Gyroscopic Investing

Setting up my PP and need help/have questions - since I have Voyager account at Vanguard, I can use their ETFs/Funds with no transaction fee so I would like to know if Forum is OK with using them rather than ones usually recommended, i.e.

LT - instead of TLT, use VGLT (Long-Term Government Bond), EDV (Extended Duration), or VUSTX (Long-Term Treasury) - if Vanguard OK, which one

ST - instead of SHY or SHV, use VGSH (Short-Term Government) or VFISX (Short-Term Treasury) - again, which one

And as to selection for gold 25% (which Vanguard does not have), instead of GLD, what does Forum think of PHYS or SGOL. Several posts in this and other forums raise concern about GLD (allocation,etc) and IAU. I prefer the convenience of an ETF or CEF, which I can manage in the same brokerage account as my equity/bond holdings, rather than owning bullion/coins held somewhere else.

Finally, if Forum feels non-Vanguard options are best, I would look for a discount broker with fees lower than the $7/trade Vanguard Voyager charges- I have seen FolioInvesting recommended ($4/trade) and wonder if Forum has comment about their service.

I already have learned much from this Forum and appreciate your help.

Thank you.

hello and welcome!

I love Vanguard and once upon a time I *only* used Vanguard,  but there are a few things discussed on the forum that I should mention:

EDV is zeroes. Definitely check out the comments about it being thinly traded, about imputed (or "phantom") interest -- so don't hold it in taxable -- and most importantly about how zeroes are not really a part of Harry Browne's plan. You could hold them as a *part* of your long bond allocation, and Medium Tex has mentioned this with regard to holders of PRPFX, which currently doesn't have a lot of long bonds.

VUSTX - you could do worse than this, but Craig and others have pointed out that it doesn't hold all 30-year treasuries. I don't think it even holds all treasuries. Perhaps it's better to pay a bit of transaction costs and use TLT. You won't trade that often, anyway. Also, you can now trade treasuries free via Vanguard's Bond Desk, although I think there's a minimum. Edit: I should add that in this thread, kobe1 pointed out that there's only a minimum in the auction and not in the secondary market.

VGLT - The Vanguard page I'm looking at says 30% of it is in 10-20yr treasuries. You really need 20-30yr instruments for a real permanent portfolio.

I hold a little PHYS in addition to IAU and GTU, plus coins. I'm not sure if it has fallen out of favor with other gyro investors, but I learned about PHYS at this forum, for what it's worth.

Vanguard is fine. They have a great reputation. Personally I'd like to see their Treasury funds 100% treasuries and not mix in things like mortgages, but you can't have everything.

Stocks - Vanguard Total Stock Market is an excellent choice.

Bonds - VUSTX/VGLT are OK, but not optimal. TLT is better. But why not just buy the bonds from Vanguard's bond desk and have them held in your account for you? It's easy and I think it's free now. If you are building your own portfolio there is no need for EDV. It's way too volatile and has bad tax treatment if you can't shelter it.

Cash - VFISX is not perfect, but OK. It holds mostly Treasuries and Vanguard is pretty conservative in how they run it.

Gold - SGOL/PHYS are probably better than GLD/IAU in some aspects (maybe taxes??). But otherwise they all have similar risks. The closed end funds from Canada are probably best of the ETFs for US persons.

With the above said, I still recommend holding assets at two brokerages just in case there is a problem at Vanguard or your account (ID theft, etc.). I think it's best to spread the money around.

CraigR,

I know previously MediumTex had noted that perhaps a combination of VUSTX and EDV would be okay. Perhaps 50/50 of each.

Think this would be too volatile as well?

b

Bonafede wrote: CraigR,

I know previously MediumTex had noted that perhaps a combination of VUSTX and EDV would be okay. Perhaps 50/50 of each.

Think this would be too volatile as well?

b

That would work fine, though some would question why you would want to do this when a fund like TLT is available.

Excessive volatility wouldn't be a problem with that setup.

Bonafede wrote: CraigR,

I know previously MediumTex had noted that perhaps a combination of VUSTX and EDV would be okay. Perhaps 50/50 of each.

Think this would be too volatile as well?

b

I think EDV may be OK to mix with the PRPFX fund, but VUSTX performs well enough that it's probably fine for the simplicity of it. Then again as Tex notes, TLT is right there. And again, Vanguard's bond desk can buy LT treasuries directly if you have the account minimums so that's best of all. You avoid all the pitfalls of funds and get cheaper expense ratio (zero) per year.

Thank you all - this has been most helpful and I'm looking forward to continuing working with the Forum.

MediumTex wrote:

Bonafede wrote:

That would work fine, though some would question why you would want to do this when a fund like TLT is available.

Excessive volatility wouldn't be a problem with that setup.

When I did a tax loss harvest of TLT  I switched to EDV/VGLT and it is working fine so far. At the time the way the market sentiment was I thought for sure I would repurchase TLT after 31 day but the new holdings just took off. I still have TLT in IRA, the EDV/VGLT combination is slightly outperforming TLT and maybe putting the overall volatility closer to 25 year bonds  instead of 20 year bonds. Anyway if my EDV/VGLT ever goes underwater I will tax loss harvest it and buy TLT