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Posted by Default User on October 18, 2007, 12:21 pm
I mentioned my problems with lack of tax-advantaged accounts in my
portfolio outside of the 401K (see "REIT strategy"). This problem goes
even more for bonds. I'm currently planning 70/30 stock/bond split. As
I can't hold very much in the way of bonds in the Roths, especially if
I go ahead and put REITs in there, what's a good strategy?
Possibilities:
1. Look at tax-exempt bond funds (ETFs?).
2. Go with regular bonds or funds and pay the tax (25% bracket).
3. "Trade" with the 401K by increasing its bond amount and decreasing
that in the brokerage account. The 401K only has one bond fund, that's
a Lehman Aggregate Index. Its average maturity is about 7.5 years as I
recall. Many of the sources I've read suggest shorter maturities.
Also, I've read differing opinions about whether foreign bond exposure
is a good idea or not. Obviously not an option in the 401K.
Brian
--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)
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Posted by Ron Peterson on October 19, 2007, 12:50 am
> I mentioned my problems with lack of tax-advantaged accounts in my
> portfolio outside of the 401K (see "REIT strategy"). This problem goes
> even more for bonds. I'm currently planning 70/30 stock/bond split. As
> I can't hold very much in the way of bonds in the Roths, especially if
> I go ahead and put REITs in there, what's a good strategy?
You might want to consider preferred stocks. PFF would be an ETF that
might work for you.
You might want to buy individual preferred stocks for a taxable
account because some some of the stocks in PFF aren't fully qualified
which is needed to get a tax break on dividends.
--
Ron
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Posted by Default User on October 19, 2007, 3:21 pm
Ron Peterson wrote:
> > I mentioned my problems with lack of tax-advantaged accounts in my
> > portfolio outside of the 401K (see "REIT strategy"). This problem
> > goes even more for bonds. I'm currently planning 70/30 stock/bond
> > split. As I can't hold very much in the way of bonds in the Roths,
> > especially if I go ahead and put REITs in there, what's a good
> > strategy?
>
> You might want to consider preferred stocks. PFF would be an ETF that
> might work for you.
I'll take a look at it, thanks.
> You might want to buy individual preferred stocks for a taxable
> account because some some of the stocks in PFF aren't fully qualified
> which is needed to get a tax break on dividends.
Ok.
Brian
--
If televison's a babysitter, the Internet is a drunk librarian who
won't shut up.
-- Dorothy Gambrell (http://catandgirl.com)
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Posted by D T W .../\... on October 19, 2007, 5:01 am
Brian wrote:
The 401K only has one bond fund, that's a Lehman Aggregate Index. Its
average maturity is about 7.5 years as I recall.
What does the length of bond maturity mean to me when investing?
My 401K has short and intermediate term bond funds,,,,,,,,,
DTW .../.../.../...
>
> I mentioned my problems with lack of tax-advantaged accounts in my
> portfolio outside of the 401K (see "REIT strategy"). This problem goes
> even more for bonds. I'm currently planning 70/30 stock/bond split. As
> I can't hold very much in the way of bonds in the Roths, especially if
> I go ahead and put REITs in there, what's a good strategy?
>
> Possibilities:
>
> 1. Look at tax-exempt bond funds (ETFs?).
>
> 2. Go with regular bonds or funds and pay the tax (25% bracket).
>
> 3. "Trade" with the 401K by increasing its bond amount and decreasing
> that in the brokerage account. The 401K only has one bond fund, that's
> a Lehman Aggregate Index. Its average maturity is about 7.5 years as I
> recall. Many of the sources I've read suggest shorter maturities.
>
>
> Also, I've read differing opinions about whether foreign bond exposure
> is a good idea or not. Obviously not an option in the 401K.
>
>
>
>
> Brian
>
> --
> If televison's a babysitter, the Internet is a drunk librarian who
> won't shut up.
> -- Dorothy Gambrell (http://catandgirl.com)
>
======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for
a FEW lines to add context, the previous post is deleted.
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Posted by on October 19, 2007, 4:14 pm
> Brian wrote:
>
>> The 401K only has one bond fund, that's a Lehman Aggregate Index. Its
>> average maturity is about 7.5 years as I recall.
>
> What does the length of bond maturity mean to me when investing?
> My 401K has short and intermediate term bond funds,,,,,,,,,
In *very* brief: longer term indicates greater sensitivity
to interest rate fluctuations - rates go up, present values
go down. Longer term bonds will have higher price volatility.
In slightly less brief: maturity isn't really the relevant
question, but rather, "duration" - which is a measure of
the sensitivity of the bonds values versus interest rates.
Note that things like floating-rate bonds often have durations
which are very very small, yet maturities which may be long.
So if you're concerned with interest rate risk, note the
duration, not the maturity.
Duration, like maturity, is usually quoted in units of time -
years. I was just looking at the portfolio details of a
muni bond fund this morning which had an average maturity
of 23 years and an average duration of only about 5.5 yrs.
Re: the earlier poster who asked about a Lehman Agg Index fund:
While the average maturity of the Agg is now around 7.3,
the duration is around 4.6 and the average credit quality
is very high - only about 20% is corporate debt and even
that is all "investment grade" debt. The rest is treasuries
and government-related (ie. agencies) and high-quality
asset-backed (ie. FNMA conforming mortgages - none of
the subprime structured stuff). Assuming the expenses are
low, it's exactly what's typically meant by "the bond market"
for asset-allocation discussions. As far as fund
categories goes, it's "intermediate-term bonds," not
long-term.
--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting
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