Altruist Financial Advisors LLC
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Short Term Taxable Bonds

 

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Short Term Taxable Bonds are bonds of short duration.

There are several very similar investment options available.  Which is best?

The funds are listed in rough order of our overall preference.

It is generally most prudent to use taxable bonds in retirement accounts.  So we only list preferences for retirement accounts.  For taxable accounts consider Short-Term Tax-Exempt Bonds.

For a listing of our preferences in other asset classes, see here.

Retirement Accounts (i.e., tax-deferred or tax-exempt accounts)

bulletVanguard Short-Term Corporate Bond Index Fund Admiral Shares (VSCSX).  E/R: 0.10%.  This fund tracks the Barclays Capital US 1-5 year Corporate Bond Index.
 
bulletVanguard Short-Term Investment-Grade Fund Admiral Shares (VFSUX).  E/R: 0.10%.  This fund principally invests in investment grade corporate bonds of short duration.
 
bulletDFA Five-Year Global Fixed Income Portfolio (DFGBX).  E/R: 0.27%.  This fund's "variable maturity" strategy should somewhat increase risk-adjusted returns.  While it contains some foreign bonds, the currency risk is always 100% hedged.  We have only a slight preference for DFGBX over DFGFX.  DFGFX has a lower expense ratio, but DFGBX has more room for the "variable maturity" strategy to operate over (which should allow it to be more effective).

bulletDFA Short-Term Extended Quality Portfolio (DFEQX).  E/R: 0.22%.  This fund's "variable maturity" strategy should somewhat increase risk-adjusted returns.  While it contains some foreign bonds, the currency risk is always 100% hedged.  This fund extends into the lower part of the "investment-grade" universe regarding credit ratings of its issuers.  We have only a slight preference for DFEQX over DFGFX.

bulletDFA Two-Year Global Fixed Income Portfolio (DFGFX).  E/R: 0.17%.  This fund's "variable maturity" strategy should somewhat increase risk-adjusted returns.  While it contains some foreign bonds, the currency risk is always 100% hedged.  The five year DFA fund gives the "variable maturity" strategy more flexibility (more time to shift over), which should enhance its risk/return characteristics.  The two year DFA fund has a lower E/R and has somewhat less volatility due to its shorter duration.  We have a slight preference for the five-year fund, but both should be very good choices.

bulletVanguard Short-Term Investment-Grade Fund (VFSTX).  E/R: 0.20%.  This fund principally invests in investment grade corporate bonds of short duration.
 
bulletVanguard Short-Term Corporate Bond ETF (VCSH).  E/R: 0.10%.  This ETF tracks the Barclays Capital US 1-5 year Corporate Bond Index.  For more information on ETFs, see here.
 
bulletiShares Barclays 0-5 Year Investment Grade Corporate Bond Fund (SLQD).  E/R: 0.08%.  This ETF tracks the Markit iBoxx USD Liquid Investment Grade 0-5 Index.  For more information on ETFs, see here.
 
bulletSPDR Barclays Capital Short Term Corporate Bond ETF (SCPB).  E/R: 0.12%.  This ETF tracks the Barclays Capital U.S. 1-3 Year Corporate Bond Index.  For more information on ETFs, see here.
 
bulletiShares Barclays 1-3 Year Credit Bond Fund (CSJ).  E/R: 0.20%.  This ETF tracks the Barclays Capital US 1-3 year Credit Index.  For more information on ETFs, see here.
 
bulletiShares S&P/Citigroup 1-3 Year International Treasury Bond Fund (ISHG).  E/R: 0.35%.  This ETF tracks the S&P/Citigroup International Treasury Bond Index Ex-US 1-3 Year index.  Basically, it invests in short-term treasury bonds of developed countries outside the US.  For more information on ETFs, see here.
 
bulletSPDR Barclays Capital Short Term International Treasury Bond ETF (BWZ).  E/R: 0.35%.  This ETF tracks the Barclays Capital 1-3 Year Global Treasury ex-US Capped index.  Basically, it invests in short-term treasury bonds of developed countries outside the US.  For more information on ETFs, see here.
 
bulletiShares Barclays Intermediate Credit Bond Fund (CIU).  E/R: 0.20%.  This ETF tracks the Barclays US 1-10 year Credit Index.  For more information on ETFs, see here.
 
bulletVanguard Short-Term Bond Index Fund Admiral Shares (VBIRX).  E/R: 0.09%.  This fund tracks the Barclays US 1-5 year Govt/Credit Index.  This fund suffers due to its use of treasury bonds (which have lower expected risk-adjusted returns than similar duration investment-grade corporate bonds).

bulletVanguard Short-Term Bond Index Fund ETF (BSV).  E/R: 0.09%.  This ETF tracks the Barclays US 1-5 year Govt/Credit Index.  This fund is a different share class of the Vanguard Short-Term Bond Index Fund (VBISX).  This fund suffers due to its use of treasury bonds (which have lower expected risk-adjusted returns than similar duration investment-grade corporate bonds).  For more information on ETFs, see here.

bulletVanguard Short-Term Bond Index Fund (VBISX).  E/R: 0.20%.  This fund tracks the Barclays US 1-5 year Govt/Credit Index.  This fund suffers due to its use of treasury bonds (which have lower expected risk-adjusted returns than similar duration investment-grade corporate bonds).

bulletTIAA-CREF Short-Term Bond Fund (TCSTX).  E/R: 0.30%.  This fund suffers due to its use of treasury bonds (which have lower expected risk-adjusted returns than similar duration investment-grade corporate bonds).

bulletPIMCO Low Duration Fund Institutional Shares (PTLDX).  E/R: 0.43%.  We see no reason to consider this fund given the availability of the above lower cost alternatives.

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This web page contains the current opinions of Eric E. Haas at the time it is written and such opinions are subject to change without notice.  This web page is intended to serve two purposes:

bulletTo educate the public; and
bulletTo provide disclosure of Mr. Haas' opinions to prospective clients.  We believe that prospective clients are well-served by being made aware of what they are buying and what they are buying is advice that is based on these opinions.

We believe the information provided here to be useful and accurate at the time it is written.  Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. 

No investor should invest solely on the basis of information listed here.  Before investing, it is important to consult each prospective investment's prospectus and consider both its risk/return characteristics and its effect on your overall portfolio.

This information is not intended to be a substitute for specific individualized tax, legal, or investment planning advice.  Where specific advice is necessary or appropriate, Altruist recommends consultation with a qualified tax adviser, CPA, financial planner, or investment adviser.  If you would like to discuss the rationale or support for any particular idea expressed on this web page, feel free to contact us.

 

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