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Learning, Sharing, and Teaching => Investor Alley => Topic started by: Done by Forty on February 20, 2013, 02:00:23 PM

Title: VBISX: Vanguard Short-Term Bond Index Fund Investor Shares
Post by: Done by Forty on February 20, 2013, 02:00:23 PM
So about a quarter of our investment dollars are currently going into VBISX, Vanguard's Short Term Bond Index Fund (and similarly, into TIP, Fidelity's iShares Barclays Tips Bond Fund ETF, in my wife's Roth) every month.  This is based on the Simpleton's portfolio suggested in the preface of The Intelligent Asset Allocator:

“Simpleton’s Portfolio” described in the preface might be a nice compromise. It is equal amounts of US large company stocks, US small company stocks, foreign stocks, and US short-term bonds with annual rebalancing."

http://ed-chang.com/review/

But I'm looking at these short term bonds continually pay about nothing, and wondering if there are better 'safe' options, like cash or a CD ladder...or maybe more intermediate (or diversified) bond funds.

I'm fairly new with asset allocations and have a bit of a blind spot with bonds.  Any help is appreciated.  We're aiming to be about 8 years away from FI, as that may figure into the advice.  Thanks in advance!
Title: Re: VBISX: Vanguard Short-Term Bond Index Fund Investor Shares
Post by: KingCoin on February 20, 2013, 02:28:21 PM
This question pops up a lot and there's never really a good answer. Basically, without steeping out on the yield curve or ramping up risk, you're left to scrounge around for incremental basis points.

The article was posted a couple weeks ago on the issue:
http://finance.yahoo.com/news/strategies-combating-ultralow-cash-yields-120000952.html

VBISX pays 1.42% which is better than most high yield savings accounts.
Title: Re: VBISX: Vanguard Short-Term Bond Index Fund Investor Shares
Post by: tooqk4u22 on February 21, 2013, 08:13:10 AM
Look at VFICX (Vanguard Intermediate Term Investment Grade).

You will get a higher yield but take on a bit more credit in interest rate risk, but not so much where you could get whacked hard. 

VBISX pays 1.42% which is better than most high yield savings accounts.

This yield is reported on the various quote sites but is not technically correct.  The current yield to maturity for the fund is 0.7% and the reported yield on vanguard currently is 0.45%.

The other fund (VFICX) is 2.2% and 2.17% respectively whereas it is quoted as 3.45%.

Go in with your eyes open - anything that is safe doesn't pay anything right now.