VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Discussion of the Bond portion of the Permanent Portfolio

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MachineGhost
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VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by MachineGhost » Thu Feb 09, 2012 1:59 pm

I've been using FLBIX over VUSTX/TLT in backtesting because it has a longer maturity than the former and reinvests dividends unlike the latter.  BTTRX has a crossover point of around 2009 where the declining duration is the same as FLBIX, so its now "off the run" for my PP purposes.  I also like the extra security of owning mutual funds directly over ETFs in a brokerage account, though I would hold FLBIX at Fidelity.

For my permamently allocated position in LT Bonds, I would like to hear if there are any advantages to buying and holding individual Treasury bonds commission-free at Fidelity over TreasuryDirect other than liquidity ease in SHTF scenarios.  And, how much of a markup on the bid-ask spread does Fidelity impose for them to be "free"? 

And why should I not go with FLBIX/TLT over maximum duration 30-year Treasury bonds, wherever held?

MG
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by craigr » Thu Feb 09, 2012 2:06 pm

I like owning the bonds directly because it eliminates all manager risk. Also once you own them there is no annual expense ratio. Finally, I know in a crisis I can rely on the bonds to do what they need to do and not be subject to underneath fund risks that could always show up. Since I hold the bonds for almost 10 years before selling them the transaction fees are greatly contained.
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by BearBones » Thu Feb 09, 2012 2:17 pm

craigr wrote: I like owning the bonds directly because it eliminates all manager risk...
Is there a benefit from owning directly from Treasury Direct vs broker?
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by SteveGo » Thu Feb 09, 2012 2:50 pm

If you need to sell Marketable Treasuries before maturity, such as  for a rebalance, you will have to transfer the bonds out of Treasury direct to your broker in order to sell. The process requires that you fill out form, have the signature guaranteed, and mail that form into them. To me this is too much trouble for LTT's. So, in my mind there is no benefit to purchasing LTTs at TD.

For short term stuff, that you intend to hold to maturity, then Treasury direct is pretty good. You buy bills and notes at auction, and when they mature the proceeds go back to your bank, or you can repurchase at the next auction. This is OK, but no better than buying them from a broker. You might save a little bit on the spread at TD.

For the non marketable things, like I-bonds, TD is the only way to go.

Years ago, TD would sell the treasuries for you, for about $40 per transaction, but they don't seem to offer that any more.
Last edited by SteveGo on Thu Feb 09, 2012 2:53 pm, edited 1 time in total.
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by craigr » Thu Feb 09, 2012 4:55 pm

BearBones wrote:
craigr wrote: I like owning the bonds directly because it eliminates all manager risk...
Is there a benefit from owning directly from Treasury Direct vs broker?
I suppose an extreme argument could be made about counter-party risk at the broker. But Treasury Direct has its own quirks with respect to liquidity as SteveGo mentions.

At some point you just have to accept that you take care of the more basic risks (like manager risk and costs) and just accept that small chance of extreme risks like a massive systemic brokerage failure.

Many brokerages today have bond desk systems that can do everything from T-Bill ladders to long term bond purchases with very little cost. It's just easier to do for most people than working with Treasury Direct.

And ironically I think you have better recourse against a brokerage than against Treasury Direct if there was a problem with your account. It is almost impossible to sue the US Government if it was required. Even if you could sue them successfully, they have unlimited resources to drag things out and basically make you go away.
Last edited by craigr on Thu Feb 09, 2012 4:57 pm, edited 1 time in total.
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MachineGhost
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by MachineGhost » Fri Feb 10, 2012 5:48 pm

Good replies.  I forgot to ask another important question:

If Treasury Bonds are held at a broker, is it in the "street name" of the broker, or your own or can be registered as such?

MG
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by murphy_p_t » Sat Feb 11, 2012 12:21 am

from what i've found, the normal retail brokers (like scot, vangrd) don't do direct registration...i'd love to be shown otherwise...this was touched on elsewhere on this forum.
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Re: VUSTX vs FLBIX vs TLT vs BTTRX vs EDV vs TreasuryDirect vs Fidelity

Post by Lil 'Edgy » Mon Jan 23, 2017 2:08 pm

craigr wrote:I like owning the bonds directly because it eliminates all manager risk. Also once you own them there is no annual expense ratio. Finally, I know in a crisis I can rely on the bonds to do what they need to do and not be subject to underneath fund risks that could always show up. Since I hold the bonds for almost 10 years before selling them the transaction fees are greatly contained.
I know that i'm responding to an old post but I want to ask Craig if it is possible for myself under 59 and 1/2 to take out a portion of my regular IRA to purchase Treasuries from Treasury Direct? I mean without tax or penalty consequences. Thanks
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