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All we ever reasonably expected as LT TRs from dedicated bond funds was 4%-5%. So when CP CD rates matched, then exceeded that threshold, all of our dedicated bonds funds were replaced with a 5-yr, CP CD ladder paying over 5% APY. The only bonds we currently own are via allocation funds FBALX and PRWCX, and their bonds account for less than 5% of our total portfolio value.
My experience is much like stillers. In fact we overbuilt our CPCD ladder. We sorta got addicted to a 5% return. In anticipation of declining rates and tempted by a much talked about share appreciation from intermediate bond funds we started building a position in Dodge and Cox Income. Perhaps we were early.
VRIG, USFR, are the main ones. THOPX, FATRX and FCFAX are another leg on the stool, and a dip of the toe into longer durations. Then there is whatever is in FBALX and PRWCX.
I will share my bond portion as of today. My target is 25% of portfolio. RPHYX (9%),Cash(6%),SNGVX (2%),STIP (2%),TPHAX(3%). I may add to exisiting funds or add Crash's favorite of old PTIAX.
Just started FALN a few weeks ago and intend to grow it in the taxable. Focused on WCPNX, but no money in there, yet.
Still like my current ones: TUHYX, PRCPX. Cash 7 Stocks 53 Bonds 38 "Other" 3
The ENTIRE portfolio is yielding me 4.09%. And then, there's the GROWTH element, too. Good day, today. Transition to Schwab continues at a snail's pace. A couple of calls from the fellow at the downtown office. Hand-holding. But he did not have any real news. Got a couple of emails, telling me almost nothing.
FCNVX is my only bond fund that hasn’t disappointed me over the past year. At some point, I’ll start adding to my intermediate bond funds but they continue t lose value.
FCNVX is my only bond fund that hasn’t disappointed me over the past year. At some point, I’ll start adding to my intermediate bond funds but they continue t lose value.
Everything is relative. If you read my post above, RPHIX is my favorite as "sub" cash and it beat the above by 1.3% RSIIX almost doubled the above for one year. No need to wait for anything when you find good funds and I posted about these funds since 2023.
FCNVX is an ultra-short-term bond. Its retail class was eliminated a few years ago, and the ER was also lowered for the remaining class. Besides the Fido m-mkt funds, it's the only Fido fund without any frequent-trading restrictions; it settles T+1. Competing ETFs are USFR, ICSH. JPST. These are all inv-grade.
What is the best bond fund total return one can HOPE for in the next twelve months? Assume dividends are irrelevant because they will be reinvested,,, assume low default rate because you have chosen a fund with high quality portfolio. And said fund has a duration of 5.8 years. And let us imagine that in the next twelve months interest rates are cut 1%. More specifically 4 cuts of .25%. So what would be the best possible total return under this scenario? Just wondering.
You have to know" what interest rates will do and then still assume the funds duration will not change.
So in a year you will get the dividend plus the % change in interest rates time duration.
A 1% decline in rates will produce a 5% increase in NAV of fund with Duration of 5. If you are in LT Treasuries you will make 20% or more. But you could also lose 20% if rates go back up
If you get any div and reinvest you have more shares at a lower price? So you net zero. You do have more shares going up IF rates go down. Am I correct that if rates fall by 1 per cent and you have a duration of 5 you might see a total return of about 5 %. Just want to make certain I understand.
@sma3, that rule of thumb, 5% return for a 1% drop in rates, may be the case for a 5yr T-bond, but not necessarily for a bond "mutual fund" which includes total return, (yield + perceived value), right? I mean, even with no drop in rates to date, a lot of mutual funds already have returned 10% or more over the past year, just in anticipation of rate drops. Bond mutual funds have in general well surpassed CDs or treasuries in 1 year. Hindsight of course. Even the very conservative RPHYX (cash-like) is up over 6%.
Just saying, it is very difficult to predict the future return of bond funds. I believe they have a pretty good near term future and room to advance more, but if rate drop anticipation has already driven them up, it's anyone's guess when that trend will end or what it will look like in the future. Just my 2cents.
A brand new fund that may be of interest to folks looking for a higher yielding, cash/MM alternative is MBSF, the Regan Floating Rate MBS ETF. It invests in government floating-rate residential mortgage backed securities. It’s just out of the gate but seems to be worth a look.
The biggest "mistake" that many do is looking at duration which have the highest correlation to treasuries. Did duration predict PIMIX performance during 2010-18...or...RSIIX in the last several months?
I already pointed out that my 3 funds have a good chance to do well regardless of duration and rates. You can make a selection what risk/volatility you want and then invest in one. Is it a guarantee? No, but I rather make 8-10% safety in bond funds in 2024 than MM or the volatility of stocks. Many spend too much time on things beyond their control instead of looking what markets are telling them. That's the difference between predictions= unknown to what markets actually tell you in real time and sometimes you find a manager that does well regardless.
MBSF is a new fund launched on 2/27/24; the ER is 49 bps. Its still missing basic data on yield, etc. M* shows portfolio as lower quality (unclear what ratings are used for GSEs or securitized holdings), but it invests in floating rate RMBS from GSEs (Fannie, Freddie). It would be interesting to compare it with Treasury FRN USFR, TFLO, both with ER of 15 bps only. One would have to see if the yield advantage of RMBS floaters over Treasury FRNs is all eaten up by extra 34 bps ER. https://www.regancapital.com/etf-mbsf/ https://www.morningstar.com/etfs/arcx/mbsf/portfolio
Been moving some funds that have been sitting in a MM fund for a bit into LT & Extended Duration Treasuries (PRULX & EDV). Obvious play on future interest rate reductions by the Fed rather than adding additional exposure to the stock market.
The answer largely depends on the future direction of the economy. On the short end, the Fed rules the roost. Farther out, inflation expectations should impact prevailing rates more. I wouldn’t feel comfortable locking up a whole lot for 10 years at the current 10-year Treasury rate of 4.2%. But I might be wrong,
For stability & cash-like returnsTBUX has excelled since inception a year or so ago.
For short-term investment grade bond funds I like LSST a lot, but don’t currently own. Along the same vein (but under the TIPS umbrella) TDTT is gold rated by M* and has a lower ER.
Intermediate term (with some sub-investment grade holdings) JPIB is excellent. Newer BINC with Rick Rieder appears to be on a par, but with a lower ER. I hold Pimco’s new PYLD. All 3 of those seem to run about even based on my day-to-day observations. None has excelled YTD.
I really like CVSIX as a bond replacement. Should provide returns similar to an intermediate term bond fund over the longer haul. But, unlike most bond funds, it holds up well in a rising rate environment. Actually, I like the gang at Calamos a lot - but they’re certainly not the lowest cost option.
I am a hopeless agnostic on the future direction of interest rates. Given this 'malady', my bond fund of choice is BAMBX. (its classified as 'multialternative', but its essentially a bond fund 'in drag' which which can hedge against volatility and revise its duration.)
The bond bear of 2022, should make it clear that most of the "professional bond managers" simply do NOT earn their keep. Their prospectii usually give them latitude to move to cash at their discretion. Did any of them do that in 2022? If not, then what are we paying them for? I mean sure, every bond fund manager should have 3 Benzs' in their driveway, but why should I pay for those?
IF I had a strong conviction of rates declining, i'd just buy EDV or ZROZ. Better still, I'd just avoid ETFs altogether, and buy individual l-t Trsys. -- But again this would only be IF I had conviction on rates. Which I do not have.
Comments
All we ever reasonably expected as LT TRs from dedicated bond funds was 4%-5%. So when CP CD rates matched, then exceeded that threshold, all of our dedicated bonds funds were replaced with a 5-yr, CP CD ladder paying over 5% APY. The only bonds we currently own are via allocation funds FBALX and PRWCX, and their bonds account for less than 5% of our total portfolio value.
I also have some 5 Yr TIPS which will be held to maturity.
All multi sector bond ETF’s. Will add when rates go higher.
Still like my current ones: TUHYX, PRCPX.
Cash 7
Stocks 53
Bonds 38
"Other" 3
The ENTIRE portfolio is yielding me 4.09%. And then, there's the GROWTH element, too. Good day, today. Transition to Schwab continues at a snail's pace. A couple of calls from the fellow at the downtown office. Hand-holding. But he did not have any real news. Got a couple of emails, telling me almost nothing.
RPHIX for "sub" MM and a possible 5-6% in 2024
CBLDX with higher volatility, but still low and higher performance and a possible 6-8% in 2024.
RSIIX/RSIVX with higher volatility, but still low and higher performance and a possible of 7-9% in 2024.
The chart below already proves my point. Why use
Multi=PIMIX or HY or high-rated bonds with a lot more volatility and be close or not at year end.
https://schrts.co/xiyUJkXx
Sometimes it is that easy. YTD RSIIX is already at 2.7% per M* and a good possibility to make over 10%.
RSIIX almost doubled the above for one year.
No need to wait for anything when you find good funds and I posted about these funds since 2023.
https://schrts.co/GGNMSWfD
Competing ETFs are USFR, ICSH. JPST.
These are all inv-grade.
So in a year you will get the dividend plus the % change in interest rates time duration.
A 1% decline in rates will produce a 5% increase in NAV of fund with Duration of 5. If you are in LT Treasuries you will make 20% or more. But you could also lose 20% if rates go back up
Just saying, it is very difficult to predict the future return of bond funds. I believe they have a pretty good near term future and room to advance more, but if rate drop anticipation has already driven them up, it's anyone's guess when that trend will end or what it will look like in the future. Just my 2cents.
Did duration predict PIMIX performance during 2010-18...or...RSIIX in the last several months?
I already pointed out that my 3 funds have a good chance to do well regardless of duration and rates. You can make a selection what risk/volatility you want and then invest in one.
Is it a guarantee? No, but I rather make 8-10% safety in bond funds in 2024 than MM or the volatility of stocks.
Many spend too much time on things beyond their control instead of looking what markets are telling them. That's the difference between predictions= unknown to what markets actually tell you in real time and sometimes you find a manager that does well regardless.
https://www.regancapital.com/etf-mbsf/
https://www.morningstar.com/etfs/arcx/mbsf/portfolio
For stability & cash-like returns TBUX has excelled since inception a year or so ago.
For short-term investment grade bond funds I like LSST a lot, but don’t currently own. Along the same vein (but under the TIPS umbrella) TDTT is gold rated by M* and has a lower ER.
Intermediate term (with some sub-investment grade holdings) JPIB is excellent. Newer BINC with Rick Rieder appears to be on a par, but with a lower ER. I hold Pimco’s new PYLD. All 3 of those seem to run about even based on my day-to-day observations. None has excelled YTD.
I really like CVSIX as a bond replacement. Should provide returns similar to an intermediate term bond fund over the longer haul. But, unlike most bond funds, it holds up well in a rising rate environment. Actually, I like the gang at Calamos a lot - but they’re certainly not the lowest cost option.
.
I am a hopeless agnostic on the future direction of interest rates. Given this 'malady', my bond fund of choice is BAMBX. (its classified as 'multialternative', but its essentially a bond fund 'in drag' which which can hedge against volatility and revise its duration.)
The bond bear of 2022, should make it clear that most of the "professional bond managers" simply do NOT earn their keep. Their prospectii usually give them latitude to move to cash at their discretion. Did any of them do that in 2022? If not, then what are we paying them for? I mean sure, every bond fund manager should have 3 Benzs' in their driveway, but why should I pay for those?
IF I had a strong conviction of rates declining, i'd just buy EDV or ZROZ. Better still, I'd just avoid ETFs altogether, and buy individual l-t Trsys. -- But again this would only be IF I had conviction on rates. Which I do not have.