Building bonds portion in a real world
Posted: Tue May 11, 2010 2:22 pm
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?
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?