Whats The Story With VTBIX???[Vanguard Total Bond Market II]

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BHChinook
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Whats The Story With VTBIX???[Vanguard Total Bond Market II]

Post by BHChinook »

I understand the symbol for Vanguard Total Bond Market II is VTBIX. M* lists this fund and only gives it 2 stars with average risk and below average return. Yahoo doesn't even list the symbol. Total Bond Market, on the other hand, gets 3 stars from M* and below average risk and average return.

Here's my concern: VTINX (Target Retirement) has been changed from using Total Bond Market to using Total Bond Market II. If this is VTBIX and if the two funds are meant to be the same, why the different M* reports? Why where the target funds changed?

Thanks
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G-Money
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Re: Whats The Story With VTBIX???

Post by G-Money »

I don't pay much attention to Morningstar's star ratings, risk/return ratings, or benchmarks. I do use Morningstar's instant x-ray and growth charts.

Go ahead and use Morningstar's chart to compare VTBIX with VBTLX (admiral share version) from VTBIX's inception. I see less than $80 difference between the two over a 4.5 year period, a difference of less than 0.2% annually. Now, VTBIX is slight more expensive (0.02%). I also believe the unique cash flow requirements of the fund-of-funds becomes a drag on the bond fund, which I believe was the main reason why they created VTBIX in the first place.

If you want a Vanguard fund-of-funds, you're stuck with VTBIX. It may be marginally worse than VBTLX. So there's a cost for convenience, and it appears to be <0.2% of bonds, plus the difference between investor and admiral shares for stocks. Pretty cheap, IMO.
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G-Money
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Re: Whats The Story With VTBIX???

Post by G-Money »

Don't assume I know what I'm talking about.
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BHChinook
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Re: Whats The Story With VTBIX???

Post by BHChinook »

Thank you so much for the previous thread links... Question asked; question answered! This forum is the best :happy
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BHChinook
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Re: Whats The Story With VTBIX???

Post by BHChinook »

One more quickie; M* lists the average duration/maturity for bonds in VTBIX as 5 and 7 years. Since this fund is exclusively for use bu their target funds, I wonder why they don't have shoter terms? VTINX recently changed their TIPS from intermediate term to short term..
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EyeDee
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Total Bond Market Fund

Post by EyeDee »

G-Money wrote:I don't pay much attention to Morningstar's star ratings, risk/return ratings, or benchmarks. I do use Morningstar's instant x-ray and growth charts.

Go ahead and use Morningstar's chart to compare VTBIX with VBTLX (admiral share version) from VTBIX's inception. I see less than $80 difference between the two over a 4.5 year period, a difference of less than 0.2% annually. Now, VTBIX is slight more expensive (0.02%). I also believe the unique cash flow requirements of the fund-of-funds becomes a drag on the bond fund, which I believe was the main reason why they created VTBIX in the first place.

If you want a Vanguard fund-of-funds, you're stuck with VTBIX. It may be marginally worse than VBTLX. So there's a cost for convenience, and it appears to be <0.2% of bonds, plus the difference between investor and admiral shares for stocks. Pretty cheap, IMO.
.
Since the Vanguard fund-of-funds invest in Investor shares not Admiral shares you probably want to be comparing with the Total Bond Market Fund Investor shares VBMFX on Morningstar's charts. As of today, VTBIX is only $18.88 less than VBMFX over the 4.5 year period.
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EyeDee
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Re: Whats The Story With VTBIX???

Post by EyeDee »

BHChinook wrote:One more quickie; M* lists the average duration/maturity for bonds in VTBIX as 5 and 7 years. Since this fund is exclusively for use bu their target funds, I wonder why they don't have shoter terms? VTINX recently changed their TIPS from intermediate term to short term..
.
Since VTBIX is used as an alternative to Total Bond Market Fund Investor shares VBMFX, it needs to have an average duration/maturity that is similar.
Randy | SCA - Build Savings early by living below one's means, minimize Costs including taxes, and maintain a diverse Allocation.
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BHChinook
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Re: Whats The Story With VTBIX???

Post by BHChinook »

I understand that Total Bond Market is roughly equivalent. My question is, since they are making a change, why not choose a shorter duration fund like they did with TIPS.
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Re: Whats The Story With VTBIX???

Post by z3r0c00l »

BHChinook wrote:I understand that Total Bond Market is roughly equivalent. My question is, since they are making a change, why not choose a shorter duration fund like they did with TIPS.
Are you asking why vanguard doesn't just tweak this fund (with 60 billion in it), the clone of a massively successful mutual fund, on a whim to try and time bond interest rates, instead of sticking with the index upon which this fund is based? Or why they are not so quick to change the duration of the 40% portion of the retirement income fund?
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G-Money
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Re: Total Bond Market Fund

Post by G-Money »

EyeDee wrote:
G-Money wrote:I don't pay much attention to Morningstar's star ratings, risk/return ratings, or benchmarks. I do use Morningstar's instant x-ray and growth charts.

Go ahead and use Morningstar's chart to compare VTBIX with VBTLX (admiral share version) from VTBIX's inception. I see less than $80 difference between the two over a 4.5 year period, a difference of less than 0.2% annually. Now, VTBIX is slight more expensive (0.02%). I also believe the unique cash flow requirements of the fund-of-funds becomes a drag on the bond fund, which I believe was the main reason why they created VTBIX in the first place.

If you want a Vanguard fund-of-funds, you're stuck with VTBIX. It may be marginally worse than VBTLX. So there's a cost for convenience, and it appears to be <0.2% of bonds, plus the difference between investor and admiral shares for stocks. Pretty cheap, IMO.
.
Since the Vanguard fund-of-funds invest in Investor shares not Admiral shares you probably want to be comparing with the Total Bond Market Fund Investor shares VBMFX on Morningstar's charts. As of today, VTBIX is only $18.88 less than VBMFX over the 4.5 year period.
True about investor shares in the funds-of-funds.

VTBIX has an ER of 0.12%, which is much closer to the 0.10% of VBTLX than the 0.20% of VBMFX. Also, I was intending to show the cost of convenience, and most investors would be using admiral or ETF share classes.
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grabiner
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Re: Whats The Story With VTBIX???

Post by grabiner »

BHChinook wrote:I understand the symbol for Vanguard Total Bond Market II is VTBIX. M* lists this fund and only gives it 2 stars with average risk and below average return. Yahoo doesn't even list the symbol. Total Bond Market, on the other hand, gets 3 stars from M* and below average risk and average return.
The reason for the rating difference is that M* rates a fund based on a weighted average of its 10-year, 5-year, and 3-year ratings. Total Bond Market Index II hasn't been around for 5 years, so its rating is based entirely on 3-year data; Total Bond Market has 2 stars for 3 years, 3 stars for 5 years, and 3 stars for 10 years, averaging to 3.
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BHChinook
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Re: Whats The Story With VTBIX???

Post by BHChinook »

Are you asking why vanguard doesn't just tweak this fund (with 60 billion in it), the clone of a massively successful mutual fund, on a whim to try and time bond interest rates, instead of sticking with the index upon which this fund is based? Or why they are not so quick to change the duration of the 40% portion of the retirement income fund?
Actually, yes, that is what I am asking. Certainly not on a whim, however, but on very careful study by people who know bonds infinitely better than do I. And I'm not suggesting a shorter term bond fund is the right answer. I only observe that they did change the duration of the TIPS fund; perhaps they gave consideration to the total bond part at the same time...

If they did (and I bet they did), it appears the answer was "no"; which is fine with me. I have a very large percentage of my retirement assests in VTINX and am very happy with it. :happy
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Re: What's difference btw Bond II VTBIX and VBTLX?

Post by FredL »

I didn't realize there is Total Bond II VTBIX. I only have Total Bond VBTLX. Do I also need Total Bond II? What is the difference btw the two?
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Re: What's difference btw Bond II VTBIX and VBTLX?

Post by grabiner »

FredL wrote:I didn't realize there is Total Bond II VTBIX. I only have Total Bond VBTLX. Do I also need Total Bond II? What is the difference btw the two?
You can't buy Total Bond II; it is an equivalent fund held by other Vanguard funds such as the LifeStrategy and Target Retirement funds. The split between the two funds means that Total Bond Market doesn't realize capital gains when other funds have to sell Total Bond Market II to rebalance.
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Re: What's difference btw Bond II VTBIX and VBTLX?

Post by anil686 »

grabiner wrote:
FredL wrote:I didn't realize there is Total Bond II VTBIX. I only have Total Bond VBTLX. Do I also need Total Bond II? What is the difference btw the two?
You can't buy Total Bond II; it is an equivalent fund held by other Vanguard funds such as the LifeStrategy and Target Retirement funds. The split between the two funds means that Total Bond Market doesn't realize capital gains when other funds have to sell Total Bond Market II to rebalance.

For those asking for admiral shares of TSM and TISM in LS/TR funds - is this a way VG could do it? My concern with using the admiral shares funds in the TR/LS funds has always been the cap gains/increased transaction costs to the underlying funds. But if VG had a TSM II and a TISM II only for the LS/TR funds in admiral share pricing - that would seem to solve that issue I would think...
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