The first bond asset class I'd add to your nominal treasuries would be TIPS, not corporates or mortgage backed bonds. But do you HAVE to do anything more than that? No way.Hi all. I hold one simple bond fund in my retirement accounts: VSIGX - Vanguard Intermediate-Term Treasury Index Fund.
This fund only has around 100 bonds, all treasury, with an average maturity of 5.6 years.
I have read some comments from very well respected forum members on Bogleheads (such as Nisiprius, Taylor Larimore, and others) stating that they prefer Total Bond Market, or US + Foreign bonds, or US + Foreign + Municipal Bonds, etc. When comparing to holding only treasuries or CDs, they essentially say “because something about having all of my fixed income in only one type of bond or from one issuer makes me uneasy.”
But they never really clarify further (that I can find). I don’t think it has to do with getting higher interest rates with other types of bonds. And I don’t think it has to do with taxes as the focus. It seems to me they are talking about possibly spreading out default risk? The message being conveyed is it is just uncomfortable to be in only one bond.
I would like to better understand this thinking. If you are only using treasury bonds, why would you need to worry about anything?
Is there any reason to diversify into UK or German bonds? Is there any reason to diversify into corporate bonds or local municipal bonds?
Thanks for your help.
Like you, I prefer to take my risk on the equity side and mostly avoid corporates/mortgage bonds. I do use munis, but for tax reasons, not diversification reasons.
Statistics: Posted by White Coat Investor — Thu Jan 02, 2025 11:35 am