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Bond Funds
Old 10-26-2011, 01:20 PM   #1
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Bond Funds

Hi, I am looking for an income investment (stream) with at least a modest amount of growth. I have approx. $150K to invest. I do not want to reinvest the dividends, but use the cash to supplement my income.
I have some mutual funds in a retirement account that I am currently contributing to w/a value of about $65K and a private reit (retirement account) w/a value of about $53K along w/some other individual stocks with a value of about $25K as well as emergency cash.
I will not be retiring for about 12 more years and my only debt is my home.
I am the main bread winner in the home and the income stream will help will bills and afford us the opportunity to breathe a little easier.
I've looked at these 3 funds. I'd like to realize at least a 5% return. I know a lot of you like Vanguard funds, but the return isn't what I'd like to receive. Any thoughts on the below? Thanks so much.
TGLMX, TGBAX, THOPX
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Old 10-26-2011, 02:50 PM   #2
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I;m still early in early retirement and have of alot of investment knowledge to gain. anyway I put $25K in USATX (USAA) back in June or so with monthly dividend coming back to me (about $80/month or ~4%) the fund value has stayed fairly stable. It's primarily municipal bonds so theres some tax breaks which I really won't have a handle on until I do my 2011 taxes.

Anyway I'd love to hear from people with significant bond knowledge/experience also.
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Old 10-26-2011, 03:03 PM   #3
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How much risk are you willing to take? The 10 year treasiury is only generating a yield a shade over 2% so if you want 5% you are going to have to accept some risk.
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Old 10-26-2011, 03:07 PM   #4
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I know I will need to take some risk, but I can't stomach a lot. It would need to be moderate.
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Old 10-26-2011, 03:10 PM   #5
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Describe "moderate." 10% loss? 20% loss? 2% loss?
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Old 10-26-2011, 07:50 PM   #6
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Yeah, me too. I want 5% or better with little or no risk. Let me know when y'all have it figured out. I'd prefer 8%, btw.
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Old 10-27-2011, 04:37 AM   #7
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Yeah, me too. I want 5% or better with little or no risk. Let me know when y'all have it figured out. I'd prefer 8%, btw.
Penfed 5% 10 year CDs were available this year. Good deals are available you just have to keep your eyes and ears open.

Alternatively get a time machine, although I think buying options on Apple stock back in Fall of 2008, would make more sense then CDs.
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Old 10-27-2011, 07:22 AM   #8
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@Brewer12345, 5-10% as I believe the dividends will offset the drop in NAV to help keep even.
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Old 10-27-2011, 07:58 AM   #9
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@Brewer12345, 5-10% as I believe the dividends will offset the drop in NAV to help keep even.
Unless you are buying junk, that yield will be tough to achieve now. Junk can drop a lot more than 10 percent.

A way to suss out a possible investment might be to look at funds with a long track record. Look at their worst performance in any year of the last ten and compare that to the current yield. I would also have more than one fund.

I run a constrained risk portfolio for my FIL. I have a mix of convertibles,junk, high grade credit and merger arbitrage funds with a smidge of commodities in both open and closed end funds. No idea if it meets your stated downside limit, but it isn't hard to roll up a port like this.

There is also the Wellesley fund.
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Old 10-27-2011, 08:05 AM   #10
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DebER, don't expect bond funds to have any serious growth potential. I have been in various bond funds for 21 years and have found they tend to have a ceiling on their NAVs.

As to specific bond funds, I have been in a particular one for about 3 years to generate the monthly dividends needed to pay my expenses. I bought into it in late 2008 when its NAV was greatly depressed so I was able to buy about 25% more shares than I anticipated beforehand. The NAV has risen since then which is good but because I am more interested in the income stream it continues to be the number of shares I own along with the monthly dividends per share which matter the most.

The bond fund has some risk in it because the bonds in it are at the low end of the investment grade category (BBB) or just below investment grade (BB, mostly, nothing below B). Whether you want to call it a "junk bond" fund is up to you. Regardless of how you characterize it, can you tolerate the risk?

The fund pays about 4.5 cents in dividends per share per month and has a NAV of about $9. That comes out to about 6% per year in dividends, or $750 per month on an investment of $150k.
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Old 10-27-2011, 08:14 AM   #11
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psst - Wellesley
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Old 10-27-2011, 08:30 AM   #12
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psst - Wellesley
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Old 10-27-2011, 08:33 AM   #13
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I've looked at these TGLMX, TGBAX, THOPX as from what I read, it's best to stay in Short and Intermediate funds right now as interest rates are bound to rise soon.
Any Opinion on the above?
Thanks so much for your comments/suggestions. I has been a help to me.
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Old 10-27-2011, 09:26 AM   #14
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I've looked at these TGLMX, TGBAX, THOPX as from what I read, it's best to stay in Short and Intermediate funds right now as interest rates are bound to rise soon.
Any Opinion on the above?
Thanks so much for your comments/suggestions. I has been a help to me.
TGLMX: junk bonds, risky. You shouldn't put all your money in something like this, but a small helping could help boost your portfolio yield.

TGBAX: global bond fund. Is it hedged for currency?

THOPX: short investment grade fund. I think you have the right idea here, but this is an expensive fund and its credit quality is at the lower end of the investment grade spectrum. You could probably find a better alternative.
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Old 10-27-2011, 09:32 AM   #15
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TGLMX: junk bonds, risky. You shouldn't put all your money in something like this, but a small helping could help boost your portfolio yield.

TGBAX: global bond fund. Is it hedged for currency?

THOPX: short investment grade fund. I think you have the right idea here, but this is an expensive fund and its credit quality is at the lower end of the investment grade spectrum. You could probably find a better alternative.
Agree with your comments. I also think it is worth noting that we are in a really low interest rate environment and if the economy starts looking stronger and rates rise you could be in for a lot of pain.
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Old 10-27-2011, 09:50 AM   #16
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+1
me too +1. Wellesley is my go to for income and a little bit of growth.
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Old 10-27-2011, 03:05 PM   #17
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Agree with your comments. I also think it is worth noting that we are in a really low interest rate environment and if the economy starts looking stronger and rates rise you could be in for a lot of pain.
It almost seems that no matter what I do, I'm going to lose unless I'm in fixed income instruments, such as CD's. Unfortunately, that's no way to make any money. Bummer
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Old 10-27-2011, 03:10 PM   #18
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It almost seems that no matter what I do, I'm going to lose unless I'm in fixed income instruments, such as CD's. Unfortunately, that's no way to make any money. Bummer
The answer for me is to live with some volatility and diversify. YMMV.
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Old 10-27-2011, 03:10 PM   #19
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It almost seems that no matter what I do, I'm going to lose unless I'm in fixed income instruments, such as CD's. Unfortunately, that's no way to make any money. Bummer
No risk, no reward is a condition most of us mere mortals must learn to deal with.
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Old 10-27-2011, 03:31 PM   #20
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Penfed 5% 10 year CDs were available this year. Good deals are available you just have to keep your eyes and ears open.
I wish they would run another special soon. I have some 6% cd's maturing with PF around the first of the year.
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