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Criteria for choosing a bond fund?

I have never invested in bonds or bond funds but I am trying to work on my asset allocation and I think I need to add bonds to my mix. I do not intend on being a bond trader so I am concentrating on bond funds and my investment accounts are with Vanguard so also focusing on Vanguard bond funds.

My questions are fairly broad:

  1. Other than the yield what do I need to look at when evaluating bond funds?
  2. Is there a need to divisify among bond funds or are the bond funds sufficiently diversified so that I can put all my bond money into a single bond fund? Currently I only have about k to invest in bonds so we are not talking about big dollars.

Here are the particular Vanguard funds I have been looking at, but this is just based on looking at the year to date yield and the "since inception" yield. I do not know what other criteria to use.

Short-Term Treasury (VFISX) Intermediate-Term Treasury (VFITX) Short-Term Federal (VSGBX) Vanguard GNMA Fund Investor Shares (VFIIX) Vanguard Total Bond Market Index Fund Investor Shares (VBMFX)

Can anyone provide suggestions on how to evaluate bond funds so that I can make an educated decision among the bond funds offered by Vanguard?

Regards,

Sam

Reply to
Sam
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Sam, a good answer to this would require a very long post...Vanguard's prospectus for their bond funds has a good explanation of the different types of risks associated with bonds generally, and with each fund specifically. Their marketing materials on the funds have more info as well. Perhaps if you review that you'll get answers to most of your questions and can post some follow-up Q's.

-Tad

Reply to
Tad Borek

Besides reading boilerplate descriptions of where such funds fall on the risk spectrum, take a gander of recent performance of various categories here... read it and weep at the horrible performance of even some of the short term categories, or safe havens like inflation protected:

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Don't necessarily jump into the recently better performing ones before considering they have gotten the benefit of a rush to quality, which is a cycle that may reverse and bleed money itself. What I am doing is using ETF's mostly which I can bail out of fast, like if t-bills lose their glitter... or quickly into, like high quality corp bonds which have been modestly hit and look ripe for recovery.

Reply to
dumbstruck

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