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06-27-2010, 06:56 AM
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#21
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by Rich_in_Tampa
No expert here, but I agree that total bond index is a fine place.
However, be aware that it is 35% in GNMA and similar, and you may not like that. That was the reason I switched to Vgd intermediate bond index. I'll keep my RE exposure in the REIT fund.
Just something to consider.
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Uhh, help me out here: what exactly is the problem with an allocation to agency MBS?
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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06-27-2010, 11:35 AM
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#22
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Quote:
Originally Posted by brewer12345
Uhh, help me out here: what exactly is the problem with an allocation to agency MBS?
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There have been numerous threads over at bogleheads about this issue for VBMFX. As I understand it there is ~38% in MBS, a mixture of Fannie, Freddie and Ginnie and no way to tease out how much of each. There has been criticism there about the amount of MBS and how they performed during the crisis and risks going forward which may be what Rich is referring to. As they are all essentially backed by the full faith of the gubm't at this point default risk seems minimal. Interest rate risks still apply but the team at VBMFX seems to try and keep the durations relatively short.
DD
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At 54% of FIRE target
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06-27-2010, 12:16 PM
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#23
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Recycles dryer sheets
Join Date: Nov 2003
Location: Charlotte
Posts: 360
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Quote:
Originally Posted by DblDoc
There have been numerous threads over at bogleheads about this issue for VBMFX. As I understand it there is ~38% in MBS, a mixture of Fannie, Freddie and Ginnie and no way to tease out how much of each. There has been criticism there about the amount of MBS and how they performed during the crisis and risks going forward which may be what Rich is referring to. As they are all essentially backed by the full faith of the gubm't at this point default risk seems minimal. Interest rate risks still apply but the team at VBMFX seems to try and keep the durations relatively short.
DD
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Perhaps, but within the realm of an index fund. We hold our MBS directly in Vanguard GNMA which IS managed quite well.
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06-27-2010, 01:50 PM
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#24
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Quote:
Originally Posted by WilliamG
Perhaps, but within the realm of an index fund. We hold our MBS directly in Vanguard GNMA which IS managed quite well.
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If you have access to it and want that slice that is a good choice, but for someone who wants to keep it simple or lack choice in their tax deferred account VBMFX is a reasonable fund to hold.
DD
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At 54% of FIRE target
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06-27-2010, 04:26 PM
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#25
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by DblDoc
There have been numerous threads over at bogleheads about this issue for VBMFX. As I understand it there is ~38% in MBS, a mixture of Fannie, Freddie and Ginnie and no way to tease out how much of each. There has been criticism there about the amount of MBS and how they performed during the crisis and risks going forward which may be what Rich is referring to. As they are all essentially backed by the full faith of the gubm't at this point default risk seems minimal. Interest rate risks still apply but the team at VBMFX seems to try and keep the durations relatively short.
DD
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I have no interest in bogleheads, since I a, not in the market for a new religion.
Uh, I still do not see a cogent or even coherent reason why one would get up in arms about agency MBS exposure in an index fund. Anyone else want to take a crack?
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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06-27-2010, 05:44 PM
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#26
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Full time employment: Posting here.
Join Date: Mar 2010
Posts: 889
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I think the total bond market index is fine. That is what I have my 401k in right now. In theory, I am not a fan of mortgage backed securities, because people are typically going to refinance when rates are low. However, it doesn't seem like it has caused any problems so far. If I had my choice I'd rather use an intermediate investment grade corporate bond fund.
If the yield is right I think junk bond funds can be a good buy. My roth ira is now in a junk bond fund that historically should give me a 3% real return, for now.
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06-28-2010, 10:34 AM
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#27
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Quote:
Originally Posted by brewer12345
I have no interest in bogleheads, since I a, not in the market for a new religion.
Uh, I still do not see a cogent or even coherent reason why one would get up in arms about agency MBS exposure in an index fund. Anyone else want to take a crack?
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The issue wasn't about the presence of the MBS in the index fund. The issue was do you want exposure to them at all if you could just be in short/int treasuries +/- TIP's. This debate was all taking place during the meltdown when short/int treasuries were the only asset class with (-) correlation. My take home was it just doesn't matter that much. Slice or dice or just hold TBMFX and get on with your life.
DD
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At 54% of FIRE target
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06-28-2010, 11:35 AM
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#28
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Quote:
Originally Posted by DblDoc
The issue wasn't about the presence of the MBS in the index fund. The issue was do you want exposure to them at all if you could just be in short/int treasuries +/- TIP's. This debate was all taking place during the meltdown when short/int treasuries were the only asset class with (-) correlation. My take home was it just doesn't matter that much. Slice or dice or just hold TBMFX and get on with your life.
DD
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Gotcha. Sounds like I would never have the patience to deal with the bogleheads crowd...
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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06-28-2010, 11:36 AM
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#29
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 14,183
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Quote:
Originally Posted by brewer12345
Gotcha. Sounds like I would never have the patience to deal with the bogleheads crowd...
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Anything worth doing is worth overdoing! Especially on the internets...
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Have Funds, Will Retire
...not doing anything of true substance...
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06-28-2010, 06:16 PM
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#30
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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Quote:
Originally Posted by brewer12345
Gotcha. Sounds like I would never have the patience to deal with the bogleheads crowd...
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No ignore poster feature over there - although the idea of implimenting one was raised recently. Given your knowledge base I don't think it has much to offer you. For us investing amateurs lots of good information and hand holding help with ignoring the noise and the financial experts talking heads.
DD
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