Investing Talk Investing Talk    FAQ   Search   Memberlist   Usergroups   Register   Profile   Log in to check your private messages   Log in  Bond Funds?          Investing Talk Forum Index -> Mutual Funds View previous topic :: View next topic   Author Message Art Harris Guest Posted: Wed Mar 21, 2007 7:15 pm    Post subject: Bond Funds? I feel comfortable choosing equity funds for my two 401k accounts, but not when it comes to fixed income investments. Currently, the "fixed" portion of my accounts are "Stable Value" funds. Due to the inverted yield curve, these funds are yielding about 5%. Would it make sense to move some or all of the money in these Stable Value funds into true bond funds? Or should I wait until the returns on the Stable Value funds start to drop? The 3-year annualized returns on some of the popular bond funds (VBMFX, VBIIX, FBIDX) are around 3 percent which seems pretty poor. If I do invest in a bond index fund, would an intermediate term fund make more sense than a "total" bond fund? Safety is my primary concern for the fixed portion of my portfolio, but I would like to get a decent return Thanks, Art Back to top   Ads Advertising Sponsor Ed Guest Posted: Wed Mar 21, 2007 8:43 pm    Post subject: Re: Bond Funds? You would be better off in your stable value fund at 5% than the funds you list below. Higher return means more risk. A multi-sector bond fund would give you that. T. Rowe Price Spectrum Income or Loomis Sayles Bond fund could provide higher returns. Keep in mind that if interest rates rise bond prices fall. "Art Harris" <n2ah@hotmail.com> wrote in message news:1174486513.568779.127930@l75g2000hse.googlegroups.com... Quote: I feel comfortable choosing equity funds for my two 401k accounts, but not when it comes to fixed income investments. Currently, the "fixed" portion of my accounts are "Stable Value" funds. Due to the inverted yield curve, these funds are yielding about 5%. Would it make sense to move some or all of the money in these Stable Value funds into true bond funds? Or should I wait until the returns on the Stable Value funds start to drop? The 3-year annualized returns on some of the popular bond funds (VBMFX, VBIIX, FBIDX) are around 3 percent which seems pretty poor. If I do invest in a bond index fund, would an intermediate term fund make more sense than a "total" bond fund? Safety is my primary concern for the fixed portion of my portfolio, but I would like to get a decent return Thanks, Art Back to top   Ads Advertising Sponsor Ron Hardin Guest Posted: Wed Mar 21, 2007 9:10 pm    Post subject: Re: Bond Funds? I-bonds (the savings bonds) are good, max $30k allowed a year, if you don't want the money in sooner than 5 years. No tax until cashed, inflation-proof, and not bad interest rate. Great if your goal is not to get rich but to stay rich. Any bank sells them and they come by mail, or you can buy them online in book entry. Buying and rolling over 2yr Treasuries will more or less match inflation without subjecting you to risk to principal from interest rate changes. Again a stay rich investment. Bond funds with long maturities are risky no matter how much they diversify. They diversify against default risk, not against interest rate risk, and it's interest rate risk that gets you. -- Ron Hardin rhhardin@mindspring.com On the internet, nobody knows you're a jerk. Back to top   Ads Advertising Sponsor Mark Freeland Guest Posted: Wed Mar 21, 2007 11:45 pm    Post subject: Re: Bond Funds? "Art Harris" <n2ah@hotmail.com> wrote in message news:1174486513.568779.127930@l75g2000hse.googlegroups.com... Quote: Currently, the "fixed" portion of my accounts are "Stable Value" funds. Due to the inverted yield curve, these funds are yielding about 5%. This suggests you may not understand what a Stable Value fund is. These are baskets of insurance contracts (guaranteed investment contracts - GICs) that are held to maturity. They are comparable in returns to intermediate bonds. "Next generation" investments by stable value funds include "synthetic" GICs. Synthetics look like GICs, but have may have bonds underlying them, with insurance wrappers, rather than being simply insurance contracts. Here's a pretty simple (though old - 1999) intro to stable value funds. http://www.infoplease.com/finance/tips/money/moneyman_082599.html FASB technical description of GICs and synthetic GICs: http://www.fasb.org/derivatives/issuea16.shtml They are not ultra short bond funds. Mark Freeland BnetOnewsX@sbcglobal.net Back to top   Ads Advertising Sponsor Mark Freeland Guest Posted: Thu Mar 22, 2007 12:08 am    Post subject: Re: Bond Funds? "Ron Hardin" <rhhardin@mindspring.com> wrote in message news:46015914.D41@mindspring.com... Quote: I-bonds (the savings bonds) are good, max $30k allowed a year, Max is $60K/SSN/year: "$30,000 in TreasuryDirect and $30,000 in paper bonds" http://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm Mark Freeland BnetOnewsX@sbcglobal.net Back to top   Ads Advertising Sponsor Bucky Guest Posted: Thu Mar 22, 2007 12:27 pm    Post subject: Re: Bond Funds? On Mar 21, 9:10 am, Ron Hardin <rhhar...@mindspring.com> wrote: Quote: I-bonds (the savings bonds) are good i-bonds and treasury bills/notes are not available in his 401k Back to top   Ads Advertising Sponsor Bucky Guest Posted: Thu Mar 22, 2007 12:34 pm    Post subject: Re: Bond Funds? On Mar 21, 7:15 am, "Art Harris" <n...@hotmail.com> wrote: Quote: Would it make sense to move some or all of the money in these Stable Value funds into true bond funds? Or should I wait until the returns on the Stable Value funds start to drop? You could wait until Stable Value yields starts to drop, but if you are investing for long term (over 5 years), you wouldn't want your money in stable value. Quote: The 3-year annualized returns on some of the popular bond funds (VBMFX, VBIIX, FBIDX) are around 3 percent which seems pretty poor. well, that's because interest rates have been steadily rising over the past 3 years. Bond funds past performance doesn't really have any impact on future performance. I think what's important is the current yield. Current yield for VBMFX and VBIIX is around 4.9%, so that's pretty good. You'll be getting a return close to 4.9% in the next year year, rather than the 3% from the past 3 years. Quote: If I do invest in a bond index fund, would an intermediate term fund make more sense than a "total" bond fund? Safety is my primary concern for the fixed portion of my portfolio, but I would like to get a decent return Then you want Total Bond market. Just look at the annual returns. Intermediate is more volatile. Total is less volatile, and maybe slightly higher return since it has long bonds. Back to top   Ads Advertising Sponsor Ron Hardin Guest Posted: Thu Mar 22, 2007 1:45 pm    Post subject: Re: Bond Funds? Bucky wrote: Quote: On Mar 21, 9:10 am, Ron Hardin <rhhar...@mindspring.com> wrote: I-bonds (the savings bonds) are good i-bonds and treasury bills/notes are not available in his 401k The I-bonds are their own 401k, except they mature on you in 30 years, if you're further out than that in planning. -- Ron Hardin rhhardin@mindspring.com On the internet, nobody knows you're a jerk. Back to top   Ads Advertising Sponsor P.Schuman Guest Posted: Mon Mar 26, 2007 7:11 pm    Post subject: Re: Bond Funds? Quote: Then you want Total Bond market. Just look at the annual returns. Intermediate is more volatile. Total is less volatile, and maybe slightly higher return since it has long bonds. I was surprised to see that VBMFX has rather shorter/intermediate maturity bonds... http://finance.yahoo.com/q/hl?s=VBMFX --- BOND HOLDINGS Averages VBMFX Category Avg Maturity 7.10 7.94 Duration 4.60 4.57 Credit Quality AAA AA Back to top   Ads Advertising Sponsor Jerry Guest Posted: Mon Mar 26, 2007 8:05 pm    Post subject: Re: Bond Funds? Unless you are very close to retirement, I would not even have a fixed income portion. If you are near and want something that will definitely not drop, I would just use a money market fund. A high yield equity fund that is trading at a big discount to NAV is RTU. This should give reasonable stability with much greater returns. Jerry "Art Harris" <n2ah@hotmail.com> wrote in message news:1174486513.568779.127930@l75g2000hse.googlegroups.com... Quote: I feel comfortable choosing equity funds for my two 401k accounts, but not when it comes to fixed income investments. Currently, the "fixed" portion of my accounts are "Stable Value" funds. Due to the inverted yield curve, these funds are yielding about 5%. Would it make sense to move some or all of the money in these Stable Value funds into true bond funds? Or should I wait until the returns on the Stable Value funds start to drop? The 3-year annualized returns on some of the popular bond funds (VBMFX, VBIIX, FBIDX) are around 3 percent which seems pretty poor. If I do invest in a bond index fund, would an intermediate term fund make more sense than a "total" bond fund? Safety is my primary concern for the fixed portion of my portfolio, but I would like to get a decent return Thanks, Art Back to top   Ads Advertising Sponsor Display posts from previous: All Posts1 Day7 Days2 Weeks1 Month3 Months6 Months1 Year Oldest FirstNewest First         Investing Talk Forum Index -> Mutual Funds All times are GMT Page 1 of 1   Jump to: Select a forum Investing Talk----------------Investing Talk-- MarketMutual FundsFutures - OptionsTechnical Analysis  You cannot post new topics in this forum You cannot reply to topics in this forum You cannot edit your posts in this forum You cannot delete your posts in this forum You cannot vote in polls in this forum 246 Attacks blocked Powered by phpBB © 2001, 2005 phpBB Group