Personal Investments • Please hep me organise the fixed income part of my portfolio

Thanks . That is the conclusion I am coming to- half in TBM and half in TIPs fund .
Except whether to use a short term TIPS like VTAPX to decrease volatility but sacrifice returns or whether to use Intermediate term TIPS like VIPSX which may have higher return but higher risk , I am struggling to decide

It probably won't make that much of a difference if you are holding 30% bond. See link. Portfolio 1 is 70% stock and 15% intermediate term treasury and 15% TIPS. Portfolio 2 is 70% stock and 15% short term treasury, and 15% short term TIPS. This is from 2013 to 2024. Sorry for the short span, but we don't have data on short term Tips going too far.




Basically, you won't get that much difference in return because stock returns are dominant component while the low fixed income portion isn't large enough to make that much of a difference in volatility since your fixed income allocation is so low. Think about it, you are talking about 30% of about 1% difference in long term return. If you look at it from only the fixed income point of view, you might feel that short term is less volatile. If you look at the from the whole portfolio, it's not enought to make a difference.

It starts making a difference if you have a much bigger bond portfolio. Let's flip the portfolio around to 30/70. See link




Now you notice that your choice of bond has more of an effect, but even at 70% bond, it's not as much as you might think. Note that during this time period 2013 - 2024, shorter duration is favored. The take away you should considered is

• View the whole portfolio as a whole rather than individual components. Your choice of bond isn't going to make that much difference in cushioning your fall when you only have 30% fixed income. It is more important that you have some fixed income.
• Related to the first point, you cannot expect an asset to never lose money. You have to be able to take a few hits. Even if you hold just cash, inflation might make that return negative.

Statistics: Posted by gavinsiu — Sun Mar 24, 2024 9:38 pm — Replies 50 — Views 2839

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