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why would somone sell Spartan Intermediate Bonds FSTMX for DFA DFIHX 1yr fixed income fund at this stage in the game?
FSTMX
YTD Return: -18.99%
DFIHX
YTD Return: 2.2%
The YTD returns tell us that FSTMX (-18.99%) has been performing poorly compared to DFIHX (2.2%).
FSTMX has been falling from a high of $44 since October of last year. In other words, the run-up for FSTMX has been over since last October and it has been going down since. This fund had more growth than DFIHX. However, the return can be negative if bought at the wrong time.
DFIHX, on the other hand, has remained between $9 - $10 since 1999. There hasn't been much growth here, but it has stability and relative safety.
The symbol FSTMX is Fidelity Spartan Total Market Index Fund. It's not a bond fund. You remind of someone I know who bought Washington Mutual (WM) at $30 because it paid a good dividend. I don't buy mutual funds, so my interest in them is very limited. Here are some detailed data on them.
FSTMX is a total market index fund (stocks), not a bond fund. And it doesn't pay monthly dividends, so I'm thinking perhaps you gave us the wrong symbol? If you DID mean FSTMX, the reason one would ditch stocks for short-term bonds is for relative safety: You think stocks might be in for a hard time in the near future, or you're getting closer to needing the money (for retirement or whatever) and want to lock in your gains somewhat, etc.
Maybe you meant FIBIX, which is the Spartan Intermediate Treasury Index fund. In that case, one might switch from it to DFIHX to get a little more conservative. FIBIX, being of longer duration than DFIHX, will be slightly more volatile. So, for example, if you were worried about the fed raising interest rates in the near future, you might switch to DFIHX so that your bond fund won't drop as much in value.
And yes, DFIHX DOES pay dividends, as most bond funds do.
Same deal--it's still intermediate-term bonds vs. short-term bonds. Shorter-term bonds are more conservative. Also, one might switch from municipal bonds to taxable bonds if, for example, they found themselves in a lower tax bracket. In that case, the after-tax yield of the taxable bonds might surpass the lower tax-free yield of municipals.
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