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Old 12-01-2014, 06:50 PM   #41
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Originally Posted by photoguy View Post
VFSUX dropped about 7% in 2008/2009 so not great but not terrible either.
Actually - that is pretty bad. Especially for a short-term bond fund. That's a good wake up call for exactly how risky such a fund is. A good example of why it should not be used as if it were a "low-risk" cash equivalent. No one would be happy with a 7% on what was supposed to be cash.

A fund much higher in Treasuries and govt-backed bonds is a much better choice if you are looking for diversification against equities during times of crisis.

VBIRX Vanguard Adm Short-term Bond Funds VBIRX vs VFSUX chart
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Old 12-01-2014, 08:19 PM   #42
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I'm ok with the drop but I purchased it knowing full well what the tradeoff is for the extra yield. I think it's even ok even as an emergency fund since a 7% haircut is not that bad (at least in my opinion -- others will differ) and presumably over time the higher yield will allow it to build up a buffer or catch up depending on how long you've held it.

For intermediate I'm trying to stick much more to treasuries (and no junk) but I have a fair bit in vanguard's total bond (only 65% gov) for various reasons.

I think as time passes, more of my short term / cash equivalents are going to be shuffled into I-bonds. But we can only put in 20k or so a year and the fixed rate sucks (how I long for the 3% real days).
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Old 12-06-2014, 09:09 AM   #43
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i bet most of us remember the days we used to laugh at anyone using a 5-1/4% savings account as a place to keep their money..

the poor results many of the short term bond funds got in 2008-2009 were really a once in a lifetime thing.

most all loaded up on what was supposed to be safe paper that later turned out couldn't be valued and turned toxic..

fidelity maintained a central core fund for use by the mutual funds where they could bring up yields by buying some of this paper.

funds like fidelity ultra conservative bond fund got hammered and they were one step above a money market.

in fact i hold the distinction of losing money in a money market. just a few cents on the dollar but we did break the buck.
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