I've been sitting on a bunch of cash that I would like to invest in bond funds. It would consist of around 50% of my portfolio. I have a few balanced funds. Equities compromise at least 50% of the rest of my portfolio. Since I live and work in Europe, I have savings in euros (gulp) that I'm not including in this mix. So, finally, the question...I'd like to assemble a portfolio of bond funds (not more than 4 if possible) which would enable the manager to decide which bonds the I should be holding. This would be a buy and hold portfolio that I would continue to hold through retirement. I don't want to decide which types of bonds to hold. That's what I would be paying the manager to do. I'm 53 years old. Any suggestions would be welcome. By the way, I have my brokerage account at Fidelity.Thanks!
Comments
-You cannot go wrong with DODIX Dodge & Cox Income Fund (USA intermediate term.) Dividends quarterly. This is a solid, conservative, reliable fund that's been around forever. Morningstar's ratings currently indicate both "above avg." risk and "above avg." return. I don't know what they did to deserve that. 4.14% yield.
-Also, I rather like PREMX. The share price has fallen, but I love the MONTHLY dividends! There's a juicy 7% yield here. (Well, OK. Actually it's 6.96%.)
-Plus, MWTRX Metro West Total Return. It's another intermediate term domestic offering. MONTHLY divs. Yield = 4.37%.
These are the ones I own and/or track. Surely there will be other ideas shared. Good luck, or should I say: "break a leg." Buy and hold, through retirement... MWTRX actually moves stuff a LOT, lotsa turnover. Just be aware of taxable events.
Another core plus fund to look at is Baird Core Plus. Available NTF as BCOSX, or institutional as BCOIX with a transaction fee. The latter is available at a low min in an IRA, or with a $25K min in a taxable account.
A different form of flexible bond fund is the multisector fund - typically a mix of junk, foreign, and domestic investment grade bonds. Loomis Sayles (LSBRX is the share class you can get at Fidelity with under $100K) and Fidelity Strategic Income FSICX are a couple to look at there.
Our main accounts are also with Fidelity; so you too have an almost unlimited choice of funds. I presume this is Fidelity, U.S. and not U.K.? Although I don't know about differences in investment choices.
FNMIX , for emerging markets exposure from a well run fund. (this fund will be subject to the value of the $US; but managed well in 2011 with a stronger dollar, which may persist going forward....until numerous other financial problems find smoother sailing, globally)
FTBFX, a total type bond fund that gives one a broader mix
LSBRX, a mutli sector, global bond mix
DLTNX, although noted as an intermediate bond fund at M*, this is a mortgage securities bond fund. I do believe Mr. Gundlach, currently has proper focus upon what is taking place in the bond world; and otherwise, too.
NOTE: Our house holds numerous bond funds; but I can not say what we may hold in this sector in one year's time, let alone a "buy and hold"; although I understand your thoughts about letting selected, broad based and active managed bond funds stay in place in one's portfolio. Managers do move on; and/or retire. Similar thoughts could also place one's choices into etf's or broad based bond index areas.........BND or VBMFX. At the very least, you'll save about 1/2% of expenses, vs some active managed funds.
I will also agree with the choices listed by others above. FSICX is a bit more restricted at this time, as to %'s allowed to be invested into various bond sectors.
Not unlike other fund choices, you need to review the prospectus to get a better understanding of a fund's flexibility. This will take some time and work to sort out what appeals to you, as well as a look backwards for returns to help with some clues as to the previous abilities of managers.
TRY THIS: Using the resources drop down menu here at MFO, select "navigator". At the "navigator" page....in the "fund name" box....type total return bond ......a list will populate, of which you may scroll downward. The list will not be inclusive of every total return bond fund, but will set a start point. You may also use total bond .......which will provide a different and shorter list.
Also, at Google Finance........in the "get quote" box, type in total return bond .......Google will set a short list in the drop down list of what it thinks you may be interested............ignore and do not click upon anything in the list...........but, do click upon the icon for "get quote". A large list will be placed below on the page. The first part of the list may be index or eft funds..........scroll down and you will find a list for "mutual funds" showing the first 20..........scroll to the bottom of this list and click upon "show all funds". The page will refresh the list. Each page will list 20 funds..........now at the bottom of each list page you will find an arrow > to let you move to the next list page of 20.
This involves a fair amount of work, but may be of value.
Either of these listing methods will also give some redundant results, as various classes of the same fund will also be shown.
Lastly, do you have your own list of bond funds that you have for consideration? The short name list of funds that have been noted in this thread is surely not complete; and others have noted bond funds of value here at MFO in past postings. Hopefully, others will offer their choices, too. Take your time with study of funds that you feel suit your needs.
I will be nosey, and ask in which country do you reside? I understand if you choose not to reply to this question. Enjoy your time here, at MFO.
Regards,
Catch
Basically, these funds will underweight treasuries and overweight Mortgage Backed Securities and Corporate Bonds, so having several funds won't really diversify you significantly. The different managers may execute their strategies with more or less skill, but they are exposed to roughly the same asset classes.
The short term funds will be less volatile and DODIX is more conservative (less exposure to esoteric bonds and Junk). You could probably choose the one or two funds you're most comfortable with and be done with it.
NickF's thoughts about overlap is indeed of value. Along that path, however; is something we use regarding overlap; but is a cushion against one manager on a different path vs another and resulting in a lower return than one may expect from a given fund type/style, even though the prospectus or name of a given fund may imply similar pathways.
We have several bond funds that are of similar type/style, sometimes even in name; and although their may be overlap of some holdings we may have 4 funds of the same style; hoping that all may perform equally; but if one fund stumbles with its choices over a time frame, we have the other 3 to support this.
Noting this point from this house may find that you choose 4 or 5 bond funds that meet your criteria; don't be too concerned with some overlap and know that one fund may stumble and yet your average return of all will not suffer. A prime example in 2011 was PTTRX vs FTBFX, both of which we hold. Mr. Gross and co. when off the path for awhile and the fund's returns suffered, but this was offset somewhat with our smaller holding of FTBFX, which nearly doubled the Pimco full year return.
An additional note about using "navigator" as noted before. In the "fund name" box; also enter the wording strategic income which will bring forth a list of other bond funds.
I note this as, the name types for many funds in a similar group may be misleading; and one may find similar goals of these funds with different names.
On an unrelated note: My wayback machine found me crossing out of North Africa, into Spain (at the strait); back in 1973 and headed toward Switzerland for part of the summer. What normally would not have been a very long journey along the south and east coasts of Spain took 2 months. A most pleasant time along all of the coastal and some inland cities and villages. One of my most pleasant memories was stopping at the small taverns for a bite of food (tapa bars?) and then refilling my empty wine bottles via the large wooden wine barrels placed into the building walls. I recall about $.20 for a full bottle. Also, I generally would select a rose' wine and found the colors and flavors to vary so much from area to area. Obviously, a product of the grapes used from that area, and the vintners recipe. Also, during an extended stay near Terragona (sp) a small restaurant/bar, owned by a gentleman from Belgium was discovered to have very good and inexpensive food. I passed the word around to other young travelers I would encounter; and always with the words....."tell him that Mark sent you". After 3 days and my return again to his restaurant for supper, he noted a substantial increase in his business from other travelers who had been sent to his place and used my name in reference. I never had to pay for another meal at his restaurant for the remainder of my stay in the area. A most pleasant and interesting journey through Spain and I eventually made the trip further into Europe.
Regards,
Catch