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I'm looking for something secure to invest in. How do you invest in govt. products online? Thanks.
Treasuries are simply bonds. You know... like those $25 bonds our parents/grandparents used to buy, throw in a box and wait for years for them to mature?
A total bond fund is almost always based upon the Barclay's Aggregate US Bond Index. This is true for Vanguard's BND fund. The Barclay's index is a capitalization weighted set of the bonds in the US bond market, but it does exclude Munis and it only includes investment grade bonds (not junk bonds).
A lot of people think it under-represents corporate bonds, but that is really a matter of preference since the index holds bonds in the exact proportion that people invest in them. It certainly holds corporates, but perhaps not as many as you would like.
Personally I own a Barclay's Agg Index fund for most of my fixed income but also have Munis (for tax purposes) and corporates (because US Treasuries pay so little now).
Owning bonds, not a bond fund, is a pain if you ever want to sell them before maturity. Bond pricing is not easy to determine for non-professionals and when you sell you have to set a price you want. If it is too high, it will be ignored. If it is too low it will be snapped up but at your loss. For US Treasuries you can get a 3rd party to sell them for you (like a bank) but they will take a hefty commission. Bond funds are much easier for non-professional investors, IMO.
while called a total bond fund agg ,bnd and vbtlx are actually missing a lot of different areas in bonds . it has quite a few gaps , under weightings cutting yield and missing segments of the bond market .
1. it has a significant Allocation to treasuries and government securities:
it allocates more than a quarter of its holdings to U.S. Treasuries, and nearly 50% to securities issued by FNMA, GNMA, FHLMC, and other U.S. government-sponsored agencies. If investors are particularly bullish on Treasuries, it offers a significant amount of exposure. But many investors would be better served to hold a higher percentage of their fixed income portfolio in corporate bonds and other fixed income instruments with higher yields.
2. No Exposure to High Yield Bonds: it offers exposure to the total investment grade U.S. bond market, meaning that they invest primarily in debt issues that are above a certain rating (BBB- by Standard & Poor’s and Baa3 by Moody’s). Bonds rated below these cutoffs carry a higher risk of default, and as such generally offer a higher rate of return. If upgraded to investment grade status, high yield bonds can see a narrowing of their credit spread and a jump in price.
3. It has a shortage of Inflation-Protected Securities: Total bond market ETFs have limited holdings in inflation-protected securities, indicating that the real returns on these securities may be negatively impacted if we experience a significant uptick in inflation .
4. it lacks foreign fixed income bonds and muni's : . Municipal bonds, emerging market bonds, and convertible bonds are but a few of the segments missing.
I'm looking for something secure to invest in. How do you invest in govt. products online? Thanks.
Bonds are not as secure as you might think. Inflation and income taxes can make your investment worth less than when you made the original purchase.
There is risks to all investments but you might find large corporations stock that pays dividends a safer investment. However, the market can always be down if you have to sell and you could have a loss. If you invest in bonds or stocks be sure you will not be forced to sell when the market is down.
Bond mutual funds have an additional problem. Their value goes up and down as interest rates change and the funds are buying and selling bonds each year. Thus you can have a real loss in your account although you did not sell any shares of the mutual fund. As interest rates increase bonds will decrease in value.
The treasury direct suggestion is the way for you to buy treasuries directly from the goverment.
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