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  • edited January 2020
    stillers, interesting comment about IICIX--I am a fan of Voya, and IICIX is offered at Schwab as an institutional fund with a very low entry amount. I agree that the Western Asset Funds are very good--highly rated by M*. I did not mention those funds, as they are rated by M* as some of the highest risk funds in this category--high SD and long duration.
  • I do not or never have owned a "core" bond fund. I am not really sure what the benefits are. When comparing them to some non-traditional funds they are much more volatile. I will assume the higher credit rating in these funds are the attraction. It seems that many less volatile funds in other categories work just as well for ballast.
  • "Gary1952">I do not or never have owned a "core" bond fund. I am not really sure what the benefits are. When comparing them to some non-traditional funds they are much more volatile. I will assume the higher credit rating in these funds are the attraction. It seems that many less volatile funds in other categories work just as well for ballast.

    Gary, the intermediate core-plus bond oef category, is very popular with investors. If you look at the AUM of these funds, they are pretty large, compared with non-traditional and multisector bond oefs. Their total return performance in 2019, and over their history, looks very compelling. They offer good diversification, with an emphasis on investment grade holdings, which minimizes credit risk. Many investors are turned off by the lower investment grade holdings of non-traditional bond oefs and many of the traditional multisector bond oefs.

  • edited January 2020
    Gary1952 said:

    I do not or never have owned a "core" bond fund. I am not really sure what the benefits are. When comparing them to some non-traditional funds they are much more volatile. I will assume the higher credit rating in these funds are the attraction. It seems that many less volatile funds in other categories work just as well for ballast.

    Agreed for the most part at present.

    That said, I used to own a couple core/IB funds a few years ago. I recently jettisoned my last one, a residual holding in WAPIX, which was good while I owned but, but worthy future gains with it seemed iffy at best.

    I currently run with a spattering of munis, multis, nontrad's and one preferred stock fund. I own bonds only because I need to own them as ballast** for my stock allocation and would rather let respective PM's slice/dice.
    **Aside: Portfolio ballast to me is anything other than stocks.

    Either way one's preference on core funds or others, dt IMO is doing a GREAT job here of covering bond categories and topics, and I wish him continued success with this thread and those initiatives.
  • I would note that Intermediate Core-Plus bond oefs, have a fair degree of diversity "between" different funds. If you want a very high grade of investment holdings, then fund like BCOIX and DODIX are appealing. If you want lower standard deviation and lower duration, somewhat similar to non-traditional and many multisector bond oefs, then a fund like MTGAX is appealing, with a standard deviation below 2 and duration close to 2 years. It seems that the longer duration funds like JAFIX, BCOIX, and MWTRX has benefited the most as the Feds hold interest rate steady for the last year. I am impressed that DODIX, with its A rating portfolio, and its low standard deviation close to 2, has been able to turn out double digit total return in the last year. You could easily hold several funds from this category, that are enough different from each other, to add another layer of diversification.
  • Yer talking a lotta sense. It clicks for me, though I don't own those particular funds. :)
  • edited January 2020
    "Crash">Yer talking a lotta sense. It clicks for me, though I don't own those particular fundsh

    Crash, please be clear that I am not recommending anything. It is just a popular bond oef category, that many investors use as a primary/core holding in their portfolios. It is worth looking at, and developing a greater understanding of this category.

  • +1.:) Understood.
  • edited January 2020
    @dtconroe,

    I have enjoyed reading and following your thread on open end bond funds (oef).

    One of the things that I picked up on in reading this thread is that you are a momentum type investor and move among one fund, or funds, to another from time to time. Would you please describe your process in doing this? What indicators you may use? What triggers this movement? How do you track and follow these indicators and your funds, etc?

    I've been looking for an investing strategy that I might incorporate within my fixed income sleeve to keep it positioned within the faster currents. In the past, I've invested mostly in multi sector bond and income funds and let the fund manager find the better places to be invested while staying put with my fund selection.

    My fund's range of movenment between their 52 week low vs. 52 week high range from 2% on the low side to about a 6% range on the high side (low to high). I've been thinking of a way to use this range of movement within my investment strategy. One thinking is to buy fixed income when the funds are out of favor and towards their 52 week nav low and then to sell them (or even just hold) when they reach a 52 week high. But, in most cases things can often move beyond these established marks in downdrafts and updrafts. I'm thinking that it is time for me to put a bond spiff (special investment) in play sometime in the future and I'm now in the process of formulating an investment plan to do this. With this, I been thinking of using a long maturity fund as it's nav range of movement seems to be the widest among funds that I have reviewed.

    Again, I'm wondering how you govern and what indicator(s) you might use in picking funds and moving between one fund to another?

    Thanks, in advance, for your reply.

    Old_Skeet

  • edited January 2020
    "Old_Skeet">@dtconroe,

    I have enjoyed reading and following your thread on open end bond funds (oef).

    One of the things that I picked up on in reading this thread is that you are a momentum type investor and move among one fund, or funds, to another from time to time. Would you please describe your process in doing this? What indicators you may use? What triggers movement? How do you track and etc?

    I've been looking for a investing strategy that I might incorporate within my fixed income sleeve to keep it positioned within the faster currents. With this I've invested mostly in multi sector bond and income funds and let the fund manager find the better places to be invested. My fund's range of movenment between their 52 week low vs. 52 week high range from 2% on the low side to about a 6% range of movement on the high side. I've been thinking of a way to use this range of movement within my investment strategy. Any thoughts?"

    Old_Skeet, I am on this forum, posting about OEF bond funds, because I am NOT a "momentum type investor", at least Not on a frequent short term trading basis. On M* there is some strong support for an investing approach, that uses momentum data based on 90 day moving averages, to invest in the "best" 4 or 5 funds. Based on the belief that 90 day moving averages signals the beginning or end of a performance pattern, investors will move between various bond oef categories, to select the "best" momentum based fund, with a strong emphasis on risk characteristics as well. I tried to use this approach for a few years, but I am not a good trader, am not very good at selling funds near their highs, and not very good at buying funds near their lows. There are some posters/investors who do this, and can do this much better than me. I am not criticizing them, but I need a different investing approach that fits my strengths, while acknowledging my shortcomings.

    With that said, I am not a pure buy and hold investor, and I do keep up with total return performance data, and I will sell a fund during the calendar year when it is lagging severely, normally to reinvest those proceeds in other existing holdings that I am familiar with and approve of. I prefer bond oefs that will produce "at least" 4 to 5%, or more", annually, with low standard deviation, and relatively smooth upward total return performance, that have a history of holding up well in down markets. I will invest in 10 to 12 funds, with the intent of holding them for at least the calendar year, and at the end of the calendar year, I will rebalance my fund holdings, and may choose to replace some existing bond oefs, with similar but better performing funds. For example, I held BTMIX for the entire 2019 year, and I chose to replace it with another very conservative, but better performing Muni fund (AAHMX) for 2020. Another example is that I held PTIAX for almost all of 2019, but toward the end of the year, I chose to replace PTIAX with IISIX, because I believe IISIX will perform similarly in total returns to PTIAX over extended periods but with lower risk.

    Some more frequent momentum based investors, will criticize me for not jumping on the performance bandwagon, because there is clearly a hot performing fund, they will hype continually, during very hot performing periods like 2019. I like smooth, above average performing funds, to hold for at least a year, and at the end of the year, my loyalty is then subject to intense re-evaluation for holding, selling, and possibly replacing them. I don't marry my investments, don't take a vow of holding them til death do us part, and do expect a level of total return performance (at least 4 to 5% TR) that is reviewed on an annual basis. In 2020, my 10 to 12 fund portfolio has almost all of the same funds I owned all of 2019, but I did replace a couple of those funds, I did increase the amount of my investment in several existing funds, and I did reduce the amount of my investment in a couple of my existing funds.
  • edited January 2020
    @dtconroe,

    Like you, I like longer holding periods for my funds, that I invest in, and do not make many frequent trades; but, I do make changes within my portfolio from time-to-time. I'm thinking that, in general, a fixed income spiff would have a life within my portfolio of better than a year perhaps sometimes less if the FOMC started a rapid rate increase campaign. Since, most of my fixed income funds are at, or near, their 52 week highs I'm presently on hold in opening a spiff bond fund (oef) position. Just thinking of how I'd work my buy and sell stategy at this time.

    Thanks again for your comment. It is appreciated.

    Old_Skeet

  • @MikeW: "DHEIX has an average annual return of about 4% and a MAXDD of only 0.2%. Looks like a very interesting fund. SD is only 0.7."

    Also, DHEIX has only been negative one month. I shares were down 17bps in November 2016 while the benchmark was down 41bps. There have been 41 full calendar months of performance since inception (August 2016 through Dec 2019. The securitized debt in the fund is ABS 62%, all IG. The overall credit rating of the fund is 80% IG. Its duration is 1.43 years.
  • edited January 2020
    Just a note that I do not "analyze" funds mentioned in this thread based on a single day's performance, or one month's performance, or 3 month's performance. When I provide information about funds, I try to provide 1 year and 3 year total return and related fund information, and I also look closely at bond oef performance in some severe downmarket periods (like 2015 and 2018), to see how well they protected principal in those periods. My overall objective on this thread, is to provide you with information about funds, and categories of funds, that generally are considered conservative. What you choose to do with that information is beyond the scope of this thread.
  • This post is about some of the more conservative Muni bond oefs. Interest rate and credit risk can impact the various categories, but if you are interested in Munis, here are a few funds for you to consider, with standard deviation below 2 and durations below 5.

    1. BTMIX: Investment grade short term muni bond oef with SD 1.13, Credit Quality A, Duration 2.37, 1yr/3yr total return of 4.24/2.91

    2. AAHMX: Short Duration HY Muni bond oef with SD 1.28, Credit Quality BB, Duration 2.80, 1yr/3yr total return of 5.40/3.63

    3. PDSZX/PDSAX: Investment Grade Muni bond oef with SD 1.61, Credit Quality BBB, Duration 3.72, 1yr/3yr total return of 6.61/4.35

    4. NVHAX: Short Duration HY Muni bond oef with SD 1.66, Credit Quality BB, Duration 3.78, 1yr/3yr total return of 8.59/6.66

    5. GSMIX: Investment Grade Muni bond oef with SD 1.95, Credit Quality BBB, Duration 4.43, 1yr/3yr total return of 8.39/5.50

    Comments: Muni oef bonds tend to be impacted by seasonal factors and we are just completing one of the strongest performing seasonal periods of January when Munis performed very well. But you may also want to consider peak to trough performance in a very tough 2016 market--BTMIX was strong and basically had no significant drop, but NVHAX had a peak to trough loss of 5.53% in a 3 month period, GSMIX had a 4.82% peak to trough drop in 3 month period, SDHAX had a peak to trough drop of 4.54% in a 3 month period, PDSZX had a peak to trough drop of 4.3% in a 3 month period, and AAHMX had a peak to trough drop of 2.7% in a 3 month period. Munis are not risk free and you can lose money in them, so consider how much risk you are willing to take after a very strong 2019.
  • I opted for NVHAX over BTMIX when I bought on 1-2-2020. The allocation to NVHAX was in my taxable account with money for future (most likely 2 years down the road) monthly expenses. I like the stronger performance over BTMIX. The short duration downturn recovered quickly in 2017 but I will watch NVHAX closely and switch to BTMIX or possibly AAHMX if I see the need to change. I am not a trader so holding on thru a downturn is similar to holding equities in a correction. Thanks for the update.
  • "Gary1952">I opted for NVHAX over BTMIX when I bought on 1-2-2020. The allocation to NVHAX was in my taxable account with money for future (most likely 2 years down the road) monthly expenses. I like the stronger performance over BTMIX. The short duration downturn recovered quickly in 2017 but I will watch NVHAX closely and switch to BTMIX or possibly AAHMX if I see the need to change. I am not a trader so holding on thru a downturn is similar to holding equities in a correction. Thanks for the update.

    Gary, best wishes on your decision. Comparing a HY Short Duration Muni fund with a BB credit rating, to an Investment Grade Short Term Muni fund with a A credit rating, is all about risk and return and having your eyes wide open. NVHAX has been a good fund but it is much more risky than BTMIX--in downmarkets, and outside of seasonally strong periods,Muni bond oef risks need to be appreciated.

  • Baird has an excellent, super safe, Intermediate Muni Bond fund (BMBIX) which is filled with pre-refunded bonds (super safe)
  • "BigTom">Baird has an excellent, super safe, Intermediate Muni Bond fund (BMBIX) which is filled with pre-refunded bonds (super safe)

    BigTom, interesting fund. I looked it up to see why it did not make my list, and it was because its SD was just above my SD criteria cut off of 2, but I agree with you that it looks like a good fund for more conservative bond oef investors. I will add it to my watchlist of funds to monitor a little more closely

  • @dtconroe Is VMPAX comparable to BTMIX? Thanks for your contributions to this website !
  • edited February 2020
    "carew388">@dtconroe Is VMPAX comparable to BTMIX? Thanks for your contributions to this website !

    carew, VMPAX is in the same category as BTMIX, is a little more risky than BTMIX with lower credit rating of bond holdings being in the BBB investment grade rating instead of BTMIX A rating. Standard Deviation of the 2 funds are very close with BTMIX being a little lower, and VMPAX has a longer duration than BTMIX. Credit Risk and Interest rate risk is higher for VMPAX which has worked to its advantage in 2019. So, my general answer is that they are similar but VMPAX is more risky. I did not select all the funds that could potentially go into the conservative list, but I could have listed a large number of investment grade short term bond oefs including VMPAX, ORSTX, and a host of other funds. It all depends on how much risk you want to take to get higher returns in hot bond markets like 2019, compared to lower returns in downmarket periods. Every investor has to set their criteria for risk and reward with funds they select. I have held BTMIX, VMPAX, and ORSTX over the years, but currently am not holding any investment grade short term muni oefs.

  • I thought I would mention one other fund that was barely above my risk criteria--SNTIX. This fund had a standard deviation of 2.07, credit quality of BBB, duration of 5.10, and at total return of 1yr/3yr of 8.17/5.53. It is another investment grade intermediate bond oef. Of the funds I mentioned before, NVHAX is a very tempting fund. My issue is simply that regardless of what the Feds do with interest rates, all of the HY Muni funds recorded record 1 year returns in 2019, and it seems that this category is most likely going to revert to its average in a year following record highs. Momentum investors don't care because they will just ride this high performing period until it cools off and then sell, but if you intend to hold a fund for another year, after a record high year, you have to wonder if valuations are being stretched and vulnerability to factors other than interest rates can negatively impact performance.
  • dtconroe Thanks for your comprehensive analysis !
  • edited February 2020
    dtconroe said:

    I thought I would mention one other fund that was barely above my risk criteria--SNTIX. This fund had a standard deviation of 2.07, credit quality of BBB, duration of 5.10, and at total return of 1yr/3yr of 8.17/5.53. It is another investment grade intermediate bond oef. Of the funds I mentioned before, NVHAX is a very tempting fund. My issue is simply that regardless of what the Feds do with interest rates, all of the HY Muni funds recorded record 1 year returns in 2019, and it seems that this category is most likely going to revert to its average in a year following record highs. Momentum investors don't care because they will just ride this high performing period until it cools off and then sell, but if you intend to hold a fund for another year, after a record high year, you have to wonder if valuations are being stretched and vulnerability to factors other than interest rates can negatively impact performance.

    Well they are off to strong start this year! Not that forecasters are always correct, but as a class munis are being forecast to do well this year. I read an article about the pool of available bonds is shrinking.

  • Hey Gary, best wishes on your investment decisions. Everyone has to make their own personal decision, for how much risk they are willing to take, and what level of risk fits their investment objectives. Hope it works out well for you!
  • This post is about Government Bond OEFs. Historically, this has been a very popular choice for safe haven, ballast, and alternative to cash roles. These are dominated by AAA and AA investment grade bonds, so they are excellent for avoiding credit risk. The real variable is that longer durations are doing very well, as the Feds appear willing to keep interest rate risk stable--as a result longer duration government bonds are having record total return years, compared to their longer term histories. Here are a few funds that are very good options, some of which you might not have heard of:

    1. FSTGX: Standtard Deviation 2.28, Duration 3.79, Credit Rating AAA, M* Risk Average,
    1/3 yr Total Return 5.78/2.58
    2. CRATX: Standard Deviation 2.18, Duration ? , Credit Rating AA, M* Risk Average,
    1/3yr Total Return 6.21/2.94
    3. SNGVX: Standard Deviation 1.33, Duration 2.4, Credit Rating AAA, M* Risk Average,
    1/3yr Total Return 3.88/2.37
    4. LEXNX: Standard Deviation 1.96, Duration 3.21, Credit Rating AAA, M* Risk Low,
    1/3yr Total Return 5.22/2.65
    5. FGMNX: Standard Deviation 2.93, Duration 2.93, Credit Rating AAA, M* Risk Average,
    1/3yr Total Return, 5.55/2.75
    6. EALDX: Standard Deviation .47, Duration .33, Credit Rating AAA, M* Risk Average,
    1/3yr Total Return 1.45/1.74

    Comments: FSTGX, CRATX, LEXNX, and FGMNX had 1 year total returns in the 5% to 6% range which is a pretty good return for a safe haven option. Their longer term Total Return performance is traditionally in the 2+% range, but there is no fear of interest rate increases 2019 and apparently not for 2020. EALDX is the ultra short duration fund, that has lower total return, because interest rate risk is not a concern right now. LEXNX is the only M* Low Risk fund but it still has excellent total return performance.
  • @dtconroe, thanks for your list. I might add VFIJX from Vanguard. Investor share class would be VFIIX.
  • Thanks bee--I agree it is an excellent option. VFIIX standard deviation is 2.04, duration is 2.68, Credit Rating of AAA, M* Risk is average, 1/3yr Total Return is 5.75/2.97. In categories like Government Bond OEFs, Vanguard benefits with its very low ERs.
  • High rated bond funds did great since 2019 because rates decrease dramatically and this category has a higher correlation to rates change. If rates will stabilize or will not go down a lot these funds will not make anything close to 5%. Predicting rates is tricky but rates now are at one of the lowest levels ever seen.

    Example: I selected FSTGX because it was the first on the list. If you look at longer-term performance for 3-5-10-15 years FSTGX annual performance is between 1.85% to 3.1%. I don't expect this fund to generate more per average annually than the above range in the next several years.
  • edited February 2020
    FD, I don't disagree with your statement above. The government bond oef category is a very high investment grade category, but within the category you do find some variance regarding duration and interest rate risk. Most of the intermediate duration bond funds above, had total return in 2019 in the 5.5% to 6+% range, but their 3 year performance is slightly below 3%. Interest rates have been very very low since the 2007/2008 financial crisis, and then we started seeing spikes in interest rates in the 2015/2016 period, and since then there has been a steady pressure to raise interest rates, with 2018 being a tough year. In 2019, we saw the Feds decide to take a "pause" in raising interest rates, and it appears they will continue that policy for most if not all of 2020. It is hard to predict rates, as you noted above, so I am of the general opinion that you need to know the difference between one year performance, and longer history of performance of at least 3 years.
  • @dtconroe Thanks again for your ongoing discussion of the numerous oef bond categories. How would BMPAX PMZAX and MTGAX fit into this discussion ?
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