FREE NEWSLETTER
Our portfolio leans somewhat towards the conservative side. Our overall target allocation is 45% equities, 45% bonds, and 10% cash.
When it comes to the allocation within bonds I have not seen much in the way of literature that recommends an allocation regarding types of bonds/durations.
Our current allocation in specific funds as a percentage of our entire portfolio is: 15% short term, 8.5% short term tips, and 16.5% intermediate (the rest of the bonds are in a target date fund).
I’m sort of aiming towards one third of bond portion of our portfolio being 1/3 each short term, short term tips, and intermediate.
My allocation is not based on any research, It just seems good to have more than 1/2 in short term to shorten my overall bond duration and thus exposure to rising interest rates. Having a portion in tips also decreases my risk to rising inflation, while the intermediate portion allows for some excess gains when interest rates decrease.
Is my thought process well thought out? Crazy?
Any insight would be appreciated.
Bonds make up 30% of my portfolio, and I simply invest in the Total US Bond Market Index Fund, along with the G-fund in my Thrift Savings Plan.
I’m not too excited by bond funds/indexes. When bond returns became very low I shifted from bond funds to individual bonds, although I do own a TIPS fund. I felt we weren’t being properly compensated for the slight risk we were taking. I was rewarded when bond funds dropped in 2022. Individual bond funds represent about 4% of our portfolio. However, G owns additional in two target date funds. While overall those have done well the bond components faltered in 2022 and have not yet fully recovered.
I continue to favor owning individual bonds over indexes, although because of interest rates we have added CDs to the mix.
That is similar to how I play it. I initially had just the plain old vanilla CD ladder back when Powell raised the rates. Then after hearing the podcasts from Doubleline, Oaktree and Pimco. I started to add more CLOs and Senior Loan ETFs when my CD ladders expires and I got my money back. I am just trying to learn more about MBS ETFs and Mortgage REITs as I consider them to be fixed income with building attached as collaterals.
Bond funds/indexes aren’t meant to be exciting 😉