We have a very substantial part of our stash (the "safe part") in Vanguard Total Bond Index (VBMX). Performance has been fine given the insanity. It is valued well within its traditional parameters, and has not suffered from the bond fund melt downs discussed in the WSJ. It is only down a bit this year inclusive of distributions. In looking at its holdings though you see corporate bonds and lots of FNMA, GNMA etc.
WSJ is full of stories about current and more pain in the bond market which has me looking again at this part of the remaining portfolio.
My question: Does the Total Bond Index remain safe enough in the current environment. Should I move the bond stash into the Intermediate Term Treasury Fund (VFITX). I recognize I canot avoid the interest rate risk. What I am seeking to avoid is too much risk in the meltdown of the various obligors within the fund. I am not seeking fool proof safety, only to avoid say a 10%-20% drop in this part of our investments.
One other point. I see that VFITX is up over 7% this year as people flee to treasuries. Does that in itself add to the risk of the switch?
Thanks for the collective help!
Zman
WSJ is full of stories about current and more pain in the bond market which has me looking again at this part of the remaining portfolio.
My question: Does the Total Bond Index remain safe enough in the current environment. Should I move the bond stash into the Intermediate Term Treasury Fund (VFITX). I recognize I canot avoid the interest rate risk. What I am seeking to avoid is too much risk in the meltdown of the various obligors within the fund. I am not seeking fool proof safety, only to avoid say a 10%-20% drop in this part of our investments.
One other point. I see that VFITX is up over 7% this year as people flee to treasuries. Does that in itself add to the risk of the switch?
Thanks for the collective help!
Zman
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