I'm 34 years old. Currently 96% stocks, 4% short term reserves.
I don't really understand bonds but I do feel I need to adjust my risk profile because I anticipate huge volatility by the end of 2026. (I know that getting concerned about timing and downturns is anti-Bogle, but I simply feel overexposed.)
I've started cycling out of some individual stock positions and I'm wondering which, if any, of the Vanguard bond fund ETFs I should look at: BND, BNDW, BNDX. Or whether I should just take the VUSXX yield...
Bnd is fine it’s the generic recommendation.
A lot of bogleheads like intermediate treasuries since they are the least correlated to equites. You could use VGIT for this.
Or VTG for a total treasury fund.
How are we defining intermediate treasuries specifically?
Usually 7-10 years maturity or something around there. The exact specifics aren't that important since it's just a middle ground between long term treasuries (technically better as long as your bond allocation is under 40%, but psychologically challenging for many) and short term treasuries (psychologically easy to hold but a worse diversifier).
A total treasury fund like GOVT or VTG is pretty much equivalent as well, since it averages to about the same duration.
6% in BND today before 4PM and don't think about it anymore. You're young. Come back when you're 40 and we'll tell you to go 10-15% BND at that point.
BND and be done. Don’t let perfect be the enemy of good
BND is a good choice. I don't know why you expect huge volatility now--you should *always* be prepared for huge volatility when you are investing in risk assets. Sometimes the risk shows up when you least expect, like when everyone is convinced the market is going up. Check your risk tolerance and commit to a long term level allocation.
My thesis is that the market will soar from here (defying the widespread jitters since last month) and there's a lot of money to be made in equities in the coming months. But I also anticipate a major setback after that and want to reposition myself between now and the summer.
Again, I know that concerning myself with all of this is anti-Bogle. But I have these individual stock positions I want to get out of anyway, so I'm trying to plan out how I redeploy that capital over the next six months.
Well, your thesis is just silly market timing and not a good reason to go into bonds. However, going into bonds is a good idea if you are uncomfortable with 100% stocks. Individual stocks have uncompensated risk, so you should certainly exit those. The question is whether you are doing so for the right reasons. Again, I would dispense with terms like "thesis" and "redeploy capital" and focus on a rational allocation based on your investment timeframe, risk tolerance, long term objectives, etc.
I'm just less doctrinaire about these things. My risk appetite will gradually shrink until the bubble pops, even if I'm generally an indexer with a 30-year horizon.
Sir, this is a Wendy's.
You should have the same "risk appetite" regardless of market conditions. It can go up or down at any time. Your risk appetite should be based on your investment needs and timeframe, not your feelings.
This is anti-Bogle only if you do not maintain your chosen asset allocations by buying equities when the market crashes and your fixed income allocation goes above your target allocation.
Figure out now what your rebalance thresholds will be and then follow your plan.
For example assume you choose an allocation of 15% for fixed income — including all cash + short term reserves + bonds. You might pick rebalanced thresholds of 10% relative (13.5% low threshold, 16.5% high threshold).
If stock crash and your fixed income holdings go above 16.5% of your now smaller portfolio, you should buy stocks until your fixed income holdings are back 15% of your portfolio. If stocks soar, then your fixed income will drift down as a percentage and you sell stocks to rebalance. So you will find yourself automatically selling stocks when they are high and buying when they are low.
I'm actually a fan of active management on the bond side. Check out $VCRB.
What's the advantage of an actively managed bond fund?
If you’re looking to buy and hold without too much worrying over duration and assuming you’re not worrying about tax-exempt funds — VBTIX or VBTLX.
Or whatever the ETF equivalent is.
BND in tax advantage account, VTEB in cash brokerage account if you are in high income bracket
Lots of good suggestions so far. I also want to put in a good word for VCRB. It's an up and coming new fund from Vanguard.
If it's for "short term" like you said, I personally would do either money market or something like SGOV.
BND is more of a long term fixed income position, imo. It went down 20% not that long ago, so it has some duration risk.
I use Fidelity's FBND instead of BND in my tax-sheltered account. It includes a small allocation to higher yielding bonds and thus the fund yields about 0.5% higher than BND. Otherwise, their performance is quite similar. Either one is great.
Why don't you move from holding individual stocks to broad equity indexes instead?
I've been doing that for a month or two now and will continue to. But (while it makes people around here mad to think about) I don't want to be stuck with this allocation when the bubble pops.
I do not understand the need for bond funds at age 34. I am 20 percent bonds at age 59 and it is more than enough.
You’re too young to be investing in a bond fund.
I’m much much older and have 350k in BND and the dividends average around 1200/month
Hello! I was using BND, but just switched some of them to be VTEB because it is exempt from more forms of taxation since we’re high w-2 earners. In tax free accounts we still use BND
Thanks for the question
Assuming you’re in the United States: VGVT because IMO Treasurys and other government debt are all you want for the fixed income allocation, and active management makes sense with bonds. VTG is similar but indexed.
Money market funds like VUSXX shouldn’t be considered for your bond allocation. Look into the “cash trap”.
JAAA has a better yield
BND is good, and perhaps some VTIP (inflation protected), VCIT (corporate), and BNDX (ex-US) if you want some additional diversification among your bonds
Go lower at your age. 6% as suggested above is more than enough at 34.
It depends on your goals of having bonds. BND has higher return compared to VGIT, but it is note correlated to stock market and less opportunity for rebalancing.
Also take a look at TIPS (eg SCHP) as outlined in the article below, which is highly recommended.
https://www.whitecoatinvestor.com/bond-funds/
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Equity percentage = 120-age is an anachronistic rule of thumb with little merit.
I am currently have equity percentage = 166 - age and next year expect to have equity% of 167-age.
Bravo.