Author Topic: 60/40 Portfolio , do you do something different with the 40 in Bonds  (Read 2180 times)

soccerluvof4

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So I am roughly 60% stocks all in taxable accounts and Actually really more like 25% in Bonds all in 401k and 15% in cash. I only bring this question up because there is sense to it since we have had a 40 year Bond bull run basically. If Fire'd and withdrawing 3% ish 56 years old should one change some bonds in 401 to stocks or as Collins says just ride it out. Seems to me it makes sense to still ride it out because if bonds drop they still would drop slower than bonds.

4tify

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #1 on: March 01, 2021, 09:29:08 AM »
I allocate 5% to alternatives, which is a mash up of commodities & real estate, TIPS. Mainly that’s to hedge against unexpected inflation. Lots of people say stocks are the better bet.

Then 5% to cash, which is my buffer for sequence of return risk for when I pull the trigger. That is just over 2 years expenses. So bonds actually make up 30% of total portfolio.

I’m over 50 so more conservative than most here and not chasing big returns. Enough is good enough for me. I should also add I’m a renter in HCOL and have no equity in primary residence.

MustacheAndaHalf

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #2 on: March 01, 2021, 09:30:36 AM »
Seems to me it makes sense to still ride it out because if bonds drop they still would drop slower than bonds.
I think you mean "bonds would still drop slower than stocks"?

In a crash, yes - everything tends to be correlated, with total bond funds falling more slowly than total stock market funds.  Overall, though, bonds aren't very correlated with stocks, which is why people diversify with them.

I personally don't own bonds right now, but if I had to pick, I'd go with short-term treasury bonds.  Above, I actually oversimplified - during the March 2020 crash, short-term treasury bonds went up in value - everything else was being sold to purchase short-term treasuries.

SpareChange

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #3 on: March 01, 2021, 11:57:01 AM »
Almost all of my fixed income is in the stable value fund in my 403b. It pays a guaranteed rate that changes once a year (2.15% for 2021). I started moving funds from total bond to it around the time the yield on the TB fund moved lower than the stable value. 

ChpBstrd

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #4 on: March 01, 2021, 02:26:44 PM »
My baseline allocation involves hedging with options instead of hoping bonds/cash will reduce SORR.

In my experience, a 95% stock, 5% option allocation (a collar strategy, to be specific) can have the volatility of a 50/50 allocation and, unlike the 50/50, have an un-breachable floor on returns.

tooqk4u22

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #5 on: March 02, 2021, 05:52:49 PM »
After I FIRE'd in June'19 I increased my AA to bonds (went to 55/45 - sort of the bond tent approach), which worked out well during the covid fall, and lowered my International exposure a bit.   I rebalanced up and down as the market fell then came back in 2020.   At the end of last year I took another 5% out of stocks and moved them to bonds/cash so now about 50/50.  Also during 2020 I moved all my bonds to cash, ultra-short and short duration.  I have maybe 10% of my bonds in intermediate duration.   Again served me well when rates went up.   So the only thing I did out of the ordinary was the taking the extra 5% of the table.   

The funny thing is that I just went back and calculated what my current accounts would be if I did nothing and the results are that I would have almost exactly the amount I currently have (and by almost exactly I mean within $300 +/-).  That is surprising and it came with a whole lot less volatility.   Seriously, I would have thought I would have been far behind.  Sure I am far behind 100% equities, but I would have never been 100% when I FIRE'd so that is not a fair comparison.   This blows my mind.   Off topic, sorry. 

Anyway, I am sticking with low duration for now and my AA (rebalance as often as needed), its probably too conservative and not for everybody/most but I sleep well at night.   

Long dated duration scares me more than crazy stock prices, but when the first comes in so will the second. 

Radagast

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #6 on: March 02, 2021, 07:52:50 PM »
There isn't too much you can do, as yields are low across the board. But a few ideas might be:
1) Load up as many savings bonds a possible. Relative to their risk they offer the best rates around (as in on the entire planet) and taxes are deferred on the interest. Plus no state or local taxes.
2) Look into VWALX (Vanguard High Yield Municipal Bond) especially if in a low tax state. It has risk and return nearly identical to corporate intermediate term bonds, but is additionally free from federal tax, which makes it fairly amazing. Get a higher return than Total Bond and free up space in tax deferred for more stocks, plus a numerical 0 correlation with stocks (but does tend to crash at the same time unfortunately). With so much in bonds it makes sense to take more credit risk, especially in entities which are not part of any stock or aggregate bond index fund.
3) Make sure you have an international allocation to your stocks.
4) Sounds dumb, but the expected return on gold is about the same as most bonds. Gold is weird and scary, but bonds are also scary, maybe even more scary. You would not be lowering your risk, but you may be diversifying it with a 5% allocation.

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #7 on: March 03, 2021, 03:22:13 AM »
I did a case study awhile ago and here is the breakdown of our investments. I guess my biggest question really straight out is do I have to much of Bonds allocated in 401ks/IRA's. As that is where when I started years ago a PSA at Vanguard put the bulk of them.

I do have GLD and GDX in my small trading accounting that is less than 2% of my portfolio for those of you that mentioned that and @MustacheAndaHalf I did mean stocks.

Anyhow here is basically the guts I had posted awhile ago in case studies and just the other day A couple people I know personally we were talking said I had to much in bonds in  my 401k/IRA's which as I said made me question if this was true because Vanguard set this up years back-

I am 56 my Wife is 52 obviously married and file Jointly.

4 kids 2 in college and 2 in HS. One on a full Athletic scholarship to out of state big 10 school and also gets monthly stipen so costs me nothing. The other also had scholarships, we paid a chunk and basically off of our costs. Works a Fulltime Job as well and on own Health Insurance as of last month. Basically I am financially free of 2 of them is my point so far.

2 in HS We have in 529's to date 160k which will cover 4 years of in state full tuition and room and board- they will be responsible for the rest. One will get barring injury scholarship money so for the next 4 years we will still continue though to contribute the max roughly 7k a year but that is it. And that is only if there is extra left in current budget since we have 4 years really covered.

I dont count 529's in our NW as I see it as money spent at some point.

Our Portfolio otherwise consists of this and how is shows up on Mint.

House paid for (712k put 100k in) call it 800k conservatively. House on a very nice lake very hard to get on in otherwise a MCOL area.
13 month CD worth $104,666.00
Classic checking$ 80,152.00
HSA-$37,672.00

TD Ameritrade- $28,335.00 ( I use this just as a fun account to stay involved in the market as I just like it but will never add more to it, again more a hobby than anything)

Wifes traditional IRA- $97,212 all invested in Bonds

Me VMRXX-$ 231,000.00

Me Invested Taxable Brokerage Account-
VFSUX- $78,132.00
VBTLX- $60,772.00
VXUS- $197,675.00
VTI- $1,016,874.00
Total Balance with actual change- $1,359,525.13

Me- Rollover IRA Account
$365,908.00
Made up of-
VFIDX- $195,003.00
VBTLX-$68,782.00
BNDX- $101,122.00

Wife- Current 401k as she went back to work- Don't have Fund Name currently but I could get. Originally we were maxing out but this last year we just put 800$ in a month to reduce taking more our of retirement funds. Off top of my head i chose a low cost S&P 500 fund and a bond fund to make it 60/40 but again not sure.

Voya- 59,830 (in 3 years) **Edit I reduced this since my case study and allocating all to stocks

Me , Deferred Annuity. Not even sure how this works but I called to withdrawal and said penalty if I take before 60 I believe. This I bought back in 1996 I put one contribution of 25k and that's it. Something when I wanted to start to save my Dad told me to do.

Transamerica- $163,368.00 ( says Commencement date 4/1/2034 if someone could explain what that means)

Total Investments Excluding 529's -

$2,513,000.00
Debt CC paid monthly 8k
Net Total investment $2,505,000
Home Conservatively $800,000
So depending on how people want to look at it $3,300,000.00
No other debts, all cars , boat etc.. paid in full.

tooqk4u22

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #8 on: March 03, 2021, 08:24:07 AM »
I did a case study awhile ago and here is the breakdown of our investments. I guess my biggest question really straight out is do I have to much of Bonds allocated in 401ks/IRA's. As that is where when I started years ago a PSA at Vanguard put the bulk of them.


That is more of a tax question (and tax credit/ACA), from an AA standpoint it doesn't matter. Generally, bonds (interest bearing) and trading (short term cap gains) should go in tax deferred because they are taxed at normal income tax rates. Although interest isn't great right now.   Plus when you withdraw from these accounts they are taxed at normal income tax rates.     

Long term gains and dividends are taxed lower, maybe even 0% if your income is low enough.

Exception is Roth IRA, if I could put it all in there without the tax hit I would. 

As far as withdrawal strategies, if you wanted to sell bonds in to cover your expenses but they are all in tax advantaged accounts then just sell stocks in taxable and reallocate a portion of bonds in tax deferred to stocks (AA remains the same).  But you may need to  manage withdrawals over more than one year to manage your taxable income. 

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #9 on: March 03, 2021, 10:12:25 AM »
I did a case study awhile ago and here is the breakdown of our investments. I guess my biggest question really straight out is do I have to much of Bonds allocated in 401ks/IRA's. As that is where when I started years ago a PSA at Vanguard put the bulk of them.


That is more of a tax question (and tax credit/ACA), from an AA standpoint it doesn't matter. Generally, bonds (interest bearing) and trading (short term cap gains) should go in tax deferred because they are taxed at normal income tax rates. Although interest isn't great right now.   Plus when you withdraw from these accounts they are taxed at normal income tax rates.     

Long term gains and dividends are taxed lower, maybe even 0% if your income is low enough.

Exception is Roth IRA, if I could put it all in there without the tax hit I would. 

As far as withdrawal strategies, if you wanted to sell bonds in to cover your expenses but they are all in tax advantaged accounts then just sell stocks in taxable and reallocate a portion of bonds in tax deferred to stocks (AA remains the same).  But you may need to  manage withdrawals over more than one year to manage your taxable income.


Thanks for that , that makes sense.

MustacheAndaHalf

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #10 on: March 03, 2021, 10:41:34 AM »
Me Invested Taxable Brokerage Account-
VFSUX- $78,132.00
VBTLX- $60,772.00
Bond income is taxed like other income, so "Vanguard Tax-Exempt Bond" (VTEAX) might be worth considering.  VBTLX earns 1.28% while VTEAX earns 0.88%.  People in the 24% bracket (or under) get more from VBTLX, while those in the 32% or higher bracket get a better return from VTEAX.


Voya- 59,830 (in 3 years) **Edit I reduced this since my case study and allocating all to stocks
It's been awhile, but years ago all of Voya's funds had high expense ratios.  I would avoid anything with their name on it, personally, but if you have a low expense ratio fund with them, I'd actually be interested if my assumption is wrong.

Is that an actively managed fund?  Depending on the time frame and category, passive funds beat active about 80% of the time.  I would avoid Voya funds unless it's a passive index fund with a low expense ratio - neither of which I've seen from Voya, yet.


Me , Deferred Annuity. Not even sure how this works but I called to withdrawal and said penalty if I take before 60 I believe.
Hopefully you locked in higher interest rates based on when you started, and with the penalty not too far off, it probably doesn't make sense to stop now.

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #11 on: March 03, 2021, 12:18:44 PM »
Me Invested Taxable Brokerage Account-
VFSUX- $78,132.00
VBTLX- $60,772.00
Bond income is taxed like other income, so "Vanguard Tax-Exempt Bond" (VTEAX) might be worth considering.  VBTLX earns 1.28% while VTEAX earns 0.88%.  People in the 24% bracket (or under) get more from VBTLX, while those in the 32% or higher bracket get a better return from VTEAX.


Voya- 59,830 (in 3 years) **Edit I reduced this since my case study and allocating all to stocks
It's been awhile, but years ago all of Voya's funds had high expense ratios.  I would avoid anything with their name on it, personally, but if you have a low expense ratio fund with them, I'd actually be interested if my assumption is wrong.

Is that an actively managed fund?  Depending on the time frame and category, passive funds beat active about 80% of the time.  I would avoid Voya funds unless it's a passive index fund with a low expense ratio - neither of which I've seen from Voya, yet.


Me , Deferred Annuity. Not even sure how this works but I called to withdrawal and said penalty if I take before 60 I believe.
Hopefully you locked in higher interest rates based on when you started, and with the penalty not too far off, it probably doesn't make sense to stop now.

I will look into the VTEX

The Voya Fund is my DW's 401k through work. I can go in and change it anytime but from the get go I picked the lowest cost fund that yes there name is not on (Dont have in front of me) to follow the S&P 500 and One other.

@MustacheAndaHalf

Here is the info on the Annuities through Transamerica- What does commencement date mean? As I mentioned when I bought this I believe my dad told me to do so. I put 25k into it.

Policy Status
Active
Policy Type
Non-Qualified
Type of Plan
Non-Qualified
Effective Date
02/09/1996
Annuity Commencement Date
04/01/2034
Policy Value
As of 03/02/2021
Current Value
$162,137.83
Initial Premium
$0.00
Total Premium Payments
$25,000.00
Systematic Payout in Effect
No

Radagast

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #12 on: March 03, 2021, 09:58:26 PM »
Me Invested Taxable Brokerage Account-
VFSUX- $78,132.00
VBTLX- $60,772.00
VXUS- $197,675.00
VTI- $1,016,874.00
Total Balance with actual change- $1,359,525.13
13 month CD worth $104,666.00
Classic checking$ 80,152.00
HSA-$37,672.00
Taxable investments above. You have plenty of cash for a few bad or illiquid years so:
I would recommend a municipal bond fund such as VWLUX, VTEAX, VWALX, or your state fund in place of Total Bond. I use and recommend VWALX, as I feel with such a high percentage bonds the extra credit risk and thus eventual return is better for the long term, and it is still not that risky, in fact very similar to your VFIDX.
I recommend Series I Savings Bonds in place of VFSUX, if you are ok with a Treasury Direct account. They have double the yield, are much safer, and the interest is tax deferred until redemption (probably in a lower tax bracket). If you don't need this money for 20 years Series EE is a great deal as well, through they are a little odd in that they do nothing for 20 years and then double overnight.
This seems to be your only allocation to international stocks. It seems insufficient to me, I would recommend about 25% of portfolio or 33% of equities. There is a very real chance that US stocks will have no real return over the next ten years, and bond yields are too low to help much. If that ends up the case, international has a reasonable chance of carrying you through.

Quote
Wifes traditional IRA- $97,212 all invested in Bonds

Me VMRXX-$ 231,000.00

Me- Rollover IRA Account
$365,908.00
Made up of-
VFIDX- $195,003.00
VBTLX-$68,782.00
BNDX- $101,122.00
It seems all tax advantaged accounts are in bonds. I suggest some stocks here for rebalancing. Perhaps VFIDX could become half Total US, half Total International stock? Ditto for BNDX.
VMRXX offers 0.01% yield. That is not acceptable unless you need the money in the next six months. There are a million investments with a higher return than 0.01% (-2% with inflation) including insulation, solar panels, and pretty much any other Vanguard fund. If you want a relatively safe long term account for the long haul, I recommend VTINX. VTINX is a great all-in-one fund that maintains a 70% bond 30% stock allocation. It includes Total US Stock, Total International Stock, Total US Bond, Total International Bond, and Inflation Bond in a single package which is well diversified to provide a steady (if modest) return above inflation. Otherwise, divert this to stocks (half US and half international again) and switch some to savings bonds I and EE in taxable if you can do so without a tax penalty.

List of Municipal funds for reference:
https://investor.vanguard.com/mutual-funds/list?assetclass=bond&taxeff=xmpt#/mutual-funds/asset-class/month-end-returns

Radagast

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #13 on: March 03, 2021, 10:03:03 PM »
I did a case study awhile ago and here is the breakdown of our investments. I guess my biggest question really straight out is do I have to much of Bonds allocated in 401ks/IRA's. As that is where when I started years ago a PSA at Vanguard put the bulk of them.
To address this question: I would say yes. These accounts are where you want to rebalance, which requires stocks as well. Also many of your bond funds are very low yield, you would be better switching some to Savings Bonds in taxable when possible, and putting more stock in 401k/IRA.

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #14 on: March 04, 2021, 02:59:29 AM »
I did a case study awhile ago and here is the breakdown of our investments. I guess my biggest question really straight out is do I have to much of Bonds allocated in 401ks/IRA's. As that is where when I started years ago a PSA at Vanguard put the bulk of them.
To address this question: I would say yes. These accounts are where you want to rebalance, which requires stocks as well. Also many of your bond funds are very low yield, you would be better switching some to Savings Bonds in taxable when possible, and putting more stock in 401k/IRA.


Appreciate both inputs. Thanks

MustacheAndaHalf

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #15 on: March 04, 2021, 07:56:21 AM »
I will look into the VTEX
Okay, but it's actually VTEAX.  Personally I prefer ETFs, which would save you a few 1/100th of a percent in expense ratio (VTEB), but I didn't mention it because I didn't see any ETFs.


Here is the info on the Annuities through Transamerica- What does commencement date mean? As I mentioned when I bought this I believe my dad told me to do so. I put 25k into it.
...
Annuity Commencement Date
04/01/2034
...
I've avoided annuities, so I don't know the answer.  Is that when you start receiving payments?

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #16 on: March 04, 2021, 02:49:46 PM »
I will look into the VTEX
Okay, but it's actually VTEAX.  Personally I prefer ETFs, which would save you a few 1/100th of a percent in expense ratio (VTEB), but I didn't mention it because I didn't see any ETFs.


Here is the info on the Annuities through Transamerica- What does commencement date mean? As I mentioned when I bought this I believe my dad told me to do so. I put 25k into it.
...
Annuity Commencement Date
04/01/2034
...
I've avoided annuities, so I don't know the answer.  Is that when you start receiving payments?




Yea i Converted over in my taxable to VTI but I should do the same in my IRA..

I have no idea thats why I asked you! lol. I was going to last year at 55 take 1/15 out a year because of the taxes but they told me that I would pay a penalty of 10% if I start taking out before 59 1/2. I will find out what commencement means.

Radagast

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #17 on: March 04, 2021, 04:04:56 PM »
I will look into the VTEX
Okay, but it's actually VTEAX.  Personally I prefer ETFs, which would save you a few 1/100th of a percent in expense ratio (VTEB), but I didn't mention it because I didn't see any ETFs.
Yea i Converted over in my taxable to VTI but I should do the same in my IRA..

It is my understanding municipal bonds can be very illiquid, which means a Muni ETF market price can become much lower than its asset value. Hence it is well worth it to use a mutual fund, as the fund keeps cash on hand for routine redemptions and can liquidate the most liquid issues at leisure. On the flip side if things get really extreme a manager can halt redemptions, whereas an ETF could always be sold at a bad enough price.
« Last Edit: March 04, 2021, 04:06:39 PM by Radagast »

tooqk4u22

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #18 on: March 04, 2021, 04:17:25 PM »
I have no idea thats why I asked you! lol. I was going to last year at 55 take 1/15 out a year because of the taxes but they told me that I would pay a penalty of 10% if I start taking out before 59 1/2. I will find out what commencement means.

Search rule 72t.  Allows you to take some money out before 59.5

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #19 on: March 05, 2021, 02:49:57 AM »
I have no idea thats why I asked you! lol. I was going to last year at 55 take 1/15 out a year because of the taxes but they told me that I would pay a penalty of 10% if I start taking out before 59 1/2. I will find out what commencement means.

Search rule 72t.  Allows you to take some money out before 59.5
[/quote



where do i "search that" ? your talking about the annuity correct?

tooqk4u22

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #20 on: March 05, 2021, 06:43:58 AM »
I have no idea thats why I asked you! lol. I was going to last year at 55 take 1/15 out a year because of the taxes but they told me that I would pay a penalty of 10% if I start taking out before 59 1/2. I will find out what commencement means.

Search rule 72t.  Allows you to take some money out before 59.5
[/quote



where do i "search that" ? your talking about the annuity correct?

No, just Google it.   It's an IRS rule that let's you take "Substantially equal periodic payments"   that allows withdrawals from IRA before 59.5.   There are strict calculation requirements but can be done. 

NorCal

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #21 on: March 05, 2021, 07:04:28 AM »
In the words of a wise man, diversify your bonds (see about the 45 second mark of below).

https://www.youtube.com/watch?v=zhUnEg0he4A

Once your portfolio is of sufficient size, I think you should move beyond the basic "Total Market" bond funds.  The bond market is huge and diverse.  In fact, it is larger than the stock market by many orders of magnitude.  The securities are also much more diverse.  They range from mortgage backed bonds to dollar-denominated emerging market bonds to high-yield bonds.  Some are short term and others are long term.  They all behave differently. 

I personally keep 20% of my bonds in Long Term Treasuries (SPTL), as they have a more pronounced negative correlation to the stock market.  They are also somewhat higher yielding.

I also keep 20% of my bond funds in a high yield bond fund (PHB).  While positively correlated to the stock market, it does have a significantly better yield.  If I were to hold this in a taxable account, I would choose a Preferred Stock Fund (PFF) due to the better tax treatment.

I will probably add an international specific fund at some point as well.

Also look at Muni bonds if you're in a high tax state like CA. 

MustacheAndaHalf

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #22 on: March 05, 2021, 11:28:15 AM »
I have no idea thats why I asked you! lol. I was going to last year at 55 take 1/15 out a year because of the taxes but they told me that I would pay a penalty of 10% if I start taking out before 59 1/2. I will find out what commencement means.

Search rule 72t.  Allows you to take some money out before 59.5
And if you don't calculate the correct pro-rata amounts, or withdraw the wrong amount ever... you pay a 10% penalty retroactively on all withdrawals.

https://www.investmentnews.com/make-sure-72t-distributions-are-taken-51420
"If the 72(t) payment schedule is modified, an individual no longer qualifies for the exemption from the 10% penalty, and the penalty is reinstated retroactively to all distributions taken prior to 591/2. That can be an expensive mistake."

PDXTabs

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #23 on: March 05, 2021, 11:37:00 AM »
Q: 60/40 Portfolio, do you do something different with the 40 in Bonds?
A: Yes, I take the 60%, and I put it all in VT. Then I take the 40% and I put that in VT too. Then I have a scotch.

Obviously, you are in a different place than I am but having read The Simple Path to Wealth by J. L. Collins I'm convinced never to hold 40% in bonds ever. But others have different opinions with bond tents, etc.
« Last Edit: March 05, 2021, 11:44:09 AM by PDXTabs »

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #24 on: March 05, 2021, 11:54:52 AM »
Q: 60/40 Portfolio, do you do something different with the 40 in Bonds?
A: Yes, I take the 60%, and I put it all in VT. Then I take the 40% and I put that in VT too. Then I have a scotch.

Obviously, you are in a different place than I am but having read The Simple Path to Wealth by J. L. Collins I'm convinced never to hold 40% in bonds ever. But others have different opinions with bond tents, etc.


I can see the case for that but at my age, 4 kids and just overall where i am at I would rather risk gains vs to huge a drop. If I were younger I would be 100% Vtsax or VTI

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #25 on: March 05, 2021, 11:58:36 AM »
In the words of a wise man, diversify your bonds (see about the 45 second mark of below).

https://www.youtube.com/watch?v=zhUnEg0he4A

Once your portfolio is of sufficient size, I think you should move beyond the basic "Total Market" bond funds.  The bond market is huge and diverse.  In fact, it is larger than the stock market by many orders of magnitude.  The securities are also much more diverse.  They range from mortgage backed bonds to dollar-denominated emerging market bonds to high-yield bonds.  Some are short term and others are long term.  They all behave differently. 

I personally keep 20% of my bonds in Long Term Treasuries (SPTL), as they have a more pronounced negative correlation to the stock market.  They are also somewhat higher yielding.

I also keep 20% of my bond funds in a high yield bond fund (PHB).  While positively correlated to the stock market, it does have a significantly better yield.  If I were to hold this in a taxable account, I would choose a Preferred Stock Fund (PFF) due to the better tax treatment.

I will probably add an international specific fund at some point as well.

Also look at Muni bonds if you're in a high tax state like CA.



Definately like to get me some rocket bonds! haha

soccerluvof4

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Re: 60/40 Portfolio , do you do something different with the 40 in Bonds
« Reply #26 on: March 05, 2021, 11:59:24 AM »
I have no idea thats why I asked you! lol. I was going to last year at 55 take 1/15 out a year because of the taxes but they told me that I would pay a penalty of 10% if I start taking out before 59 1/2. I will find out what commencement means.

Search rule 72t.  Allows you to take some money out before 59.5
And if you don't calculate the correct pro-rata amounts, or withdraw the wrong amount ever... you pay a 10% penalty retroactively on all withdrawals.

https://www.investmentnews.com/make-sure-72t-distributions-are-taken-51420
"If the 72(t) payment schedule is modified, an individual no longer qualifies for the exemption from the 10% penalty, and the penalty is reinstated retroactively to all distributions taken prior to 591/2. That can be an expensive mistake."


and i'd be that guy!