Bond funds for an etf portfolio

Bobziz

Slightly less gov and more corporate in VAGS. I'm thinking I may add short duration to reduce volatility, something like UKG5. 

GeoffTF

noclaf said:

masonic said:

You could drop the middle one. If you want index linked that would need to be via a separate fund, but generally shorter dated would be preferable to avoid the interest rate risk associated with rising inflation. I thought there was an index linked 1-5 year ETF available now. Edit: perhaps that was just ITPS (US TIPS), in which case individual holdings are more attractive than a fund.

Thanks Masonic, do you have a view on Corp Bonds and the need to include them? My understanding is they move broadly in lockstep with Equities so wouldn't provide much diversification when Equities drop....possibly an over-simplification but that's why I dropped the Corp Bond ETF.

Not to any significant extent if the bonds are investment grade, as they are in VAGS.

masonic

noclaf said:

masonic said:

You could drop the middle one. If you want index linked that would need to be via a separate fund, but generally shorter dated would be preferable to avoid the interest rate risk associated with rising inflation. I thought there was an index linked 1-5 year ETF available now. Edit: perhaps that was just ITPS (US TIPS), in which case individual holdings are more attractive than a fund.

Thanks Masonic, do you have a view on Corp Bonds and the need to include them? My understanding is they move broadly in lockstep with Equities so wouldn't provide much diversification when Equities drop....possibly an over-simplification but that's why I dropped the Corp Bond ETF.

I don't like corporate bond funds. I would consider them to be a watered down version of equities that doesn't provide much value in an equity heavy portfolio and many are packed with lower credit rating debt to boost their yield. I can see the case for holding them if you want natural income in retirement and/or are a cautious investor. Personally, I would not want to hold a bond fund with significant debt rated at BBB+ or below.