PIMIX - Bond Income Fund

[lawman]

I'm about to invest a large amount of money in PIMIX..I understand the risks involved with bond funds but I'm mostly concerned with interest rate risk..I got creamed by this fund when interest rates advanced so rapidly not long ago..I liked the fund for many many years when interest rates were declining..Since rates are now higher than they've been in years I'm thinking about getting back in..Can those who argue that rates can and will get much higher give me the basis for your belief...Other general discussion and comments appreciated..

 

[bloom2708]

Why not make a Treasury ladder with your large amount?

As each rung matures, you get your full investment back. Spend or buy another rung.

Rates can certainly go up if the economy and jobs stays hot.

The listed expense ratio is .87% what is your cost? How will you make up the nearly 1% over the market?

Very hard to predict the future.

 

[lawman]

Why not make a Treasury ladder with your large amount?

As each rung matures, you get your full investment back. Spend or buy another rung.

Rates can certainly go up if the economy and jobs stays hot.

The listed expense ratio is .87% what is your cost? How will you make up the nearly 1% over the market?

Very hard to predict the future.

Adjusted expense ratio is .5%..I have a lot of treasuries that are maturing..That's what I'm using to fund this change..The distribution yield of PIMIX is much higher than what medium term treasuries are yielding and treasuries are callable..If interest rates go down my treasuries are at risk of getting called...Seems to me like it is more likely for rates to go down than up..This is money I have no plans for so if I need to ride another big price drop in PIMIX I will just ride it out..My main preference is the 1.5% better yield I cn get from PIMIX. https://www.pimco.com/en-us/investments/mutual-funds/income-fund/inst

 

[mathjak107]

it has a high level of junk and BBB .

so if protection in a recession is what you want , it is not a good place to be .

for income purposes it’s fine

 

[pb4uski]

Adjusted expense ratio is .5%..I have a lot of treasuries that are maturing..That's what I'm using to fund this change..The distribution yield of PIMIX is much higher than what medium term treasuries are yielding and treasuries are callable..If interest rates go down my treasuries are at risk of getting called...Seems to me like it is more likely for rates to go down than up..This is money I have no plans for so if I need to ride another big price drop in PIMIX I will just ride it out..My main preference is the 1.5% better yield I cn get from PIMIX. https://www.pimco.com/en-us/investments/mutual-funds/income-fund/inst

Treasuries are not callable.

 

[lawman]

Treasuries are not callable.

Oh yeah...thanks!
I was thinking of my government agencies

 

[Montecfo]

This is not a plain vanilla bond fund. It uses derivatives. But it is well managed.

What I'm not sure about, Lawman, is how you got "killed" in this. It has performed rather well.

 

[target2019]

PIMIX dropped from 12 to 10 in the Great Bond Debacle. I might call that a creaming. BUt not a killing.

 

[lawman]

This is not a plain vanilla bond fund. It uses derivatives. But it is well managed.

What I'm not sure about, Lawman, is how you got "killed" in this. It has performed rather well.

I held it many years but sold it near he lowest share price when interest rates advanced so rapidly..I may not have gotten killed as bad as it appeared because I had been taking the distributions and not reinvesting them so the loss that showed on paper was really not that bad probably. I know it's not a vanilla bond fund and I'm willing to accept that risk..I just have no strong opinion of what interest rates might do from here..Most seem to think the Fed is likely to start dropping rates but I remember the 80's..How likely is it that that happens again?

 

[all4j]

Can those who argue that rates can and will get much higher give me the basis for your belief...


How likely is it that that happens again?

1st post you ask 2 questions: (1) “can” rates go up? My answer is ‘of course’ & list of reasons wouldn’t be short. That list depending upon what I’m mentioning in #2; (2) “will” rates go “much higher”? To really answer that there needs more clarity on 3 parts: (a) which rates? (b) over what time period? (c) what is “much” to you? In post #9, you asked in what the fed did in the 80s is likely to happen again – I’d say “not likely”.

I’d think perhaps the bigger challenge re: interest rate risk for pimix is if the yield curve changes from being inverted. What I’m currently seeing is a 3month treasury at 5.44%, 3 year at 4.22%, 5 year at 4.12%. PIMIX is showing an effective duration 3.55 years & effective maturity at 5.31 years. So, IF the yield curve moves away from being inverted, perhaps the 3 month rate will go down & 5 year rate go up? That’s why clarity is needed on which rate. How fast & how much each would move might depend on time period you pick – end of 2024? 5 years out? The fed will have a greater & more immediate impact on the shorter end of the curve.

An observation…you’ve not really solicited opinions on whether this fund is best solution or even better than your current situation with individual treasuries; so take this for what it’s worth. If you make this change, you are changing products. When you are buying a relatively active fund, a big part of the decision is your trust in fund management. You’ll be paying them to navigate through interest rate risk. There are trade offs between products. My opinion is that these considerations bear more weight than near term fed actions.

Good luck!

 

[Montecfo]

I held it many years but sold it near he lowest share price when interest rates advanced so rapidly..I may not have gotten killed as bad as it appeared because I had been taking the distributions and not reinvesting them so the loss that showed on paper was really not that bad probably. I know it's not a vanilla bond fund and I'm willing to accept that risk..I just have no strong opinion of what interest rates might do from here..Most seem to think the Fed is likely to start dropping rates but I remember the 80's..How likely is it that that happens again?

Well yeah you can't sell at the lows. No bond or bond fund with duration did well in 2022 except floaters.

Part of being comfortable with the risk is not selling into weakness.

This has performed well and yes you can't ignore the distribution.

I do own it myself and have for years. I would expect most bonds and funds to do well this year. If you are concerned about inflation then perhaps TIPS or i-Bonds.

 

[lawman]

Thanks guys....I have tons of I-bonds that I've had for 20-25 years..What I've learned since 2008 is to stop selling into lows..I'm the poster child for "buy high sell low".

BTW you can expect it to be years before the S&P closes at new highs...I bought a small amount of a S&P 500 index fund yesterday..

 

[Qs Laptop]

Lawman, I feel your pain. I was into PONAX for a long time. PONAX is basically the same as PIMIX. While I saw some good appreciation and got the dividends, the period from 2019 through 2023 was pretty bad. With rates about to decline I expect it will start recovering, but I bailed out on most of it over a year ago.