IUSB
iShares Core Total USD Bond Market ETF
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I could see VTI and VXUS for someone willing to specifically derisk from US equities given the current political environment. Or just do VT long term and call it good enough since the overall returns are roughly similar. For Bonds I believe IUSB, BND, or AGG are pretty close too with about 17k basket holdings according to Fidelity Investments. Anything else is simply increased decreased diversification and increased risk at the benefit of potentially higher returns or greater losses
Changing sector weights to underweight sectors you think are more volatile probably won't be as helpful as you think. XLK (S&P 500 Technology) and XLC (S&P 500 Communications) have better 3 year alpha and Sharpe ratio than all the other S&P 500 sectors even though tech and communications are supposed to be riskier. XLP (S&P 500 Consumer Staples/Defensive) has worse returns and risk adjusted returns than IUSB (total USD bond market) over the past 3 years. Healthcare is another sector that's supposed to be safer, but the performance has been abysmal this year because of UnitedHealth. You thought DIA would be safer because it's supposed to be more spread across sectors, but UnitedHealth has noticeably dragged it down. DIA's limited holdings make it somewhat riskier than other index funds since it depends more on individual stocks. the DJIA is also weighted by price, which is a pretty nonsensical way to weight an index in the first place. If BRK-A was in DIA, it would be 99% of the portfolio. Ultimately, choosing to overweight a "safer" sector doesn't necessarily mean the value of your investment is safer, especially when adjusted for inflation. This also applies to asset classes, but at least a rate cutting cycle is beneficial for bond prices. Even foreign bonds are somewhat affected by rates in the US because foreign bonds are compared with US bonds. I used 3 year measurements because that's what my brokerage's app shows. Over the past 5 years, XLP has clearly outperformed IUSB.
IUSB yields about 0.5% more on average but with bond funds/etfs every little bit helps (%yield, %er) to make it worthwhile over purchasing bonds themselves (though most may prefer shorter term CDs, TIPs for inflation, etc. the latter US govt backed for US saver-investors fwiw). It still has enough investment grades and ultimately Treasuries to weather foreseeable downdrafts, plus probably respond better to the inevitable bounceback. High yield default rates long term averaged 4% in the 1980s down to 2% recently; 2009 was a high with 10% defaulting in the U.S., but the amt of high yield in IUSB is still very low vs investment grade. Now if looking at risk parity like I did when starting, look at long term Treasuries. I did following the late Harry Browne’s advice on his late ‘70s “permanent portfolio” though there’s an updated discussion on optimized portfolio website (which points out that investment grade corporates aren’t as safe as govt bonds … to each their own). Caveat: I might be a little fearless as I still have long term Treasuries and even long term zeroes from a previous “risk parity” portfolio of mostly US aggressive growth for .. growth vs. LT treasuries as a “hedge”, though still be looking to cash most of those in with my going into retirement bond funds [they themselves “4 fund”] being almost equal SHY/maybe ISTB, IUSB>>TLT, hedged BNDX>>> unhedged IGOV (not counting actual TIPs and CDs to cash in …). [i]Add[/I] so for stocks, I’ll be “2 fund” with VONE>IXUS in my IRA (US self-directed retirement account), .. for bonds I’ll have more than a few funds/etfs to spread various risks.
IUSB yields about 0.5% more but with bond funds/etfs every little bit helps (%yield, %er) to make it worthwhile over purchasing bonds themselves (though most may prefer shorter term CDs, TIPs for inflation, etc..). It still has enough investment grades and ultimately Treasuries to weather foreseeable downdrafts, plus probably respond better to the inevitable bounceback. High yield default rates long term averaged 4% in the 1980s down to 2% recently; 2009 was a high with 10% defaulting in the U.S., but the amt of high yield in IUSB is still very low vs investment grade.
Really appreciate the breakdown, especially the point about VXUS vs IXUS. I’ve struggled with VXUS’s small-cap tilt too. Curious if you think IUSB’s current yield makes it more attractive than BND despite the slightly higher risk? Been debating if it’s worth the extra 0.3–0.4% in yield long-term.
Those are funds that buy effectively every company on the market. Info on the idea and implementation: https://www.bogleheads.org/wiki/Three-fund_portfolio You can do it with any number of funds, but with Blackrock would be ITOT, IXUS, and IUSB. Some discussion on why this approach: https://www.bogleheads.org/wiki/Bogleheads%C2%AE_investment_philosophy Fund providers have created target date funds that implement this strategy, and these days they've gotten very cheap in terms of fees, which is great because for most people they can simply pick something from their brokerage called like "target retirement 2055" and it'll do basically the right thing, including maintenance and risk adjustments over time, with zero effort from the investor.
BND is almost 70% in US Govt securities and then pretty much AAA, A, BBB corporate bonds. The corporates give a bit more yield but are far less useful to balance stocks since corporate bonds often have a “call” provision if rates drop/prices rise significantly. Calls allow a bond issuer to pay off the principal and issue new debt at the new lower rate (something similar happens to mortgage backed bonds btw as homeowners refinance). Treasuries don’t have that problem except one special case in the late 1970s. Still BND has mostly Treasuries so it’s useful, just not as useful as a pure Treasury fund if rebalancing is your goal. Some core bond ETFs like iShares IUSB also contain a bit high yield bonds which even give more yield vs more defaults. Then you have to look at average maturity and duration. Longer bonds are more sensitive to interest rate changes, which can be bad or good depending on how you use them.
80% bonds seems too high imo. If you are really worried about stock volatility, leave the individual stocks and go to an All Equity etf like AVGE or an all stock etf like ITOT, SCHB or VTI. That way you don't need to worry about anything if something were to happen that moved stocks one way or another. A simple all bond etf like IUSB is all you need. If you like to diversify more, the treasury related bond fund GOVT is a good addition. Have you also considered a CD ladder?
BND or IUSB are good ones to start with. I would look at using morningstar, ETF.com, or etfdb.com to look at different options.
Probably some to VTI, yes. Not a bad way to go. Also be sure to include some overseas and emerging makers, then offset the equities with some high credit quality intermediate bonds like BND AGG or IUSB. Small amount to broad based commodities, a little GLD maybe. You start with that and you have the beginnings of a nicely well balanced, diversified, global portfolio
PUT options on IUSB. There no one trading it and I’m already up as we are at an all time low and only going lower. You heard it hear first.
I wonder if it will mimic the holdings in their Asset allocation etfs that are pretty much like index balanced funds like vanguard lifestrategy or Fidelty four in one index fund. , I guess time will tell. For the record the ishares asset allocation etfs use IUSB for US bonds and IAGG for international bonds. Along side with their SP500, SP mid cap , and SP small cap for US allocation, and developed and emerging for international.
Thank you. Signed up for an auto Roth selector s few years ago and have more than enough IUSB bonds in there that have steadily been tanking. I've been on the fence as to remove them or hold them, and this (at least) makes it a little more clear. Thanks!
Move the core S&P 500 stuff to the S&P 500 (non core variant). Sell this: JEPI (15%) IUSB (global usd bonds - 9%) IVV (7%) SCHD The sector cape of your stuff is bad, many other issues. Put it into a bank (FDIC) that pays 5.3%. Wait for a stock market correction of 35% percent. then move it again into the market. Sell SCHW and move to emerging markets or asia
QQQM (15%) VOO (15%) JEPI (15%) IUSB (global usd bonds - 9%) IVV (7%) SCHD (6%) Microsoft (5%) Apple (5%) SCHW (4%) NVDIA (2%) Plus other stocks 1% each
All equities. Add a little bond exposure with IUSB or BND or BNDX. You can even switch out the two Vanguard funds for AVGE and AVNM respectively.
I recently moved to ICVT, IUSB and TLH for my 10% as duration isn't as much of a risk since rates have risen so much. These aren't recommendations, just what I'm using on a 90/10 portfolio. When you say buy stock, the market is the only thing that people won't buy when it's 20% discounted. If your time horizon is 20 years plus, yes you should be investing when affordable.
Just looking at them from a technical analysis perspective: EMB: RSI's overbought, so is likely to go down / sideways in the near future HDV: Looking like it'll go sideways IGIB & IUSB: Looks like they both have a bit more room to go up before they correct SHY: Could go any which way -- currently has upward price momentum working in its favor, but its future is by no means certain
You should do it yourself, but I think you’re looking at too many funds. If you want it to be passive then: - ITOT (https://www.ishares.com/us/products/239724/ishares-core-sp-total-us-stock-market-etf) - IUSB (https://www.ishares.com/us/products/264615/ishares-core-total-usd-bond-market-etf) At some percent allocation that matches your risk tolerance. But the time you’re 50 you probably will want the IUSB to be about 25-40% of your portfolio (depending on risk tolerance). If you want some international then add in some ACWX (https://www.ishares.com/us/products/239594/ishares-msci-acwi-ex-us-etf) but keep it at less than 20% of your equities allocation.
/u/Don_Julio_Acolyte This. Also IXUS instead of IEFA to include emerging markets and smaller caps. Similarly IUSB instead of AGG for more bond diversification. All that said, IVV IEFA and AGG are also fine. Just slightly less diverse.
There are several mutual funds and etf’s that use them IUSB and SCHZ are both decent bond ETF’s. Usually a portfolio you pick you amount of risk you wish to take in. Then based on your risk you have a percentage in Large Cap, Small Cap, international, and fixed bonds, I also do dividend stocks. Depending who you are using Schwab, Vanguard, Fidelity, or others all have decent ETF’s and mutual funds to fit this criteria.