So most of the funds being discussed above really make most sense if you have longer term income and/or legacy targets.
You seem to be describing a situation where liquidity/real-value preservation should be a much higher priority, even if that comes at the cost of long-term expected returns.
I tend to think DFA's Retirement Income and the TSP L Income funds are indicative of what you should be looking at in cases like this.
DFA's version is 20/80, and the 80 is 48% market TIPS, 32% One-Year Fixed.
TSP's is more like 25/75, and the 75 is 69% G, 6% F (TBM equivalent). As an aside, interestingly one could see G as very much a sort of blend of market TIPS and short-term bonds. For me it is really the gold standard (pun intended) for liquidity/real-value preservation, but of course you have to be in the TSP.
OK, anyway, an observation: DFA is using a lot of TIPS (TSP a lot of G), which makes a lot of sense and yet other broadly-marketed all-in-one funds do not. To be blunt, I don't think they could if they wanted to, because the TIPS market is too small!
So, like, Vanguard Target Retirement Income is like 30/70, and then the 70 is 37% TBM, 16% Total Intl Bond ("TIB"), and only 17% market TIPS. I don't think this is great, but that is probably as much Vanguard can do without exceeding the limits of the TIPS market. So it needs all that TBM/TIB, and compensates by having more stocks.
OK, so what to do? Well, despite my reservations, I think Vanguard Target Retirement Income is a possibility. If DFA is an option, you could do theirs.
But--at current rates, I would also be tempted just to go with a shorter-term TIPS fund. VTIP (ER of 0.04%) or STIP (0.3%) are options. I like the portfolio in TIPX, less so the ER of 0.15%. But with even shorter-term TIPS currently having a real yield of around 2%--I don't know, that sounds good enough to me.
You seem to be describing a situation where liquidity/real-value preservation should be a much higher priority, even if that comes at the cost of long-term expected returns.
I tend to think DFA's Retirement Income and the TSP L Income funds are indicative of what you should be looking at in cases like this.
DFA's version is 20/80, and the 80 is 48% market TIPS, 32% One-Year Fixed.
TSP's is more like 25/75, and the 75 is 69% G, 6% F (TBM equivalent). As an aside, interestingly one could see G as very much a sort of blend of market TIPS and short-term bonds. For me it is really the gold standard (pun intended) for liquidity/real-value preservation, but of course you have to be in the TSP.
OK, anyway, an observation: DFA is using a lot of TIPS (TSP a lot of G), which makes a lot of sense and yet other broadly-marketed all-in-one funds do not. To be blunt, I don't think they could if they wanted to, because the TIPS market is too small!
So, like, Vanguard Target Retirement Income is like 30/70, and then the 70 is 37% TBM, 16% Total Intl Bond ("TIB"), and only 17% market TIPS. I don't think this is great, but that is probably as much Vanguard can do without exceeding the limits of the TIPS market. So it needs all that TBM/TIB, and compensates by having more stocks.
OK, so what to do? Well, despite my reservations, I think Vanguard Target Retirement Income is a possibility. If DFA is an option, you could do theirs.
But--at current rates, I would also be tempted just to go with a shorter-term TIPS fund. VTIP (ER of 0.04%) or STIP (0.3%) are options. I like the portfolio in TIPX, less so the ER of 0.15%. But with even shorter-term TIPS currently having a real yield of around 2%--I don't know, that sounds good enough to me.
Statistics: Posted by NiceUnparticularMan — Sat Jul 20, 2024 12:39 pm — Replies 11 — Views 2033