For my situation, T Rowe Price recommends an investment allocation of 40% stocks, 40% bonds, and 20% short-term securities (presumably MMF or short-term bonds. I prefer mutual funds over individual securities. Within the 40% bond category, they recommend 28% investment grade, 7% junk, and 5% international. How do I go about selecting the specific bond funds for these three? We're talking about $40k for the bond category. Would three mutual funds be appropriate, one each for investment grade, junk, and international? I guess a broader question is, since bond prices are so high, should I hold off putting ANYTHING into bond funds for awhile?Personally, I think it's somewhat silly to consider diversifying your bond holdings into junk and international on such a small balance. Essentially, you're looking at $7k in junk and $5k in international. With these amounts, not only are you near many funds' minimum balance requirements, but the potential gains you stand to make are relatively small. If, somehow, you made an additional 2% on each of these over an ordinary domestic bond fund (unlike stocks, when it comes to bonds 2% is a significant difference), you're only looking at a gain of $240. This might easily be eaten up in additional costs for such funds. Far simpler would be to just buy a single domestic bond fund and leave it at that. This also makes your job of rebalancing the portfolio easier.I notice your message subject reads "Early retirement". If you are indeed contemplating early retirement on this portfolio as it stands, you might want to reconsider. At $40k for a 40% bond position, this would suggest the total portfolio is only $100k. This, I suspect, would be extremely difficult to retire on for the vast majority of people.
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