Risk of putting it all in VG GNMA fund?

[cashflo2u2]

I am thinking of putting my entire fixed income portion of my portfolio into the VG GNMA fund. Currently yielding a little over 5% and the NAV hasn't varied much over the last decade at least. What would be the risk in doing this, other than the old saw about putting all eggs in one basket?

[cute fuzzy bunny]

The big risk would be in running out of money after xx years because you're barely keeping pace with inflation.

You'd be better off buying 100% tips. At least they'd protect you in the event of a surge in the CPI.

You'd still probably find yourself losing buying power after a decade or two.

Try target retirement income, lifestrategy income or wellesley. At least the stock component of those will give you enough long term appreciation to keep the buying power up.

[LOL!]

Taxable or tax-advantaged account? Have you looked at VFSUX? It has a yield of 4.95% which is not much lower than 5.16%. And Vanguard has CDs that pay 4.9% nowadays. I'm sure you can find some other places with CDs around 5%.

In other words, there are other games in town that are unrelated to securities associated with mortgages.

[cashflo2u2]

Thanks. The fixed income portion of my portfolio is 40% with the balance in diversified equity holdings. So, this would be a switch in the FI portion from other short term bond funds and cd's to the VG GNMA fund. Maybe I should have made that point.

[youbet]

OP said "fixed income portion."

I have a chunk of my fixed allocation in VFIIX. Historically stable NAV, reasonable yield, government guarantee, Morningstar five star rating. What's not to like?

I also include some short term and inflation protected funds. What has you interested in the 100% GNMA allocation?

[cute fuzzy bunny]

I think I'd avoid any investments with "SUX" in the ticker symbol.

[cashflo2u2]

Yes, VFSUX I considered but the underlying securities in the GNMA fund are guaranteed by the federal government whereas the SUX fund are corporate. Does that not make GNMA less risky with a slightly higher return. If I do the Wellesley, etc. it throws off my existing equity weighting.

[cashflo2u2]

I like simple and I cannot think of any risks I am not already taking in the FI portion of my port.