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Old 12-19-2016, 08:13 AM
 
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using a bond index fund though like BND OR AGG compared to say fidelity's total bond fund would have left you behind almost every time frame .

the stock side may work out okay but that is NOT THE CASE WITH THE BOND SIDE AND TOTAL BOND FUNDS . i would take fidelity total bond any day over straight index total bond funds.

managed bond funds are a much better choice .

Last edited by mathjak107; 12-19-2016 at 08:23 AM..
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Old 12-19-2016, 08:21 AM
 
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I have bought individual bonds and held them to term, but I would never buy a bond fund.
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Old 12-19-2016, 08:27 AM
 
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not much different . look at a 30 year bond as an example .

if rates rise a bond fund loses nav but the interest rate increases over time . you will still be behind the curve but the rate will increase .

your bond at maturity won't lose nav but the interest rate never goes up and interest rates and inflation usually move together so getting back your 1k and having it buy 500 bucks worth of stuff 30 years later is still a loss .


the same apply's to the intermediate term bonds . if rates rise ,interest on the funds rise even though the nav falls . your bond never increases and getting that 1k back 10 years later still loses purchasing power.

at the end of the day a bond fund is just a collection of individual bonds that are always maturing and always being bought
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Old 12-19-2016, 09:30 PM
 
Location: Montgomery County, PA
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I wonder how many people really know how bonds work. I admit I am not totally clear either. For example, I thought you get a fixed interest, established by the rates at the time of purchase until maturity. Apparently not.
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Old 12-19-2016, 09:42 PM
 
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Quote:
Originally Posted by HappyRider View Post
I wonder how many people really know how bonds work. I admit I am not totally clear either. For example, I thought you get a fixed interest, established by the rates at the time of purchase until maturity. Apparently not.
Yes if you buy individual bonds and hold until maturity you get the rate promised. However if you sell bonds before maturity there is discount rate to adjust/account for the difference in the bond interest you are selling and current rates. Bond funds are buying and selling bonds all the time before maturity.
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Old 12-21-2016, 02:09 AM
 
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as well as bond funds get a boost in interest as rates rise while your individual bond does not so that levels out the playing field eventually .

as an example a treasury bond fund with an average duration of 5 years will fall about 5% in nav for every point increase , but over 5 years it will make an extra 5% in interest giving you back the deal you signed on for .

there is not a whole lot of difference between the 2 in high quality bonds .

you can have the added benefit or risk of credit upgrades or down grades effecting bond funds as well as premiums and discounts to nav with some bond funds .

that can help you or hurt you once you move away from gov't bonds .

i own both . i started accumulating some TLT and 30 year bonds as i think rates on bonds got sold off way to heavily the last 90 days . i think we will see some nice gains in long term bonds once it is realized that trump mania is way over blown and the markets roll back .

my guess is 2017 will be a decent year for gold and long term bonds the red headed step children of investing right now . remember , there is always things not even on the radar yet that always seems to alter what we all see and think .

anyone predict the outcome correctly for this year when markets were dropping last jan and feb when bond yields were hitting new lows ?

Last edited by mathjak107; 12-21-2016 at 02:33 AM..
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Old 12-21-2016, 07:12 AM
 
Location: Mount Airy, Maryland
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Quote:
Originally Posted by mathjak107 View Post
using a bond index fund though like BND OR AGG compared to say fidelity's total bond fund would have left you behind almost every time frame .

the stock side may work out okay but that is NOT THE CASE WITH THE BOND SIDE AND TOTAL BOND FUNDS . i would take fidelity total bond any day over straight index total bond funds.

managed bond funds are a much better choice .

Are you talking about FTBFX?
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Old 12-21-2016, 07:19 AM
 
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yes . i much prefer ftbfx to AGG or any of vanguards total bond index funds or etf .
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Old 12-21-2016, 07:29 AM
 
Location: Mount Airy, Maryland
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I really am a bit clueless about bonds, I know I should know more. As I age I have moved money from stocks to bonds, the joke on me is I moved some of my 401 from Wellington to Wellsley right before the bond crash. I mean I get the interest rate correlation but what can be expected from bonds moving forward understanding these are only projections/guesses.
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Old 12-21-2016, 08:08 AM
 
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Originally Posted by DaveinMtAiry View Post
I really am a bit clueless about bonds, I know I should know more. As I age I have moved money from stocks to bonds, the joke on me is I moved some of my 401 from Wellington to Wellsley right before the bond crash. I mean I get the interest rate correlation but what can be expected from bonds moving forward understanding these are only projections/guesses.
I don't mean to seem rude, but what bond crash? Vanguards Total Bond and Wellesley are still up for the year and their is intact. Neither has gone negative for the year and they are income funds. So whether it be interest, dividends if they are being reinvested you are buying them at a cheaper price. What is riskier is Fidelity Growth company which can produce violatile capital gains with minimal dividends. The fluctuations in NAV have different consequences depending on the type fund.

For those contributing monthly to a bond fund and having distribution redistributed the longer term trading range can be more important than fund price at any given time.

Last edited by TuborgP; 12-21-2016 at 08:19 AM..
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