Vanguard GNMA Fund Admiral Shares

[Graybeard]

I'm surprised I am thinking about a bond fund but I am.

I got out of them 3+ years ago but treasuries, CDs, the Vanguard Settlement Fund and the Vanguard Treasury Money Market fund all have seen their yields drop a lot. At 75 I am not interested in a 10 year Treasury note or even 2 or 5 year notes. Since 2022 I have been in 1 year or less T bills and this year 1 year CDs to keep money available that is in my rollover IRA, could put $500k to $750k into GNMA fund. A bond fund would allow for selling shares whenever if I wanted to pull the money out vs waiting for another instrument to mature because I buy and hold to maturity. I realize a bond fund's duration can be a problem when rates rise, currently it is 5.2 years. The distribution yield has been dropping all year, currently it is 3.66%. I understand the negative convexity associated with the GNMA fund but there are a lot of mortgages that are 2.5 to 3.5% out there so it seems unlikely many of those will be refinanced. YTD, GNMA fund is up 7.15% but in January the nav was about 35 cents a share cheaper and no doubts that has contributed to the return so far. The housing market is not doing well due to "higher" interest rates, price appreciation on homes and the down payment needed.

I was in this fund about 20 years ago and it did well. With all that in mind, are there reasons the GNMA fund is a good idea now or a terrible idea?

VFIJX-Vanguard GNMA Fund Admiral Shares | Vanguard

 

[mrfeh]

So, it sounds like you sold low and are now considering buying high. The exact opposite of what you want to do.

If anything, this should demonstrate not to time the market. And avoid funds that invest in sectors.

Perhaps buy a shorter term bond fund like VFSTX and learn to ignore NAV changes.

 

[Graybeard]

I sold 20 years ago and did well despite the nav did drop back then. I am considering buying now. This would be a replacement for lower yielding instruments I have been buying.

I thought I explained this clearly. I was curious if anyone finds GNMA today to be headed for problems due to rates and the current housing market.

 

[Texas Proud]

I am not a big GNMA fan... I owned it when I was young... but I thought that other bond funds had better yields and better results...

I do not have any regular bond funds now... but do have some HY ETFs... so take with a grain of salt..