Author Topic: Buying bonds from TreasuryDirect.gov  (Read 944 times)

jamesbond007

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Buying bonds from TreasuryDirect.gov
« on: April 15, 2019, 06:49:11 PM »
I am sure it is a safe government owned site. But my question is related to diversification. So far I've been 100% VTSAX in my investment account and Vanguard Target 2045 fund in my 401Ks. I want to start adding bonds to my portfolio to get an 80/20 stock/bond split. Where do I start? T-Note or T-Bond? Please help.

samirol

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Re: Buying bonds from TreasuryDirect.gov
« Reply #1 on: April 15, 2019, 07:21:07 PM »
For rebalancing, the best option is going to be using a Vanguard mutual fund like the Total Bond fund (VBTLX). Let's say that stock prices rise  and your 80/20 asset allocation becomes 90/10 so you need to sell stocks and buy bonds. It is an easy change within your brokerage to do this (sell a dollar amount of one fund and buying that dollar amount of a different fund) rather than selling stocks, transferring to Treasury Direct, then buying individual issues. Treasury Direct is great for buying I Bonds, but a mutual fund would probably fit your needs better.
« Last Edit: April 15, 2019, 07:23:23 PM by samirol »

PDXTabs

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Re: Buying bonds from TreasuryDirect.gov
« Reply #2 on: April 15, 2019, 07:30:25 PM »
Yes. People used to buy original issue 30 years treasury bonds and hold them for the whole 30 years. Now that their interest rate is so low I would not suggest this.

EDIT - I do buy I series savings bonds on TD, but I actually count that as my emergency fund (not part of my portfolio).
« Last Edit: April 15, 2019, 07:32:24 PM by PDXTabs »

COEE

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Re: Buying bonds from TreasuryDirect.gov
« Reply #3 on: April 15, 2019, 08:16:08 PM »
Buying bonds at TD is easy.  Setup your purchase date and your account to draw from.  After the auction, a few days later they draw the funds.  Done.

I agree with the suggestions above to buy a bond mutual fund or bond ETF so you can rebalance.  Easy.

I buy T-bills and I-bonds pretty regularly through TD.  I think it's easy.  A lot of people don't like the website interface though.  Most (all?) brokerages will let you buy new issue bonds without any fees so you don't have to deal with TD.  You can sell your bonds early if you need to and save yourself the 0.03% expense ratio, I suppose.

jamesbond007

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Re: Buying bonds from TreasuryDirect.gov
« Reply #4 on: April 15, 2019, 08:37:38 PM »
Thanks for the suggestions. I was thinking buying bonds would save me some dough by not having to pay state tax. But I guess we are splitting hairs here. My emergency funds ($50K), I want to put on TD. I will start buying VBTLX. I don't want to rebalance by current portfolio. I want to divert new funds towards a bond fund until I achieve a 80/20. This could take a while.

PDXTabs

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Re: Buying bonds from TreasuryDirect.gov
« Reply #5 on: April 16, 2019, 08:36:57 AM »
Thanks for the suggestions. I was thinking buying bonds would save me some dough by not having to pay state tax. But I guess we are splitting hairs here. My emergency funds ($50K), I want to put on TD.

Well, you can buy $10K of I-Bonds per year and they have the additional benefit that they are tax deferred. There's no coupon payment so you don't pay any tax until you cash them in.

jamesbond007

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Re: Buying bonds from TreasuryDirect.gov
« Reply #6 on: April 16, 2019, 10:40:28 AM »
Thanks for the suggestions. I was thinking buying bonds would save me some dough by not having to pay state tax. But I guess we are splitting hairs here. My emergency funds ($50K), I want to put on TD.

Well, you can buy $10K of I-Bonds per year and they have the additional benefit that they are tax deferred. There's no coupon payment so you don't pay any tax until you cash them in.

Did not know that. Thanks.

CorpRaider

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Re: Buying bonds from TreasuryDirect.gov
« Reply #7 on: April 16, 2019, 11:06:37 AM »
Yeah, was going to say, I would start with I-bonds.  It's almost like you increase your available tax deferred space and they are inflation hedged.  You could buy $10K in your name and $10K in spouse's name if applicable. 

Also can get $5K in paper bonds with your tax refund if you set things up to have a sufficiently large overpayment. 

Currently they have a nice .50% fixed rate/real return component.  I think that runs through April 30th and is slated to drop (to maybe .15%) after that.  So if I was going to buy some for this year I would probably try to do it before the end of the month.

« Last Edit: April 16, 2019, 11:13:02 AM by CorpRaider »

jamesbond007

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Re: Buying bonds from TreasuryDirect.gov
« Reply #8 on: April 16, 2019, 08:25:46 PM »
Read upon I-bonds. Looks very interesting. I only forego the last 3 months of interest if I withdraw before 5 years. Seems like a good way to save up for a house down payment. Am I reading this right?

dividendman

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Re: Buying bonds from TreasuryDirect.gov
« Reply #9 on: April 16, 2019, 11:46:17 PM »
following

CorpRaider

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Re: Buying bonds from TreasuryDirect.gov
« Reply #10 on: April 17, 2019, 07:22:25 AM »
Read upon I-bonds. Looks very interesting. I only forego the last 3 months of interest if I withdraw before 5 years. Seems like a good way to save up for a house down payment. Am I reading this right?

Yeah, I think that's right.  You have to hold for a minimum of a year though.  Kind of also get a intermediate term rate on a floating rate security, at least historically. I wrote a couple of posts about them on my blog, but it sounds like you pretty much got it.