Question about Bond Funds

[pb4uski]

I guess that I prefer the target maturity bond ETFs because I can control the duration of my portfolio better by deciding how much to invest on each rung of the ladder and I know what I will receive in the target year. With a bond fund, the managers can change things without my knowledge within broad bounds of the investment guidelines.

Back in the great recession I was burnt by the Evergreen Core Bond Fund in my 401k when the managers essentially made a big bet on mortgage backed securities that was within bounds of the investment policy but differed from the asset composition when I added that investment to my portfolio. It took me almost a year to notice that the fund was lagging badly to other core bond funds and determine why... but by then it was too late... cost me over $20k as I recall.

 

[TuborgP]

it could since depending on the types of bonds pro's tend to do better spread wise as well as assessing credit worthiness . a good fund manger who has an eye for bonds with good up grade potential in rating can add alpha .

Almost a year ago Vanguard started a managed bond fund called Core Bond fund. I was in day 1 and also have their bond index fund. I am waiting for yearly results to compare. Some of the various Fidelity enhanced index funds have outperformed their non enhanced indexed counterparts.

 

[mathjak107]

fidelity's total bond fund is so much better than vanguards total bond . there are very few time frames if any vanguard beat ftbfx .i own both vanguards and fidelitys but i wish i didn't split it and kept everything in ftbfx instead .

 

[REWahoo]

fidelity's total bond fund is so much better than vanguards total bond . there are very few time frames if any vanguard beat ftbfx .

Can you post a chart comparing their performance to confirm your statement?

 

[mathjak107]

Sorry about my snarky caps comment. That was out of line.

awe shucks ! . don't worry , i am used to the comments but it is what it is .

the good news is i run 5 miles every other day and spend the days i don't run weightlifting and the diabetes is under control with no meds . in fact off lipitor and blood pressure meds too . the diet and exercise have me high normal .

but the nerve damage in my fingers and toes seem to not heal , it has been years now with no change .

 

[mathjak107]

Can you post a chart comparing their performance to confirm your statement?

just go to morningstar and hit compare . vanguard admiral shares total bond vs fidelity fbtlx total bond .

1yr vbtlx 1.07 ftbfx 6.40%

3yr vbtlx 2.58% ftbfx 3.38

5yr vbtlx 2.07 ftbfx 3.32

10 yr vbtlx 4.32 ftbfx 4.94%

fidelity includes the higher fees too . so lowest fee's ain't always the best way . especially in bond funds .

i like fidelity high income a lot too sphix . until recently i had 20% of my portfolio in it . we clocked in up 16% last year with a beta of 1/2 that of the s&p 500 .

 

[Running_Man]

As an individual asset proponent, I have always differed with those that claim a bond fund is no different and actually better than owning individual securities. If this were so there would not be such major differences in performance of an index of US bond funds, over the last five years the VANGUARD TOTAL BOND FUND returned 12 percent FIDELITY TOTAL BOND FUND 18 percent

Over the last 10 years VANGUARD TOTAL BOND FUND returned 45 percent and FIDELITY TOTAL BOND FUND 60 percent.

Yet people will sing praises of Vanguard for their “low” management fees, as if that is the only item that creates differences in portfolios. For the average investor, they are told just invest in the index and it is impossible to do better. These two performances alone should be enough to tell anyone what a load of crap you are sold when you are asked to suspend any thought into making investments.

A ten year US treasury bought ten years ago would have yielded 4.76% and paid zero in management fees. Just held to maturity and burying the interest payments in the back yard you would have earned 47.6% or 2.6 percent better than Vanguard’s Total Bond managed to do in a declining interest rate environment. A zero coupon bond would have earned 59.20 percent about what the Fidelity total bond fund earned over the same time period. So the difference between these two bond funds for the past 10 years is equivalent to burying your bond payments in the back yard for 10 years.


PerfCharts | Free Charts | StockCharts.com

 

[mathjak107]

you have seen me say many times that indexing may not be the best way to do things automatically .

i know my news letter has beaten the s&p 500 for more than 30 years . that is because you do not need the individual funds to beat their index . you can use use managed funds weighted a certain way through their sweet spot and then swap funds .

there are always trends in things you want to take advantage of . not timing , but just nudging things a bit to better fit the big picture .

vanguard has no high yield bond fund etiher . last year that was a great place to be . fidelity high yield sphix had great returns , served as a proxy for stocks and did it with almost 1/2 the volatility of the s&p 500 .

i only give vanguard about 10% of my assets . fidelity has the other 90% .

 

[mathjak107]

As an individual asset proponent, I have always differed with those that claim a bond fund is no different and actually better than owning individual securities. If this were so there would not be such major differences in performance of an index of US bond funds, over the last five years the VANGUARD TOTAL BOND FUND returned 12 percent FIDELITY TOTAL BOND FUND 18 percent

Over the last 10 years VANGUARD TOTAL BOND FUND returned 45 percent and FIDELITY TOTAL BOND FUND 60 percent.

Yet people will sing praises of Vanguard for their “low” management fees, as if that is the only item that creates differences in portfolios. For the average investor, they are told just invest in the index and it is impossible to do better. These two performances alone should be enough to tell anyone what a load of crap you are sold when you are asked to suspend any thought into making investments.

A ten year US treasury bought ten years ago would have yielded 4.76% and paid zero in management fees. Just held to maturity and burying the interest payments in the back yard you would have earned 47.6% or 2.6 percent better than Vanguard’s Total Bond managed to do in a declining interest rate environment. A zero coupon bond would have earned 59.20 percent about what the Fidelity total bond fund earned over the same time period. So the difference between these two bond funds for the past 10 years is equivalent to burying your bond payments in the back yard for 10 years.


PerfCharts | Free Charts | StockCharts.com

a 30 year bull market in bonds really helped zero coupon bonds . lets see how those do when we go the opposite way . they will get hurt badly so hindsite is 20/20 as they say .

but i still agree about just thoughtlessly using index funds .

 

[eytonxav]

fidelity's total bond fund is so much better than vanguards total bond . there are very few time frames if any vanguard beat ftbfx .i own both vanguards and fidelitys but i wish i didn't split it and kept everything in ftbfx instead .

+1 Ford O'neill and his team do a great job.

 

[mathjak107]

fidelity has a superb bond dept . i always liked high income and capital and income . at times new market income has been fabulous as a proxy for stocks . bonds are where vanguard drops the ball in my opinion . they don't even have a high yield bond fund . fidelity high income has been better than just buying HYG OR JNK

 

[Boho]

With stocks historically outperforming bonds, I'm thinking the first thing I should do to limit volatility is search for a good index fund, second is search for good foreign securities, and third, maybe search for good bonds. I'm working on the foreign part now. I actually tried a bond search twice but I couldn't find anything that met my standards. I'm not sure I'll try again but maybe when I buy foreign I'll get something with bonds.