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Posted by W. Wells on January 28, 2007, 3:12 pm
I am 70 and am putting some of my portfolio into bonds. At present have 14%
(Dodge&CoxIncome, Van. Intermediate Bonds,VanShort Term BondsVan Total Bond
Mkt) Have about 4 years in cash. Want to put about 30% more in bonds. Am
looking at some Fidelity but haven't found one I like yet.
Anyone with ideas of some more good bond funds?
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Posted by on January 28, 2007, 4:42 pm
> I am 70 and am putting some of my portfolio into bonds. At present have 14%
> (Dodge&CoxIncome, Van. Intermediate Bonds,VanShort Term BondsVan Total Bond
> Mkt) Have about 4 years in cash. Want to put about 30% more in bonds. Am
> looking at some Fidelity but haven't found one I like yet.
>
> Anyone with ideas of some more good bond funds?
https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?
FundId=0035&FundIntExt=INT
duration is about 5 years, yield about 4.6%.
In a severe bond market downturn, one could see the fund returning 0
one year (ie the price fall offsets the income). Maybe even -5%.
Very difficult to see things being worse than that.
https://flagship.vanguard.com/VGApp/hnw/FundsSnapshot?
FundId=0039&FundIntExt=INT
slightly higher credit risk, but lower risk due to higher interest
rates causing an NAV loss (a duration of 2.3 years is very low, and
reduces the risk-- the longer the duration, the more risk to the fund
NAV if interest rates rise).
Both funds have low MERs, which is highly desirable.
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Posted by P.Schuman on January 29, 2007, 6:17 pm
it's interesting that I have the Vanguard GNMA, LT Bond, & Prime MM.
All were about the same performance, but I did sell the GNMA awhile back,
and now it appears to be the front runner in yield & returns :)
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Posted by on January 30, 2007, 2:47 am
wrote:
> it's interesting that I have the Vanguard GNMA, LT Bond, & Prime MM.
> All were about the same performance, but I did sell the GNMA awhile back,
> and now it appears to be the front runner in yield & returns :)
LT Bond - the yield curve is inverted (short rates are above long
rates, an unusual phenomenon, conveying some chance of a recession),
long bonds have not done that well
Prime MM is a money market fund?
GNMA - mortgage backed securities normally do poorly when interest
rates *fall*, because of a phenomenon known as 'negative convexity'.
Basically, when interest rates fall, homeowners refinance their
mortgages, and the bond holders get back the money they have invested,
before they want it.
This is a big problem with MBS, and why, for example, David Swensen
doesn't recommend them in his books.
My concern with the mortgage backed securities (MBS) market now is
that the average level of credit quality of mortgages has fallen
significantly: there has been lending to people who would once never
have gotten mortgages, and at much higher income multiples than was
historically the case. If the US housing market continues to fall
(which I expect) there is significant credit risk for mortgage
holders. Also there has been massive hedge fund activity in this
area, and history teaches that when it goes wrong for hedge funds, the
market correction is brutal, and large.
*all* depends on what is in a particular MBS-- which mortgages. But
if the MBS market becomes a bear market, *all* MBS (virtually) will
increase their risk 'spread' over US treasury bonds.
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Posted by on January 28, 2007, 4:47 pm
> I am 70 and am putting some of my portfolio into bonds. At present have 14%
> (Dodge&CoxIncome, Van. Intermediate Bonds,VanShort Term BondsVan Total Bond
> Mkt) Have about 4 years in cash. Want to put about 30% more in bonds. Am
> looking at some Fidelity but haven't found one I like yet.
>
> Anyone with ideas of some more good bond funds?
Let me add that I would avoid funds which invest in 'high yield' or
'junk' (or in the case of index bond funds, more than a small
proportion of the fund in such bonds). Such bonds don't always
provide returns commensurate with the risk and as we are moving into
more uncertain economic times, the risk that the borrowers cannot
repay is much greater than it has been.
http://www.allianzinvestors.com/mutualFunds/profile/PMTR/about_A.jsp
has an excellent record but with the sales charge and the size of the
fund, it is going to be hard for you as an investor to outperform.
The fund manager, Bill Gross, is always an excellent read, though (see
Allianz website or PIMCO website, Pimco is a subsidiary of Allianz).
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