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Check Your Bond Fund
I had a great conversation with @Mindingmythirties last week on Bond Funds
Let me loop you in..../
/.....THREAD
I had a great conversation with @Mindingmythirties last week on Bond Funds
Let me loop you in..../
/.....THREAD
1/ Bond Yields Move Opposite of Interest
When interest rates are high, bond yields are low.
If you have a balanced portfolio, your stocks will offset this.
When interest rates are high, bond yields are low.
If you have a balanced portfolio, your stocks will offset this.
2/ Face Value Not Guaranteed
If you bought a bond certificate, you would be entitled to the face value of the bond.
With a bond fund (even index) the fund changes its composition to match the market.
That market may be the total bond market or the fund managers picks.
If you bought a bond certificate, you would be entitled to the face value of the bond.
With a bond fund (even index) the fund changes its composition to match the market.
That market may be the total bond market or the fund managers picks.
3/ Check Your Turnover
FXNAX - 38%
VBTLX - 31%
My bond fund FXNAX has a turnover of 38%. Liz’s bond fund VBTLX has a turnover of 31%.
This means less of her bonds are being exchanged. Resulting in less sensitivity to interest rates.
FXNAX - 38%
VBTLX - 31%
My bond fund FXNAX has a turnover of 38%. Liz’s bond fund VBTLX has a turnover of 31%.
This means less of her bonds are being exchanged. Resulting in less sensitivity to interest rates.
4/ Bond Losses are Nothing Like Stocks
1973-2016
Worst 12 month bond loss is ~13.9%.
Worst 12 month stock loss is ~43%
If you are a long term passive indexer, you’ve got nothing to worry about.
The new higher interest bonds in your portfolio will return your losses.
1973-2016
Worst 12 month bond loss is ~13.9%.
Worst 12 month stock loss is ~43%
If you are a long term passive indexer, you’ve got nothing to worry about.
The new higher interest bonds in your portfolio will return your losses.
