Need to dump VBTLX!!

[audreyh1]

Open ended bond funds as others noted will go down if interest rate move higher. Investors will often redeem, compelling the bond fund manager to sell at worst times and lock in losses. If instead one owns individual bonds, or term preferreds, with intention of holding until maturity or called there is no interest rate risk. If rates go up, the market value for awhile may go lower, but will return to par as the bond or term preferred approaches its maturity date or redeem at par if called. Huge difference.

When bond funds get oversold due to fleeing investors that’s an excellent time to buy more.

 

[Quattro73]

When you buy bonds at near zero rates you get near zero return.

 

[sleepysurf]

Equities for growth. Bonds for "ballast" (to reduce overall portfolio volatility). Diversifying my bond allocation (between Total Bond, Limited Term Muni's, and Short Term Treasuries) helps me sleep well at night, even with the '22 bond debacle.

 

[pb4uski]

What is the 10-year performance if 2022, when it lost about 13 percent, is excluded? What I'm thinking is that there may have been 10 and 15-year periods during which its performance was more like what an investor might have expected.

Count the interest rate gains because they were gradual but not count the interest rate losses because they were sudden? Sounds foolish to me.

 

[pb4uski]

I don't know what index bond fund investors expect. I do know that average compounded real bond returns from 1926-2018 were:

Long-term corporate 3.0%
Long-term government 2.5%
Intermediate-term government 2.1%
30-day treasury bills 0.4%

Also, over that period intermediate-term gov't bonds had the lowest correlation coefficients, although t-bills and long-term gov't bond coefficients were very similar to intermediate gov'ts.

I have a faint recollection that Vanguard suggests that BND should have yield about equal to the 10 year Treasury in the long run.

 

[Al18]

I don’t think most early retirees care about the 10 year yield, especially if they aren’t receiving SS yet. If you are retired, you need money to fund your retirement, and for most of us, that means selling stocks and/or bonds every 3/6/12 months. If stocks are down for the period, then we’re selling bonds. 2022 was a down year for stocks, so bonds were sold. As of today, 6 month performance for SP500 is -0.14% based on NAV price.

 

[Lorenzo]

Count the interest rate gains because they were gradual but not count the interest rate losses because they were sudden? Sounds foolish to me.

I wasn't exactly suggesting "not count" something. I was making a point--which could very well be off base--that looking only at the most recent 10-year period or 15-year period and not looking at any of the many 10 or 15-year periods that preceded those that included 2022 looks like recency bias. In earlier periods, these intermediate-term bond funds apparently performed more or less as expected. Of course, ignoring 2022 is taking the tenuous position that 2022 was so anomalous that the same thing surely isn't going to happen again in the next 10 or 15 years.

 

[PatrickW]

FWIW, I got tired/disgusted with the performance of the bond (ETF) portion of my portfolio several years ago, and moved that allocation into GLD instead. One of the best moves I’ve ever made.

In fairness, I’ve recently sold off all my GLD, and allocated that portion to dividend funds. I don’t see going back into bonds anytime soon, if ever.

 

[richardf]

I know I should've been paying more attention to my Vanguard total bond market fund, VBTLX, over the years, and didn't really realize what a loser it is. Over 5 years it's down -17.23% and Max, which I assume means when I bought it, is down -6.95%. I have a total of about $96,000 in there right now. I think I want to put this into VUSXX, a treasury money market fund and at least make some money off it, yet it will be safe. Yes, I hate to sell it when it's down, but it's always down. Does anybody else have this fund and are you just waiting to see if it gets better? I always was under the impression that they are a good thing to have in your portfolio.

I was put into a bond fund in 2020. It immediately tanked through 2021 and is still down into 2025. Thankfully it was only $33 K. AIBAX! now worth $26 K. My question is what is the purpose of bond funds and why in the world would anyone invest in one? Should I unload this turkey or try to wait it out to break even?

 

[Al18]

Over the past 5 years (2021-2025) my average interest rate from all my CD’s was a cumulative 18.0%.

By comparison, 5 year total cumulative return AIBAX was 3.14%.

I just checked on Fidelity, where you can create a 5 year CD ladder, with FDIC guaranteed interest rates ranging from 4.15% to 4.30% APR.

 

[pb4uski]

I was put into a bond fund in 2020. It immediately tanked through 2021 and is still down into 2025. Thankfully it was only $33 K. AIBAX! now worth $26 K. My question is what is the purpose of bond funds and why in the world would anyone invest in one? Should I unload this turkey or try to wait it out to break even?

IF you had $26k in cash available for investment, what would you invest it in?

Is it in a taxable, tax-deferred or tax-free account?

 

[FiveDriver]

A Question --

Does TTM (Trailing Twelve Months) include both Dividends Paid and any change in NAV ??

Tracking Bond Fund performance is made more difficult by the wide variety of metrics.....each tracking a subset of the real bottom line change in value.

 

[SecondCor521]

A Question --

Does TTM (Trailing Twelve Months) include both Dividends Paid and any change in NAV ??

Tracking Bond Fund performance is made more difficult by the wide variety of metrics.....each tracking a subset of the real bottom line change in value.

Depends on the data source. You have to read the fine print and know what you're looking at.

 

[FiveDriver]

That's what I was afraid of !!

SEC Yield gives you a projected return based on the previous month. Not really all that helpful in a choppy market.

Yield to Maturity isn't all that helpful either.

What does the Morningstar website report on Bond Funds ?

 

[FiveDriver]

OK, so Total Return is the key metric I'm looking for. But it appears to be cleverly concealed down in the weeds.

I don't subscribe to Morningstar -- is there a free site that provides this very important Data Point ?
Any comparison websites that give one-to-one comparos?

 

[SecondCor521]

I tend to go to the source, so for example if I want to know how VBTLX has performed, I'd go to Vanguard's website for that fund and look there.

But I also tend not to look at past returns for investment selection. I invest long term buy and hold in investments based on their characteristics such as asset type, tax characteristics, and geographic area of investment, not on their past performance.

 

[Trooper]

I tend to go to the source, so for example if I want to know how VBTLX has performed, I'd go to Vanguard's website for that fund and look there.

That's what I do also.

 

[FiveDriver]

I tend to go to the source, so for example if I want to know how VBTLX has performed, I'd go to Vanguard's website for that fund and look there.

But I also tend not to look at past returns for investment selection. I invest long term buy and hold in investments based on their characteristics such as asset type, tax characteristics, and geographic area of investment, not on their past performance.

I primarily do my shopping at Fidelity. At least I'll know what to look for on their Performance page.

Sometimes it's like shopping for a car, when the gas mileage is stated in 'Liters per Kilometer' on the window sticker....heh-heh.

 

[audreyh1]

OK, so Total Return is the key metric I'm looking for. But it appears to be cleverly concealed down in the weeds.

I don't subscribe to Morningstar -- is there a free site that provides this very important Data Point ?
Any comparison websites that give one-to-one comparos?

You can get the Total Return metrics from M* without paying anything. Even look at the comparative total return performance graphs for specific time durations.

Fidelity will show you those M* metrics too on the Fidelity site. Fidelity is also showing total return.

 

[FiveDriver]

So, I found a Bond/ETF Screener on Fidelity's site under the Performance tab. Using the YTD Criteria I'm looking for, I see a column called Market Total Return. This displayed only Fido's Bond ETF's and their high-earner was -- FDHY (a junk bond Fund) which may have Institutional Minimum Purchase amounts, not shown in this screen. The Total Return was 3.29% YTD. I believe YTD Return is important as it covers a turbulent period of Market uncertainty.

If that's the best Fido has in Bonds.......I'll stay in FZDXX.