Really? The symbol is VFSUX? Too funny.
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makes it easy to remember!
Really? The symbol is VFSUX? Too funny.
Sent from my iPad using Early Retirement Forum
Morning All -
We have accumulated funds in non-IRA Vanguards Short Term Bond Fund (VFSUX).
Read an article in Money Dec edition suggesting that with expected interest rate small change, better to go to Intermediate Term.
We have enough liquidity in other accounts to whether storms over next 3-5 yrs so this money is more longer term.
I guess I may be answering my own questions if we should go from ST to IT. As long as we have enough liquidity then better to go IT.
If we do go IT, better to go Vanguard IT (VBILX 7.2 yrs avg maturity) or Vanguard Total Bond (VBTLX - 5.5 ys avg maturity)
Would appreciate your thoughts. This forum has amazing amount of knowledge and insight.
Thanks!!
Kannon
Don't try to time the bond market. Nobody knows what's gonna happen with interest rates.
The deciding factor is your time horizon - when will you possibly need to sell the fund. I look for a fund where the average duration is between .7 and 1.0 of my time horizon. If you may not need to ever sell the fund, then just use total bond.
just becareful as what was fine for 35 years may not be fine once bond yields turn that corner.
the last 44 years we have seen the fed push up the fed funds rate by 1% or more lots of times and 50% of the time bonds rose. in fact only in one year 1994 did they lose money.
but that was because investors saw it differently and bid bond rates down.
well with little place to go at this point that history may mean little and those bond funds falling in value may cause some real pain.
just this past 4 weeks the long treasury bond has lost 7% . intermediate term treasury lost 2.50%, , corporate bond fund lost 1.70% and total bond lost 1.00 %. most of it over the last 2 weeks .
the benchmark us aggregate bond index fell 1.25% the last month . we may have reached the point that bond yields are on the rise and bonds may act more as a dead weight than adding to the party .
worse yet is it may take away.
equities and cash may be the best way to go according to quite a few top researchers .
Just so folks remember - if you aren't selling your bond fund shares, none of this matters. If you're holding bond funds for the long term, you want rates to go up, so that you are earning more money.
I don't plan on selling my intermediate bond funds for 10+ years, and I'm rooting for rates to go up, and the sooner the better.
Bond are just back to where they started at the beginning of this year. So it's just noise! We often go through periods of "rush to quality" when world events look scary, then rush out again when things look rosy. Repeated ad infinitum!
Perhaps you are concerned, but I fail to see why most other investors should be. I think a number of posts in this thread were from people who were holding intermediate term bond funds in tax deferred accounts and had a time frame of over a decade. For this type of investor, a rise in interest rates should be a cause for rejoicing, not for concern. The higher interest rates will inevitably translate into better bond returns well before they expect to need the money.1 to 2% drops in intermediate term funds and 7% in longer term does trigger a concern .
getting 3% on a fund that fell 4% is a poor investment whether you are selling or not.
This is where we disagree.
If I'm not selling a fund, why would I care what the NAV is?
Please look at the NAV of intermediate bond funds over large periods of time. You will see it wobble, but not stray very far, even when there are large changes in interest rates.
Perhaps you are concerned, but I fail to see why most other investors should be. I think a number of posts in this thread were from people who were holding intermediate term bond funds in tax deferred accounts and had a time frame of over a decade. For this type of investor, a rise in interest rates should be a cause for rejoicing, not for concern. The higher interest rates will inevitably translate into better bond returns well before they expect to need the money.
As always, I am somewhat bemused by investors that are so risk averse that they are concerned by 1%-2% declines in intermediate term bonds, but at the same time are willing to hold substantial portions of their portfolios in stocks, which can be subject to 10%-20% declines in a similar time frame.
do not look at a 35 year old bull market where you could sit static in bonds during our lifetime with what will happen when the cycle reverses and goes up .
Again, what's the reason for your concern? If the multi decade decline in interest rates really is at the cusp of a reversal, any long term bond investor should be absolutely ecstatic. Instead of looking at 2%-3% average returns in bond funds going forward, we can now look forward to the higher interest rates translating into better bond returns long before we will need the money.the c9ncern now is just for the reasons i mention above. a reversing interest rate cycle is something we have not seen in our lifetime yet but we are darn close now.
Look at the graphs in this thread; what bond fund investors care about is total return, not NAV:
Bogleheads • View topic - Bond Funds - Lower Rates - Impact on Total Return
Here's another explanation:
What Happens to Bond Funds When Rates Go Up?
Again, what's the reason for your concern? If the multi decade decline in interest rates really is at the cusp of a reversal, any long term bond investor should be absolutely ecstatic. Instead of looking at 2%-3% average returns in bond funds going forward, we can now look forward to the higher interest rates translating into better bond returns long before we will need the money.
duh!!!!!!!!!! that is my point . do you know what total return is ? . it is your nav and dividends and interest all looked at together . yes it includes the nav .
duh!!!!!!!!!! that is my point . do you know what total return is ? . it is your nav and dividends and interest all looked at together . yes it includes the nav .
I'm not sure what point you are trying to make. The graph in the link clearly shows that bonds were a good investment in a four year period of rapidly rising interest rates. As I've said already, you are concerned, but I am happy. We'll have to wait to see which emotion is better suited to bond investors in the next four or five years.
You seem to like slinging numbers around without providing any justification whatsoever. Inflation was never anywhere close to 5%-6% from 2003-2007. Intermediate term bonds provided positive inflation adjusted returns during this period, so they turned out to be a good investment in 2003. If rates had continued to rise after 2007 because of the huge spike in inflation you are envisioning, intermediate term bonds would have been an even better investment in 2007 than in 2003, because they were purchased during a period of high interest rates and the relatively high dividends would have been reinvested at even higher interest rates.if rates continued rising beyond 2007 and went to 7 or 8% you may be getting 3% or 4% total return on your invertment . 3% in 5 or 6% inflation is a loss no matter how you look at it. higher rates and higher inflation usually coincide.