Bonds in a portfolio and TIPS ladders

Financial Independence/Retire Early -- Learn How!
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ben
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Post by ben » Mon May 09, 2005 11:21 am

Zendrix - I think that is a very clever thing to do. EM debt is much more volatile than our usual garden variety FI/bonds.
When I give the "quick" overview of my base portfolio I say:

40% global equities, 30% real stuff(reits/commo/metals), 30% FI.

But the FI actually consist of equal parts of TIPs, PFUIX(foreign developed) and PEBIX (EM debt). (- and some GIM for good measure).

MENTALLY I have the 10% EM debt in a seperate class with equity like volatility - creating a 50% "equity volatility" and 50% "other volatility" group. - Now one could start looking at the "other" category and argue that most of that (VNQ/PCL+PCRIX+VGPMX) have equity level or higher volatility TOO.... hmm....

Cheers!
Normal; to put on clothes bought for work, go to work in car bought to get to work needed to pay for the clothes, the car and the home left empty all day in order to afford to live in it...

peteyperson
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Post by peteyperson » Wed May 11, 2005 9:00 am

Zendrix,

Harvard University Endowment Fund allocation a category for 'HY Securities' which is split evenly between US junk bonds and EM debt. They separate it out because it functions entirely differently from their other bonds.

Petey
zendrix wrote: Cathyet: That Vanguard Diehard post is interesting. I hope they keep going on the topic too.

Has anyone from the US who holds EM bonds considered placing them outside of their bond allocation? (I understand that non-US citizens may hold them for different reasons) As Petey said above, EM bonds can not be relied upon as a safe haven during wild market swings which is the main reason most people hold bonds. I have also seen examples where they are not good long term investments. However, in the short term, some hold EM bonds more likely for other reasons, such as hedging against the falling dollar. So wouldn't placing EM bond holdings somewhere other than among ones safe haven, fixed income/bond category and instead in a distinct category of their own or within the equity portion of a portfolio be more appropriate?

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