TLT, EDV, FLBIX, BTTRX: options for 401k

[Wonk]

Hey there bond aficionados,

Looking for some opinions on bond fund choices. I'm finally getting around to adjusting my wife's 401k and some creativity is needed.  Since I'm mostly taxable my options are wide open, but hers are restricted within the confines 401k world.  Basically, the 401k fund choices are garbage so I set up a brokerage link and have been running 90% PRPFX for a while, with the remaining 10% in a stable value fund until I can get a suitable long term option.

Problem is, the brokerage window doesn't allow TLT or EDV as options--I suppose no ETF's allowed.  That means I'm going to need to run the long bond portion with a mutual fund.  It looks like FLBIX performs similar to the volatility in TLT, while BTTRX is a zero fund and is less volatile that EDV, but more than TLT.  I'm pretty sure I can go with either fund, but I'd like to hear any thoughts from others before I set it up.

I'm thinking an 85% PRPFX/15% BTTRX would work or an 75% PRPFX/ 25% FLBIX would work as well.  Any opinions?

Thanks.

[KevinW]

Are you open to thinking of your and your wife's holdings as one big PP?

Does the brokerage window allow individual bonds?

Browne prescribed nominal bonds, not the zeroes that BTTRX holds.  You'll have to do your own research on whether you're comfortable with zeroes.  I decided against it.

I'm not aware of any long-term nominal Treasury mutual funds other than FLBIX and VUSTX.  Each has its flaws, which have been discussed here recently.  FLBIX loans out some of its assets.  VUSTX dilutes its Treasury holdings with non-Treasury government agency bonds.  Again, you'll have to reach your own conclusion on this issue.

[Wonk]

Are you open to thinking of your and your wife's holdings as one big PP?

If I absolutely need to, yes.  She likes to see the quarterly statement showing a nice, straight 45 degree line, so I figured if there was a way to smooth out the volatility of PRPFX within her account, I'd do it.

Does the brokerage window allow individual bonds?

Browne prescribed nominal bonds, not the zeroes that BTTRX holds.  You'll have to do your own research on whether you're comfortable with zeroes.  I decided against it.

I'm looking into the possibility of direct bond buying.  Out of curiousity, why did you decide against the zeros?

I'm not aware of any long-term nominal Treasury mutual funds other than FLBIX and VUSTX.  Each has its flaws, which have been discussed here recently.  FLBIX loans out some of its assets.  VUSTX dilutes its Treasury holdings with non-Treasury government agency bonds.  Again, you'll have to reach your own conclusion on this issue.

I haven't been reading the posts like I used to so I was unaware of the ETF lending assets issue until I noticed the thread today.  What a pain in the ass.  I guess if I can't buy bonds directly through the brokerage link, I'll need to pick a fund and cross my fingers.