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Which bond fund in FIDO?

Having chosen to be bonded at the hip to FIDO in my 403b, and facing 0.01% money market returns in the third year of a presidential cycle, with a US stock market that seems fairly to over-valued, and Ukraine, Iran, and China posing concerns, I wondered what others might choose from the following options: FNMIX (are emerging market bonds coming back?) which might offer more return; FFRHX (lower return with some experts claiming these funds aren't as safe as they seem - but FIDO has good bond analysts); FAGIX (high yield, an area which has usually done better than predicted).

These funds have redemption fees of 1% for 60 to 90 days, which shouldn't matter, since funds would only be moved to equities if there were a precipitous decline (and I'd be late to the party anyway). All lost varying amounts in 2008-9, and less in 2011; and I am retiring probably in 3 years, so income would be nice, but I can tolerate some volatility, if I am made whole in 5 to 7 years.

If you feel I have abused the site, keep the castigations brief. I can tolerate more risk than short-term bond funds offer. I'm about 65% in equities across my various retirement accounts, if that colors your answer. My wife and I can probably survive for a year or two on SS income, but she'd be complaining (I actually like beans and rice - with enough spices).

Comments

  • Within Fido, I would either recommend a multi sector bond fund like FSICX which is not a bad fund if not one of the top funds in that sector OR a basket of bond funds to buy and hold without worrying about what is happening in the market and making your own bets in sectors. The latter never ends well.

    An equal basket of TIPS, intermediate US treasuries, short term corporate, GNMA, corporate high yield, and national muni high yield is as close as I have experienced to a "permanent" portfolio for all market conditions and without worrying about investment horizon.
  • cman said:


    An equal basket of TIPS, intermediate US treasuries, short term corporate, GNMA, corporate high yield, and national muni high yield is as close as I have experienced to a "permanent" portfolio for all market conditions and without worrying about investment horizon.

    Very nice cman. I like the concept. Would you include foreign bond funds in this "permanent portfolio" of fixed income allocation? If so, currency hedged, like the Vanguard Total International Bond Index Fund, or currency unhedged? What are some of the unhedged foreign bond funds that you think are worth looking at?
  • TedTed
    edited April 2014
    @STB65: Hunt with the big dogs, FAGIX
  • Thanks for the advice, all of you. FSICX had escaped my notice. Beats the bogey M* selected for it. Thanks, cman.
    Since FAIGX has 70% equity and costs 1.16%,, I'll just slump back in my rocking chair on the porch, Ted. (Or did you mean FAGIX?)
  • rjb112 said:


    Would you include foreign bond funds in this "permanent portfolio" of fixed income allocation?

    I didn't include international funds in this particular buy and forget type of portfolio. Developed market bonds don't yield much diversification or yield benefits and additionally have currency risks as you have noted.

    EM bonds are too volatile for this type of portfolio although they can increase total return over time. If you use enough allocation to make a practical difference, they will pull you down enough to make a difference at times! Best left to active managers in multi sector funds or portfolios where you are actively managing allocation to exploit its volatility. They move slowly enough relative to typical equities that they are great for momentum based strategies and the returns make it worthwhile to do so.
  • @cman, why do you suppose Vanguard decided to put an allocation to their Vanguard Total International Bond Index Fund in all of their Target Date Retirement Funds as well as their "all in one" funds? Target Date Retirement Funds are probably going to see huge growth over the years, both inside and outside 401k plans.
  • @rjb112, it isn't for me to comment why Vanguard uses a particular fund in their fund of funds. Depends on the requirement - marketing, tolerance to volatility, raising assets for new funds, allocation strategy ... It isn't necessarily bad (except for that fiasco with VWUSX in VGSTX in the dot com crash).

    I am not suggesting that international bond funds are useless for any purpose. Depends on the portfolio strategy. My suggestion was for the simplest alternative to a single multi sector bond fund for a buy and forget type not to imply suitability of funds for portfolios in general.

    There are a lot of Vanguard funds I wouldn't use for a specific application but are used for various (valid) purposes.:-)
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