Here’s my bond fund experience inside my Fidelity 401k. My AA target is 60/40. I have 3 bond funds out of the 5 that are offered in my 401k. The fixed income funds I have are a Stable Value Fund (23%), FXNAX (10%) and VIPIX (7%). Over the last year, the SVF returned 1.4%, which made it the champion of my bond funds last year. Here’s what FXNAX and VIPIX did:
At the trough, FXNAX lost 15% from the peak, and now it has recovered 5%. At the trough, VIPIX lost 19% from the peak, and now it has only recovered 1%.
I’m seeing noise in the financial news media that bonds funds are recovering. FXNAX seems to support that, but VIPIX, not so much. Mixed signals, a false narrative, or a little of both? Hmmm.
Probably like a lot of folks, after a year of losing I was wondering if I should “stay the course”, or not. Should I abandon bond funds entirely? Well, I did initiate some changes yesterday. I sold all the SVF (returning 1.4% p.a.) and bought the one money market fund in our 401k, FIGXX, that is currently returning 4.2% p.a. FIGXX's returns has increased in lock step with the Fed increases. So, at present and looking forward into 2023, this change seems to be in the direction of goodness. I plan on doing the same for my VIPIX, unless something drastic happens soon (it probably won’t), and I will keep an eye on FXNAX. So, I’m mostly abandoning bond funds right now, but not 100%.
More info. I’m still working. I will be retiring late in 2023. At that time, I’ll roll the traditional 401k portion of my 401k into my Fidelity tIRA, and the Roth 401k portion of my 401k into my Fidelity Roth IRA (opened in 2015). I used to think retaining the SVF in my 401k may be a good long term idea, but I just realized I have gutted that idea! Something else to noodle on.
Once I retire and roll these funds over, I’ll have a lot more flexibility and access to bonds!
Comments, advice, questions?