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Old 11-09-2015, 04:05 PM   #41
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Originally Posted by youbet View Post
I agree with Audrey. And I'll add that "break even" means the NAV of the fund will equal what you invested originally at (in this example) five years. You could sell and get your money back. But you may have done better with another investment category or method. Having your money tied up for five years and "breaking even" in nominal dollars isn't a success.
I don't think the NAV will get back. It would stay lower until interest rates returned to where they were before.

All theoretical of course.
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Old 11-09-2015, 04:13 PM   #42
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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.
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Old 11-25-2015, 07:39 AM   #43
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I put together a muni portfolio over the past two years using Fidelity to buy new issue bonds. It took a bit over a year to assemble as I wanted to spread things across states for risk minimization. I tend to look for AA rated offerings. I also put a bit into 3 funds to juice up the yield a bit. The numbers break down as follows:
71% in individual bonds (17 positions) with maturities spread from '24 to '33; yield 3.125%
20% in FTABX; yield 3.45%
5%in NIQ; yield 4.59%
9% in NXP; yield 3.95%

The overall portfolio yields 3.36%.
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