I've been reading the threads about bond funds, and currently am holding VBMFX in my portfolio.
What about FGOVX -
I've created some CD ladders, and was looking at other fixed income backstops to keep my hands from tinkering with the money....
Likely flight to quality. Look at how low Treasury yields have sunk (and Treasury prices have risen). FGOVX isn't necessarily a Treasury fund, but it still holds government issues that may have categorically risen in price along with Treasuries. I haven't checked the data to confirm, though.
Mark Freeland snipped-for-privacy@nyc.rr.com
Look at the assets inside the funds. We often talk here of asset allocation and asset classes and just treat "bond" or "fixed-income" as a thing unto itself. It's more complicated than that.
Last year, US Treasury bonds rallied as everyone sold everything else in the universe and bought them. In the process the sold off not just stocks but also other kinds of fixed-income securities - especially corporates.
VBMFX has a substantial portion invested in corporates and a smaller allocation to treasuries and agencies than does FGOVX. That's the main difference. FGOVX has no corporates at all. They are both in the highest grade securities, have average maturities on the order of 5 or so years (one just above that, one just below).
Back in 2006, I was holding both Vanguard VFIIX (GNMA) and the LT Corp fund - VWESX. Didn't feel comfortable at the time, with the housing mess on the horizon. Sold them both - and put some into the index VBMFX, not sure where the rest went :)
Looking back - wonder if I should have kept GNMA vs going to the bond index ? (selling the LT corp was probably a good move)
with some of my ladder CD's maturing in the next couple of months, wondering what makes the most sense looking forward to the next year with respect to fixed income and stability - and keeping my hands from tinkering ?
A - keep the money in CDs, but the term would be for 1 year - 2.05%
B - take the money, and add to the VBMFX mutual fund - hold long term
C - other :)
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