Treasury Direct versus Vanguard Brokerage for 30 year treasuries?

[fnord123]

I looked at the FAQ and didn't see a recommendation on whether to use Treasury Direct or Vanguard Brokerage (or another broker) for buying/selling long term treasuries.

I thought TD had fees for transferring securities (treasuries) in/out, but I can't find anything on their website: http://www.treasurydirect.gov/indiv/hel ... rnMore.htm

Assuming one has free brokerage purchases @ Vanguard (e.g. through flagship etc.) is there any benefit using one versus the other?

[MadMoneyMachine]

I think one of the factors you may wish to consider when buying LT Bonds directly is that they would best be held in a tax-advantaged account (IRA). So opening a Vanguard Brokerage account for your IRA and buying the LT Bonds there is the way to go.

[pplooker]

I am so glad someone asked this question.  I currently just buy TLT and don't worry about it, but the thought has occurred to me I might want to switch at a certain point.

[craigr]

Many discount brokerage fees are small for purchasing bonds directly. Once you own the bonds you don't have recurring expense ratios each year. So while there may be a fee up front, as you hold the bonds for 5-10 years before selling you probably will come out ahead. If you do more bulk purchases of the bonds (say quarterly or annually for rebalancing) the cost ratio declines even further.

Another advantage of holding the bonds directly is you know exactly what you have. You don't have to worry about a fund manager making a mistake and impacting performance. It's just one less problem.

As MediumTex reminded me in another post, many 401(k)s offer brokerage windows so it may be possible to buy bonds directly for retirement accounts on the secondary market. It may be worth checking with the 401(k) plan admin to see what is offered.

[Jan Van]

Hi y'all, newbie here!

I was just looking at the "bond trading desk" in my Vanguard account, and I must say it boggles me. Does anybody have any pointers on how to use this?
It also looked like i'd have to pay a $40 fee for buying bonds?

Thanks for any info!

jan

[MediumTex]

Hi y'all, newbie here!

I was just looking at the "bond trading desk" in my Vanguard account, and I must say it boggles me. Does anybody have any pointers on how to use this?
It also looked like i'd have to pay a $40 fee for buying bonds?

Thanks for any info!

jan

Basically, just pick the longest duration 30 year bond available and buy as many as you need to fill out your PP LT treasury allocation.  You will pay $40 for the whole transaction if you do it online.  Interest is paid twice a year.

Maybe do the first transaction over the phone and get all of your questions answered.  It's not any harder than buying stocks online once you've done it.

[Jan Van]

Thanks MT, sounds simple enough...

I just wanted to try it out, buy maybe one or a few to see how it goes. But at $40 for a transaction I didn't want to do that!
Bought some TLT instead today...

jan

[SmallPotatoes]

I'm echoing jmourik about using Vanguard Bond Desk vs. a fund like VUSTX. I think funds are easier (though fees are potentially higher) to manage and I like the idea of Admiral Shares and Flagship perks down the road. Anything wrong with this plan?

[craigr]

The perks of Admiral status really are not that relevant. The Vanguard ETFs have the same expense ratios as Admiral status by and large for instance and even the non-Admiral fund shares are falling in expenses over time.

Holding the bonds directly through the bond desk is better if you can do it. It really is not a hassle as they just sit there giving you interest and you buy/sell them very seldom. The benefit though is you know you own the bonds and are not risking some bond manager doing something dumb with your money trying to boost performance to make themselves look good. Lastly, there is no expense ratio involved when you hold the bonds directly so you save money over time not having to pay someone 0.25% a year to sit on Treasury bonds for you.

Overall, it's just one less thing to go wrong if you can keep the transaction fees in line by doing larger block bond purchases. Any LT bond fund is going to be inferior to direct bond ownership in some way or another. If that's all you can do that's fine of course. However, if you have the simple option of using the bond desk and doing so for reasonable costs, then by all means use the bond desk and skip the fund.

[Jan Van]

... and I like the idea of Admiral Shares and Flagship perks down the road.

I'd think that holding bonds in your Vanguard account would count towards Flagship status, not sure though. I mean, I own non-vanguard ETFs in my brokerage but it still counts towards my total holdings. I'd give Vanguard a call and ask if you want to know for sure.