What is your Bond Choices & Allocations for your portfolio

[judasofaustralia]

@rjozen That's a pretty good portfolio. I only chose the the Multi asset one since it's got the typical boglehead 3 fund portfolio all in one. I chose the other ETFs for more exposure to the markets outside SA.

 

[faith4l]

@rjozen Be careful of hypothetical questions, peoples positions differ.

Stop thinking in terms of currency or platform. They both just a way to get to funds for a desired allocation. The funds you mention have different allocations as well (Short, long, country specific etc.)

1. EE is just a platform. You should buy funds ideally unless there is a term needed, which should then not be regarded as your "long term" but rather a term place to XYZ reason
2. See 1, buy the market, then tilt to your more specific needs with educated reason for tilt
   1. For ZAR
      1. Taxable accounts would be Satrix funds, they are cost effective atm for both local and foreign if I recall.
      2. In RA would be Sygnia all bond index if you manage your RA yourself, else just whatever the manager is allocating - partly due to my self managed RA being with Sygnia
      3. I don't buy global bonds in my RA due to costs
   2. For USD, AGGG due to estate taxes, else BNDW (so depending on your USD holding value. Estate taxes is only really consideration at around 250k+ USD value)
      1. I don't buy local bonds in foreign currency accounts due to cost effective access locally already and contain them already in RA.
3. Whatever the global allocation is atm - that is what I buy. A simple a fund that would automatically mimic that, don't need to tinker.
   1. For local bias, I add a small percentage, although depends on how far away from retirement you are. This would mostly be within RA already and no where else. If I need more local bias tilt, will be depending on where I do that tilt (within RA, taxable account etc.).
4. 90/10 atm
   1. Mostly due to bonds in RA.
   2. Everywhere else I do not do bonds or income based investments for my long term portfolio, yet.
   3. Going forward, my new allocations will contain bonds that will slowly change my portfolio allocation. 10 years before retirement you should already have some direction of allocation going on and slowly adjust towards retirement. This is because something like sequence of return risk exists as well. Running a 100/0 portfolio until day of retirement, getting a strong market downturn, can dramatically effect your retirement if not managed.
   4. This is what works for me. Understand my position is most probably very different to yours.
5. This is meant for one of your last retirement withdrawal vehicles in order to maximize tax free growth (so it needs to sit the longest). 100% Equity here as it beats bonds in the long run. For simplicity, I just buy global funds and forget it for eternity. 5-10 years away from withdrawing from it, I will adjust things over time and introduce an allocation that is fit in conjunction with the rest of my portfolio. Since no CGT is applicable here, I don't need to worry about triggering tax with rebalancing.

Big note - I do not live in South Africa atm. I haven't contributed to an RA in many many years as it mathematically doesn't make sense for my position/needs. My long term position is aggressive in allocation as I'm covered on the short-mid term quite well. Dependents etc. is covered as well. No depts anywhere. Ability to pay cash for anything I need.

Now, for yourself.

If you want bonds, understand that you will already have exposure in your RA which if I recall will be a chunk of your portfolio atm and going forward. For TFSA, unless you want to 100% maximize taxation of every drip, just buy global MCW index fund here and move on. In your taxable accounts, see what is needed further and tilt here. Again USD/ZAR doesn't matter. But if you do plan on investing for say 7+ years, the fees and options you have in foreign currency is superior than what we have in ZAR. E.g. VT fund vs GLOBAL (tickers of funds). Satrix Global vs AGGG or IGLO or BNDW etc. etc.

Again, starting out keep it simple! Understand what or why you are picking a fund and how it compliments your investment strategy.

 

[faith4l]

• 1nvest ICE Treasury short
• Satrix Global Aggregate
• SA Bond ETF
• USD EE - BNDW

You looking at different things here that you can't compare under the same umbrella. Here, SA is SA (e.g. STXGOV). Global market based is BND or STXGBD

1nvest ICE Treasury short - No, there is other options for short term investments. Don't let US recency bias influence you

 

[rjozen]

@faith4l So Local market i have seen few suggestions STXGOV and for global BND (USD EE)

Where would Satrix Global Aggregate fit then? A ZAR EE vehicle to track global Bonds?

And 1nvest ICE a Local ZAR EE vehicle to tracke US Bonds?

Or how and where would you classify or basket them?

 

[rjozen]

@faith4l I think it would be a 50/50 split on currency and Region eg: 50% maybe in ZA EE - STXGOV, and 50% in USD EE on BNDS.

My current Age is now 39 - Been 12 year pension contribution, (moved over to RA) working on that RA for last 8 years, adding in a Provident fund from this year, (still going to carry on with RA) and starting EE TFSA and other investing also from this year.

TBH my RA is not very well funded besides the pension fund that got transferred over there, very minimal contributions each month...

 

[faith4l]

@rjozen Apologies, I got my ticker wrong I see. I meant to post global bond fund which is BNDW and not US ONLY version, BND (needs the W).

So when referencing to global, I'm referring to a fund that mimics a global bond index fund that contains multiple countries. BNDW is an example of this is dollars and STXGBD is an example of this in rand. Both track an index, although slightly different.

So much rather something like Total exposure of 50/50 (in terms of allocation, regardless of currency). Although I would personally not run a 50% South Africa bond allocation and much rather something like 30/70 between local + global (global again being multiple countries globally that track a global index).

Just to add, bonds are not 100% the same as equity allocation to currency/interest in other markets. But there is a benefit to global bonds. Doing 30/70 in your taxable might been you end up around a higher local exposure by include exposures in your other investment vehicles (RA, TFSA etc.)

To reiterate, need to look at all your holdings together to really get a picture.

 

[rjozen]

@faith4l Thanks For lengthy feedback and effort to share the wealth of knowledge you have. And 100% agree One rule of investment might not be a fit for everyone, thus why I called it out in my initial post, and follow up post even.

But for me the way I also learn, is from seeing what other people do in their journey, and finding out their "why" on why they selected XYZ, its very fun and educational at the same time for me, learning and educating myself.

and 100% agree EE is just a vehcile, but there are all other different paths jsut to get funds to the investment vehicle.

Thus why my EE risk profile should be High, and my overall portfolio balances out as my RA is the more conservative route, but again, just investigating what options are there, As i have studies a few different Bogglehead 2/3/4 Fund lazy setups, and curious how some people execute their portfolios, and what rules they follow, although everyones rules wont be the same.

Reason or inspiration for the post, was the post I linked in the original post, from another SUB, that was quite a very interesting read, that the risk to reward level form 100% stocks to even 80/20 or 60/40 stock/bond split. Was very interesting read, and made sense why lot of bogglehead portfolios has such a big Bond split inside.

But again I am in no position to give actual factual data, i have my thoughts at the moment, and still just learning all this and taking in as much as I can comprehend at the moment.... and what makes sense to me. and if it doesnt trying to find reason why.