Vanguard STIG (VFSTX) VS Fidelity HIF (SPHIX) What am I miss

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Vanguard STIG (VFSTX) VS Fidelity HIF (SPHIX) What am I miss

Postby Splais » Sun Mar 24, 2013 1:50 pm

I have been looking at the 10 year chart and performance of two funds: the Fidelity High Income Fund (SPHIX) compared to the Vanguard Short Term Investment Grade Fund (VFSTX). I'm confused.

I was under the assumption that the short term bond fund had less downside risk and would be more stable than a longer term bond fund. But when I got looking at the mentioned Fidelity fund I found that the historical share price stability between the two was near identical, the collapse in '09 was similar, and the recovered to pre collapse highs was similar. However the returns for the Fidelity fund over the entire ten year period were more than twice that of the Vanguard fund.

Could someone help me out here with what I have missed; why I would put money in the Vanguard fund instead of the Fidelity? thanks.
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Re: Vanguard STIG (VFSTX) VS Fidelity HIF (SPHIX) What am I

Postby phish_indexer » Sun Mar 24, 2013 2:00 pm

If you look at the chart, I don't see how you can say that the '09 collapse was similar. In fact, the junk bond fund looks much more like a stock fund than a bond fund. The returns of the short-term fund take a very small dip in 2009, then continue to provide stable returns. This is what you want in a bond fund. You don't want your bonds mimicking the returns of your equities, which is essentially what SPHIX did.

Green line is Vanguard Total Stock, Blue line is SPHIX, Orange line is VFSTX.

Image
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Re: Vanguard STIG (VFSTX) VS Fidelity HIF (SPHIX) What am I

Postby SteveKL » Sun Mar 24, 2013 2:04 pm

These two funds are not just apples and oranges, they're artichokes and tangerines--completely different investments. If someone was ONLY comparing returns, and knew nothing at all about the underlying investment, the fact that Fund A has 3x the return of Fund B should at least tell you something about the inherent risk of each.

The only Vanguard fund that compares to SPIHX is their high-yield corporate bond fund VWEHX, which is closed to new investors.

Vanguard's web site has a nifty research feature where you can do a side-by-side comparison of various funds. Fidelity's may also. When you see the pertinent details of these two funds laid out side-by-side, the answers to your question are obvious.
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Re: Vanguard STIG (VFSTX) VS Fidelity HIF (SPHIX) What am I

Postby Splais » Sun Mar 24, 2013 2:29 pm

Phishing, boy I should have looked closer at price spread, low to high in 09. Love the way you overlayed those charts. Now tell me there is an easy way to do that.

When I look at your chart I see that it took Total Stock 4 years to get its value back; but it only took SPHIX a year. This was my point vs VFSTX.

SteveKL, I hadn't seen that on Vanguard site, I will find it.

One of the things I see and haven't quit grasped yet is the following: when you look at the last ten years, not all, but a lot of the funds totally recovered there original highs in the 09-13 period, some in only two years. So doesn't it follow, that if you just bit your lip in 09 and held on, it didn't really matter what fund you had. Now of course this only holds true if you will not need the money. When I look at phish's chart, if there is any chance you will need the money then caution is the only option.
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Re: Vanguard STIG (VFSTX) VS Fidelity HIF (SPHIX) What am I

Postby phish_indexer » Sun Mar 24, 2013 2:35 pm

Splais wrote:Phishing, boy I should have looked closer at price spread, low to high in 09. Love the way you overlayed those charts. Now tell me there is an easy way to do that.

SteveKL, I hadn't seen that on Vanguard site, I will find it.

One of the things I see and haven't quit grasped yet is the following: when you look at the last ten years, not all, but a lot of the funds totally recovered there original highs in the 09-13 period, some in only two years. So doesn't it follow, that if you just bit your lip in 09 and held on, it didn't really matter what fund you had. Now of course this only holds true if you will not need the money. When I look at phish's chart, if there is any chance you will need the money then caution is the only option.


You can do fund comparisons on Morningstar, that's where the link is from. As to your second point, yes, you would've been back to where you started had you bit your lip and held on. However, if you re-balanced by selling bonds and buying stocks, you'd be doing even better. That's why you often hear of the re-balancing bonus. I'd argue re-balancing is more of a way to control your risk profile than to boost returns, but in this instance you would have netted the bonus by re-balancing at the March 2009 nexus.
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