Would you invest in a brand new Vanguard fund?

[Cat-tirement]

In general, I know to be wary of new funds. Would you be any less wary of a new Vanguard fund?

In a recent message from Vanguards email list, I read about new total international bond funds they have created (VTIBX/VTABX). These were only created in May, so no real track record. Anyone else see this and considering this fund? Any other thoughts?

https://personal.vanguard.com/us/insights/article/intl-bond-allocation-052013

 

[MichaelB]

I invested in brand new funds a couple of times. In each case the manager was familiar and had a very good track record. In this case these are index funds so there probably isn't any compelling reason to get in early.

 

[REWahoo]

In this case these are index funds so there probably isn't any compelling reason to get in early.

The fact that they are index funds should also greatly reduce any concern about them being new.

 

[Which Roger]

I think the article lays it out very well. I would consider adding some as a diversifier. I think I would ease into them (or any new asset class) rather than moving a big chunk of money all at once. Also, if I did this, I might consider reducing my stock allocation slightly to keep my overall risk level constant.

The article also talks about Emerging Market Bonds. Nothing wrong with these, but I would treat them more like risky stocks than bonds and allocate accordingly.

 

[Midpack]

Here's an earlier thread on the same Vanguard fund, thought it might augment your thread.

http://www.early-retirement.org/forums/f28/vanguard-international-bond-fund-65018.html

 

[pb4uski]

I have ~20% of my fixed income allocation in VTABX. I've only had it less than a month but the decline has been much less than my domestic bond fund investments, so far so good.

BTW, Vanguard's Target Date funds will hold ~20% of their fixed income allocation in VTABX.

 

[hlfo718]

A similar fund has been in existence for a few years now in Europe but I guess they had to work something out with the US version. But yes, not a problem buying a new Vanguard index Fund.

 

[W2R]

The fact that they are index funds should also greatly reduce any concern about them being new.

+1 I think the greater question is whether or not you want to buy this fund, not its newness.

 

[samclem]

If the index itself was new, or if there were reasons Vanguard might hop to a new index for the same fund, then I'd have more concerns. But I'd have no hesitation to invest in a new Vanguard fund that was based on an existing, established index.

 

[bamsphd]

Would you be any less wary of a new Vanguard fund?

I would be much less wary of a new Vanguard index fund.

Though my impression is that Vanguard tends to introduce new index funds after the area has become extremely popular. So from a dirty-stinking-market-timer perspective, a new Vanguard index fund may signal we are near a top for the area covered by the index.

Index funds are usually more efficient after they have grown large. New funds are inherently smaller funds. On the other hand, I would rather invest in a new Vanguard index fund than a "temporarily waiving fees" fund from some other provider, at least assuming a taxable account. Since I tend to have a very long holding period on my index fund investments.

I read about new total international bond funds they have created (VTIBX/VTABX). These were only created in May, so no real track record. Anyone else see this and considering this fund? Any other thoughts?

I was interested in adding more international diversification to my bond portfolio. However, this line in the fund summary killed it for me. The fund employs currency hedging strategies to protect against uncertainty in future exchange rates, so investment returns are expected to reflect the underlying performance of international bonds. Hedging strategies cost money generally not directly reflected in the management fee, and in this case would hedge away some of the currency diversification I desired. So I do not expect to invest in this particular Vanguard offering.

 

[pb4uski]

....However, this line in the fund summary killed it for me. The fund employs currency hedging strategies to protect against uncertainty in future exchange rates, so investment returns are expected to reflect the underlying performance of international bonds. Hedging strategies cost money generally not directly reflected in the management fee, and in this case would hedge away some of the currency diversification I desired. So I do not expect to invest in this particular Vanguard offering.

Actually, their hedging of fx risk was an attraction to me since my obligations are all USD and I have enough fx exposure through my international equity investments. Different strokes, I suppose. I concede that hedging is not free and borne by the shareholders, but the new fund should have sufficient economies of scale to optimize the fx hedging cost.

 

[Animorph]

I'd want to look at past index performance relative to similar indexes, and make sure that Vanguard was performing close to index minus expenses. There are a few index funds, not sure any are Vanguard, that do not come very close to their index for one reason or another.

 

[veremchuka]

Vanguard has what 120+ mutual funds? You could pick a lot of things whether new or not. My philosophy is KISS. The 3 or 4 fund portfolio is simple and easy to rebalance.

 

[Cat-tirement]

Here's an earlier thread on the same Vanguard fund, thought it might augment your thread.

http://www.early-retirement.org/forums/f28/vanguard-international-bond-fund-65018.html

Thanks for that reference. I didn't see it when I did a quick search before making my original post.

I read the earlier Vanguard article linked in that thread, and discovered that they have changed the target date funds to also include the new total international bond fund. This was good to learn, as I have a good chunk of my current 401k in one of those target dates, so I already own some of the new bond fund through that.

 

[bamsphd]

Actually, their hedging of fx risk was an attraction to me since my obligations are all USD and I have enough fx exposure through my international equity investments. Different strokes, I suppose. I concede that hedging is not free and borne by the shareholders, but the new fund should have sufficient economies of scale to optimize the fx hedging cost.

While I pay all my bills in dollars, when I glance at "Made in" labels I'm quickly reminded that much of my spending is not US based.

I too have a large international equity allocation. However, my fixed-income is currently 100% USD based, with a heavy US Treasury component. So diversifying some of my fixed-income out of dollars would be nice if it could be done at a very low expense ratio, but is not critical.

 

[photoguy]

In the vanguard article I was expecting to at least see some kind of efficient frontier plot. I remain unconvinced -- my guess is with a stock heavy portfolio it makes almost no difference.