Author Topic: help please with bond choices in 401k  (Read 2621 times)

FSL

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help please with bond choices in 401k
« on: December 15, 2014, 02:12:56 PM »
Hello! Relatively new mustachian here. Long time lurker, but only just started posting.

I'm looking to get perspective on the bond choices in my 401k. I'm currently 30, so only a small portion of my investments are in bonds, but the 401k just introduced some new options.

Currently, my funds are in Pimco Total Return Fund PTTRX Institutional Class as that previously was the only bond fund offered. They've just added Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX), Vanguard Inflation-Protected Securities Fund Institutional Shares (VIPIX), and JPMCB High Yield Fund CF Class. I've included expense ratio details below:

Pimco Total Return Fund PTTRX: 0.46%
Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX): 0.05%
Vanguard Inflation-Protected Securities Fund Institutional Shares (VIPIX): 0.07%
JPMCB High Yield Fund CF Class: 0.51%

What do you recommend I should put my contribution in (again, only about 10-15% of my total balance)? How would you recommend that my contribution change over time (i.e. all in vanguard total bond now, but diversify with high yield/tips as I get older)?

mxt0133

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Re: help please with bond choices in 401k
« Reply #1 on: December 15, 2014, 03:21:02 PM »
I personally have it all on Vanguard Total Bond Market Index Fund Institutional Plus Shares (VBMPX): 0.05%, because of the expense ratio.  I won't be touching it for a decade or two and with the that time horizon i'm comfortable with a total bond market index because I suck at knowing which type of bonds will do well in the near term.

FSL

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Re: help please with bond choices in 401k
« Reply #2 on: December 15, 2014, 08:42:07 PM »
Thanks! That's where I'm leaning as well, but I wasn't sure if it was worth putting some into the high yield as well for diversification.

ClaycordJCA

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Re: help please with bond choices in 401k
« Reply #3 on: December 15, 2014, 10:09:09 PM »
High yield bonds are actually more highly with stocks than investment grade bonds. So, what is the purpose of your bond funds?  If to diversify from stocks, don't put much (if any) in high yield bonds.

hodedofome

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Re: help please with bond choices in 401k
« Reply #4 on: December 16, 2014, 08:57:45 AM »
I don't see the purpose of high yield bonds. They pretty much act like stocks but generally have lower returns. I also question whether TIPS will do what they promise.

In your situation, you just have to determine if PIMCO is going to out-perform the total bond index, or not.

wtjbatman

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Re: help please with bond choices in 401k
« Reply #5 on: December 16, 2014, 09:42:41 AM »
If you're in the accumulation stage you want total bond fund (VBMPX). You're not in or near retirement so you don't need TIPS, and you aren't seeking income so you don't need high yield bonds (which, as others have already pointed out, have a higher correlation with stocks anyway which is something you don't want if you're holding bonds).

FSL

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Re: help please with bond choices in 401k
« Reply #6 on: December 16, 2014, 02:20:02 PM »
Thanks for the points about high yield bonds! It sounds like I should move the money into the vanguard total bond fund, given the lower expense ratio. Thanks everyone!