 10:58 pm So the people on this board who are drunk on iBonds need a shot of ice water. :beer
How can you not be drunk on I Bonds when both nominal bonds and TIPS suffer from 'financial repression’ -- the suppression of interest rates below the rate of inflation. Only I Bonds haven't been dragged into the morass. They're free lunch. I'm not only drunk on I Bonds, I'm naked cartwheels drunk on them.
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