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Author: AcmeFool Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75813  
Subject: Re: Thoughts on Bond Funds Date: 8/7/2011 8:45 AM
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I've got around 67% of our overall portfolio in fixed assets with Vanguard, with the rest in equity funds at Vanguard. The fixed allocation is about two-third intermediate investment grade, the balance in short-term investment grade. I don't really know what else to do with our fixed assets. I too am not interested in buying individual bonds, nor am I interested in buying bunches of CDs from a bank/banks. Our fixed allocation is a more than minimal seven-figure amount, so bonds funds at Vanguard seem to make the most sense for our fixed allocation. The duration is fairly short for both the short and intermediate funds. I'm retired, so protecting an income stream and our portfolio are my primary concerns right now. Good luck.

Thanks for your reply. This fits in with my mentality a little more, though our situations are quite different. While you are retired, I am 39 (wife is 34) and a ways off from retirement. My goal is to reach retirement in 19 years, when my daughter should be graduating from college.

Many here would say I don't need to bother with fixed income, but I don't really agree. I think it is an appropriate part of all portfolios, gradually increasing until retirement.

In our case, we don't have access to the funds you are using in our 401(k) or 403(b) accounts. But we do have access to the Total Bond Market Index fund which seems to be pretty similar to the intermediate investment grade fund.

We will be in these investments for the very long-term. I know people have shown how a rising interest-rate environment leads to NAV losses that are not fully compensated by the higher yields, even when held to "average maturity". Additionally, they have shown that a CD or Bond Ladder held to maturity will outperform in this situation. But it is also a lot more work and not necessarily something I want to worry about!

Other asset classes are much easier for me to handle than Fixed Income. But I think I have to keep life as easy as possible, even if it means leaving some long-term return on the table.

Thanks again for your thoughts.

Acme
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