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by frgtpsswrdlame 2858 days ago
If you're not a HNWI I wouldn't bother buying individual bonds (and if you are, you're probably paying someone to do it for you). You can get 99% of the benefit of this full ladder just using a few etfs. Check out $VGSH, $VGIT, $VGLT - expense ratios are only 0.07. But also if you're young you probably shouldn't worry about this. You don't hold many bonds anyway and you shouldn't be trying to time the market - just buy a total bond fund and forget it.

If however, you do want some pizzazz in your bonds, also check out barbells and bullets. The concept is the same as a ladder except you're not equal-weighted across time. And then check out Vanguard's short, intermediate and long corporate bonds and you can do similar things in the corporate space.
2 comments
JumpCrisscross 2858 days ago
> You can get 99% of the benefit of this full ladder just using a few etfs

Bond funds churn. Not only does this create tax implications, it also means instead of earning 2% (when prevailing rates are 3%), you lose 1%.

Bond funds are better bets for foreign, high-yield and other creditors where the credit component dominates the rate component. Paying someone to buy your Treasuries, on the other hand, is wasteful.

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jterenzio 2858 days ago
I agree for long-term investments a fund might be better (ex. in a retirement account mixed with equity funds) but if you bought those bond funds in the past few years and sold them you might not have made much of a return. For example in the past 1 year the price of VGSH went from 60.83 to 59.87 so you lost over 1% on the price change which cancels out most of the interest yield. My point is that for short-term savings in a rising rate environment this can work better.
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jhfdbkofdcho 2858 days ago
Isn’t that ignoring dividend payouts? This says it’s like -0.2% over the last 12 months including payouts vs -1.6%. No idea how accurate this is but it’s an important correction to just the price returns if you’re talking about holding the shares.

https://www.etfreplay.com/chart_totalreturn.aspx

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jterenzio 2858 days ago
Yes, but the yield on the payouts is only around 2.5% with this fund so the price change has a massive effect on your overall return.
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dmoy 2858 days ago
Yes that is ignoring dividend payouts, which for a bond (edit: bond fund) is a substantial part of the return.
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