Hi all - I received an investment plan from Vanguard which recommended international bonds in our portfolio. I've setup an IPS (can share details if helpful) and allocated up to 5% of the total for world bonds - small percentage, but figured a lot of international companies will have overlap in VBTLX and FSITX anyway. I'm in the process of firing my wife's 403b advisor and liquidating the craptastic funds we've been in (between 0.9-2.79% ER and ho-hum returns...are you kidding me?) and moving to another approved 403b provider that offers Vanguard Admiral funds. The only downside to the new provider is they charge 15 basis points (0.15%) for an asset management fee, but combined with Vanguard's low ER, I'm still well ahead of the game.
Two questions:
1 - Is having up to 5% of the portfolio in world bonds worthwhile, or should I just scrap it and move that amount into domestic bond funds (VBTLX or FSITX)? The ER for VTABX is almost 3x as much as the domestic funds - 0.19% versus 0.07%. It's a small percentage of the total portfolio and won't radically skew things either way, just wondering if I should even bother.
2 - Assuming the answer is "yes" to the above, I have three options for placement - our taxable Vanguard investment account, my wife's new 403b, or our Roth IRAs at Vanguard. Typical advice is to keep bond funds out of taxable, and I'm assuming that would apply to international as well, but the 403b asset management fees, combined with the higher ER on this fund, will mean an effective ER of 0.34%. Assuming a 25% tax bracket (and living in the great state of "Tax York", so getting hit there as well), am I better off keeping it in the tax deferred 403b at the higher effective ER, or just paying taxes on the dividends and placing it in taxable? Not sure of the pros/cons of having it in the Roths.
Hope I provided enough info...would be happy to share details of my IPS or other info if needed.
Thanks in advance...