What type of bond funds would you buy now?

[daylatedollarshort]

Who knows though? Vanguard Total International Bond Index Fund has fallen 11.04% YTD while the total domestic bond index fund has fallen 13.72% I wouldn’t have predicted that. Not fun to experience but they both seem like they are still basically doing their jobs as ballast to the stock side, which is down internationally 16.88% and domestically 16.92% YTD.

Wouldn't ballast mean something that has gone up, or at least stayed flat, to counteract the loss in stocks? As of this writing, Google Finance is showing BND down -15.40% for the past one year period. VFAIX, Vanguard's 500 Index Fund Admiral Shares, is down -15.33% for the past 1 year period. Fidelity's money market is around 3.6% now, one year Treasuries are at 4.69% and individual TIPS currently have higher yields than I bonds, plus similar inflation adjustments. The TIPS and Treasures have no market risk if bought at par or less and are held to maturity. It seems like cash or individual fixed income would have provided more ballast this past year than bond funds.

From the Fidelity web site, "But over the past year, bonds have taken to behaving more like stocks. Indeed, from October 2021 to October 2022, the price of the Bloomberg Barclay’s US Aggregate Bond Index, which represents the vast investible universe of US bonds, has dropped almost 16%, essentially equaling the decline of the S&P 500 over the same time." Investing | bond market outlook | Fidelity

 

[FANOFJESUS]

That’s what I’ve done, converted all our bond funds to T-Bills starting back in July (better late than not) for now. And I’ll probably go longer Treasuries once rates stabilize. I don’t see any reason to buy bond funds at the moment, despite owning them in the past. YMMV

I am thinking about doing that to. What year maturities are you buying? 1 year, 2 year , 3 year , 5 year. How far are you going out? Equal amount in each year?

 

[Doc0]

I'm in T Bills 3 and 6 month duration. Right now bonds are not set and forget. 3 mo pays 4.39% 6mo Bills are paying 4.67%. About as close to risk free money as you're ever going to make. Do it in Roth or IRA to avoid tax bill

 

[I am He]

Could someone explain to me the difference between the total return between a ladder and a fund that would be churning over from rung to rung? I understand that during interest rate changes that the NAV will show gains/losses but if you're going to hold on for 40 years, it seems to me that the expense ratio is all that would be lost (which is plenty compounded for 40 years).

So if I buy a 10 year ladder (a few new issues and more than that in secondary offerings since you can't just buy a new 6 year bond) vs buying a fund (that bought the same duration treasuries, for ex.) and hold it for 10 years wouldn't they come out the same in the end, less the expense ratio? Possibly even doing better as they might have access to cheaper rungs due to their multimillion dollar purchasing power?

I've bought a ladder thinking I was smart, but since I'm not using the money to actively rebalance (it's there for safe keeping...losing to inflation), the price fluctuations of a fund seem less important than the total return. Even the individual bonds held at a brokerage can show losses vs the market but, mentally, I know they're worth "face value" eventually. But in a bond fund, since we don't know those "face values," I question whether I'm making more work than I'd need to?

Cheers!

 

[mrfeh]

Could someone explain to me the difference between the total return between a ladder and a fund that would be churning over from rung to rung? I understand that during interest rate changes that the NAV will show gains/losses but if you're going to hold on for 40 years, it seems to me that the expense ratio is all that would be lost (which is plenty compounded for 40 years).

So if I buy a 10 year ladder (a few new issues and more than that in secondary offerings since you can't just buy a new 6 year bond) vs buying a fund (that bought the same duration treasuries, for ex.) and hold it for 10 years wouldn't they come out the same in the end, less the expense ratio? Possibly even doing better as they might have access to cheaper rungs due to their multimillion dollar purchasing power?

I've bought a ladder thinking I was smart, but since I'm not using the money to actively rebalance (it's there for safe keeping...losing to inflation), the price fluctuations of a fund seem less important than the total return. Even the individual bonds held at a brokerage can show losses vs the market but, mentally, I know they're worth "face value" eventually. But in a bond fund, since we don't know those "face values," I question whether I'm making more work than I'd need to?

Cheers!

You have things exactly right, but many folks here will tell you you have it wrong. This forum has a preponderance of individual bonds/market timers.