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Old 01-01-2015, 02:38 PM   #21
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I took a look at the annual rate of return of a total bond fund (Vanguard) and compared it to the rate of return on the 401k fixed income fund. Based on these numbers, so you think it would be a good idea to keep whatever bond allocation I have in the 401k in the fixed income fund? It looks like for 5 out of the 10 years selected, the fixed income fund had a greater rate of return than did the total bond fund.

C1 C2 C3
2004 4.51 4.24
2005 4.77 2.40
2006 4.99 4.27
2007 5.18 6.92
2008 5.31 5.05
2009 5.3 5.93
2010 4.3 6.42
2011 4.17 7.56
2012 3.64 4.05
2013 3.16 -2.26

C1- year
C2- fixed income 401k fund
C3- vanguard total bond fund
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Old 01-01-2015, 02:56 PM   #22
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I would prefer the fixed fund at this point because it has no interest rate risk. At some point interest rates will increase and the value of the bond fund will decline as a result but the fixed fund will not decline. Since interest rates are at historical lows, the likelihood of interest rates increasing seems much higher than interest rates declining, although when the change will happen is not real clear.
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