Ah I see. The honest answer is it really doesn't matter too much. Short term will have less volatility, and more return right now since the yield curve is fiercely inverted. Intermediate/long term will be more likely to smooth out an equities crash. But the long term returns on both are pretty similar and in the end there's no perfect bond.This is exactly what I’m doing/planning. Since I’m effectively using fixed income, my question remains — what fixed income?I would simply keep investing as you do now with your current asset allocation, assuming you have a classic 3 or 4 fund portfolio. Raise your bond percentage if you won't have enough to feel like you need to. Keep the bonds in your tax-deferred account and hold total US funds in your taxable. When you want to buy the house, sell the stock funds and re-balance by adjusting what's in your tax-deferred to keep your AA. This is what I did, I sold some losers and got a tax deduction, but maintained my asset allocation with adjustments to my IRAs.
I use a combination of intermediate term treasury funds and TIPS funds. I prefer treasuries to total bond since they don't have state tax (I'm forced to have some of my bonds in taxable) and total bond correlates closer to equities since it has corporate bonds. It's been shown that say a 65/35 stock/bond portfolio with treasuries has a higher return for the same volatility as a 60/40 with total bond.
If you are focused on keeping money safe and reducing volatility for the bond side, go with a short term treasury funds and/or a short term TIPS fund. If you are trying to get higher overall returns and more chance that the bonds will correlate negatively, go for an intermediate term bond fund.
I personally think holding individual treasuries is not worth the hassle except for the specific case of a TIPS ladder to provide yearly inflation adjusted income during retirement. If you are in the accumulation phase, there's no one time horizon you're looking for, so a low fee fund which will keep rolling and buying new issues for you is just fine.
Regardless, none of these choices will perform wildly differently over the long term, so just pick one and stick to it.
Statistics: Posted by cvoege — Wed Sep 11, 2024 9:33 pm