martlou wrote:Thank you for your post! I think my discomfort comes from having so much money in one fund plus my lack of experience with bond funds fluctuating over time. I don't need to move it for liquidity so I will hang in there. It looks like I bought the fund at the high though!
NYBoglehead wrote:martlou wrote:Thank you for your post! I think my discomfort comes from having so much money in one fund plus my lack of experience with bond funds fluctuating over time. I don't need to move it for liquidity so I will hang in there. It looks like I bought the fund at the high though!
Don't look at it too frequently. It'll go up and down over time, but in the end you should be good. Even if interest rates rise the NAV will go down but you'll be receiving more interest and re-investing it at a lower NAV, thus buying more shares. It is much better there than in the money market fund. I know having that much in one fund sounds like a lot, but the fund invests in thousands of bonds and will be adding new ones as they are issued. 6 years is still a lot of time, don't worry about the day to day flucuations.
martlou wrote:I bought this at a NAV of $11.20 and didn't dollar cost average, so I am down.
martlou wrote: how is the bond fund going to be better than leaving the money in a money market?
sscritic wrote:livesoft wrote:Thirty-six millicents.
But "$0.36 cents"? What's the dollar sign doing in there?
Confusing us. Or is it the word cents that is confusing us?
Bustoff wrote:martlou wrote: how is the bond fund going to be better than leaving the money in a money market?
While the NAV of the TBM is essentially flat after one year, each share paid 12 months of dividends totaling $0.36 cents.
The Prime money market paid 12 months of dividends totaling $0.00036. I don't even know how to say that figure.
There are a lot of savvy investors around here. Rather than asking if TBM is a good investment going forward, perhaps we can ask Bogleheads which bond funds they are investing in going forward.
Vanguards Ken Volpert claims, “The best place to be is very defensive and very short-term,” he pointed to Vanguard Short-Term Corporate Bond ETF (VCSH) or Vanguard Short-Term Investment-Grade Fund (VFSTX) .
Perhaps adjusting your fixed income allocation to three equal parts such as 1/3 Short-Term Corporate Bond, 1/3 Total Bond Fund, 1/3 CD's might help you sleep better.
martlou wrote: Thank you for clarifying! So if I understand correctly, on a 5.2 duration, the price would fall 5% approximately with 1% yield increase, and it could take about 1.5 years to be even again if the yield increased from 1.7 to 2.7% ? With this explanation, how is the bond fund going to be better than leaving the money in a money market?
This is no means a catastrophe - so don't panic. One lesson to learn from it is to fully understand something before you invest in it - regardless of what investment that is. There is nothing wrong with sitting in cash for a long time while you understand your options. I am not saying the intermediate bond funds are a bad investment, just that things tend to go a whole lot smoother when you understand how they work, and competing investments, before taking the plunge. Also, dollar-cost averaging is a good idea if you have concerns about investing a large sum all at once.
I am surprised you are fixated on the $11.20 price you paid. Since you purchased this fund it has paid out $0.07824 in distributions and will pay today another ~$0.022 dividend, for about a $0.10 total. That really means you bought for $11.10. It will probably have a NAV today of $11.00 even, so you will be down less than $1800 since you purchased. (I don't see how you say you have lost $3,000.) To me that seems quite a small fluctuation for an intermediate-term bond fund and no big deal.
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