Gyroscopic Investing

Hello,

Just setting up the PP for my family savings. Does everyone here use mostly individual long term bonds or TLT? Just wondering.

thanks!

Jeffrey

Welcome!

I can't speak for everyone else, but I personally use TLT.

I use TLT. A big point for the PP that attracted me was simplicity. TLT makes it easier than buying individual bonds.

One good strategy can be individual bonds for your "deep bonds" (those which you don't expect to touch for a long time), and TLT for your "shallow bonds", those you might need to sell for rebalancing or for withdrawals or something.

Buying individual bonds is fun (to me), and it'll save you some money.

If you're the tinkering type, buying individual bonds might satisfy some of your tinkering urge, keeping you from tinkering in detrimental ways.

Buy the individual bonds. It's really no harder than buying CDs. I would not want 25% of my retirement money sunk into a single fund with possibly creative things going on behind closed doors.

You could buy them in lots of, say, $10K, then buy TLT with the remainder of the bond allocation.

I buy the individual bonds.

i started out with TLT since bond purchases were complicated at the time, they involved difficult to manage accounts with treasury direct, it wasn't "the ideal" but it was plenty good enough.... when vanguard and others simplified the process i switched over to the more ideal, mostly individual bonds with a little TLT left over for rebalancing... buying individual bonds is now easier than setting up my spreadsheet to track them was

I have a mix of the two. TLT in my Roth (relatively small total roth account value). Taxable account has mostly individual bonds with a small amount of TLT for rebalancing if needed.

I use individual bonds, but check your trading platform/brokerage and see how they plan to make money off the trade. For example, I bought some using TD Ameritrade and it when I went to sell I got so-called "bids" that were 5% below the expected value. Wouldn't want to do a lot of trading at the cost, but really I don't rebalance that often

TLT is simple and easy to buy/sell, just like GLD or IAU.
As you become more comfortable with the allocation, you can explore other options to holding assets directly.

You can buy both individual Treasury bonds and TLT commission-free at Fidelity.

I used to use TLT, and now I find it convenient to buy individual bonds at Vanguard or Fidelity, and nearly always at auction.

What is everyone NOW doing? TLT or buying the individual bonds? Also, curious if any of the original responders are now doing the opposite.

Vinny

yankees60 wrote: ↑Fri Jan 03, 2020 8:38 pm What is everyone NOW doing? TLT or buying the individual bonds? Also, curious if any of the original responders are now doing the opposite.

Vinny

Roth: I still have TLT (smaller ROTH account)
Taxable: Individual Bonds and TLT - about 50/50 currently.

Individual Bonds in Vanguard.
TLT in my IRA

TLT

I started out 100% in TLT when I switched to the HBPP in 2013. It is the simplest way to begin.

After about a year in TLT, I switched to individual 30 year T-bonds, which are easy to purchase on the secondary market through a Fidelity brokerage account. Unlike ETFs and mutual funds, there are no commissions or fees to trade bonds at Fidelity. However, investors should understand that Fidelity makes its money in the bid/ask spread. Holding individual bonds removes manager risk and gives maximum flexibility to the investor.

Note that tax placement can be just as important because T-bonds throw off a constant stream of taxable interest, regardless of whether you own a bond, a fund, or an ETF. I do not hold any T-bonds in taxable accounts (including TreasuryDirect). All of my holdings are currently either in a traditional IRA or a Roth IRA.

jhogue wrote: ↑Sat Jan 04, 2020 9:36 am I started out 100% in TLT when I switched to the HBPP in 2013. It is the simplest way to begin.

After about a year in TLT, I switched to individual 30 year T-bonds, which are easy to purchase on the secondary market through a Fidelity brokerage account. Unlike ETFs and mutual funds, there are no commissions or fees to trade bonds at Fidelity. However, investors should understand that Fidelity makes its money in the bid/ask spread. Holding individual bonds removes manager risk and gives maximum flexibility to the investor.

Note that tax placement can be just as important because T-bonds throw off a constant stream of taxable interest, regardless of whether you own a bond, a fund, or an ETF. I do not hold any T-bonds in taxable accounts (including TreasuryDirect). All of my holdings are currently either in a traditional IRA or a Roth IRA.

Which now explains the appeal of I-Bonds to you. Because they have NO constant stream of taxable interest (only taxed upon their maturity date or when you sell them?), which then allows you to hold these in taxable accounts (including TreasuryDirect)?

Vinny

Tax deferral is one of the appeals of I-bonds to me, but certainly not the only one. I think they are the most versatile form of Deep Cash for retail investors-- a sort of financial Swiss Army knife. I keep some I-bonds in a Treasury Direct account and some in paper I-bonds in my local bank safe deposit box.

They have-
- No principal risk.
- No interest rate risk.
-No call risk.
-No inflation risk.
-No deflation risk.
- No fees or commissions.
-No state or local taxes.
- Less principal risk than FDIC - insured CDs.

jhogue wrote: ↑Fri Apr 10, 2020 8:45 pm Tax deferral is one of the appeals of I-bonds to me, but certainly not the only one. I think they are the most versatile form of Deep Cash for retail investors-- a sort of financial Swiss Army knife.

They have-
- No principal risk.
- No interest rate risk.
-No call risk.
-No inflation risk.
-No deflation risk.
- No fees or commissions.
-No state or local taxes.
- Less principal risk than FDIC - insured CDs.

Under your (and others' (but probably mostly yours)) I'll probably now every year be buying my $15,000 limit of them.

Vinny

EU citizen here. I hold individual (German) bonds.

It is a bit more of a hassle, but it has tax advantages for me: the dividend from an ETF is taxed with dividend tax, and dividend from an actual bond is not.

senecaaa wrote: ↑Sat Apr 11, 2020 4:00 am EU citizen here. I hold individual (German) bonds.

It is a bit more of a hassle, but it has tax advantages for me: the dividend from an ETF is taxed with dividend tax, and dividend from an actual bond is not.

Wow, that’s a nice tax code twist.