Originally Posted by Golden sunsets
Yes - that is the way we have this set up. I have never been a fan of bond funds, due to the affect on NAV of rising interest rates, but if the money is long term I have convinced myself that as long as my time horizon is as long as the duration, then I have limited my downside. That and individually held bonds of high quality are what we have settled on for the bulk of the FI portion of our portfolio.
I don't worry about this either, precisely because I'm holding long term, and I am rebalancing with other parts of my portfolio anyway. Bond funds when paired with equity funds lower the volatility of the portfolio which is my goal.
Just because short term interest rates rise, that doesn't guarantee intermediate rates rise either. Often intermediate bond funds have still managed to do better than break even during a period of rising interest rates.
The original discussion was whether SEC yield or distribution yield "counts". I tend to use SEC yield and duration (and credit quality) when comparing funds.