Building bonds portion in a real world

[foglifter]

The previous thread touched a bit various possibilities of investment vehicles for the bonds portion of PP and, inspired by that, I'd like to discuss a practical question: how could the bonds portion be constructed in a real world of limited investment choices? As far as PP is concerned, my 401(k) offers an index TSM fund, which I use as a part of the stocks portion, and a few actively managed Fidelity bond funds, none of which of course able to play the role of LT Treasuries (in fact, the opposite is true - they all tanked in 2008 thanks to MBS and high-yield-laden portfolios ). Here are the details of the available fixed income options (with expense ratios):

Bond funds:
Fidelity Short-Term Bond (FSHBX) (0.45)
Fidelity Investment Grade Bond (FBNDX) (0.45)
Fidelity Intermediate Bond (FTHRX) (0.44)
Fidelity Total Bond (FTBFX) (0.45)

Fixed Income:
Fidelity Retirement Money Market Portfolio (FRTXX) (0.42)

I can split the bonds portion between 401(k) and IRA, so I think I could use any decent LT Treasuries ETF or fund in my IRA and perhaps allocate another part in the 401(k). Perhaps I could use FTBFX and FSHBX in 401(k) and TLT in IRA, but in this case the %% should be probably tweaked, perhaps the overall bonds portion should grow higher than 25%. The IRA space is precious as I use it for gold and foreign equities, so I'm trying to come up with reasonable %% of specific bond funds in 401(k) and IRA.

On the other hand, my 401(k) makes  roughly a half of my overall portfolio. Which means I have to fit at least 2 asset classes of PP into it. Perhaps, instead of bonds, I could keep stocks (TSM) and cash (ST bond fund) in it and buy TLT in my IRA for the bonds portion...

Could you recommend a reasonable allocation?

[Quasimodo]

Using your 401k for stocks and cash, and your IRA for gold and long term treasury bonds seems the best option to me.

It looked as though none of the Fidelity bond funds were treasury-only anyway. Short or medium term corporate bonds wouldn't be a good implementation of the PP.

Good luck!

John

[pplooker]

LT treasuries are surprisingly hard to do when you're an accumulator because a lot of 401k plans seem to not offer then in any form.

My solution has been to just bite the bullet and buy TLT in a separate tax advantaged discount brokerage account.  I've thought about shifting things around and buying VUSTX in my Vanguard account instead, which isn't quite up to snuff but it might be a lot easier.