Best American Funds bond fund?

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eengstro
Posts: 22
Joined: Sun Apr 12, 2009 5:22 pm
Location: Central Coast, CA

Best American Funds bond fund?

Post by eengstro »

Hello Bogleheads, new (almost) poster, longtime reader here.

I have a SIMPLE IRA through American Funds. I currently have about 2.2% allocated to the Bond Fund of America (ABNDX); the rest of the account is split between five different stock funds. I'm thinking I should have 20 or 30% of the account in bonds (I'm 32).

My question: what is the best (or most appropriate) bond fund -- or combination of bond funds -- from American Funds for my situation?

My initial thought is to just use the Bond Fund of America (ABNDX), with perhaps some Capital World Bond Fund (CWBFX) and US Gov't Securities Fund (AMUSX) thrown in for international and treasury coverage.

Your thoughts?

Please note that I don't contribute to this account anymore, as I have since changed jobs, so the front-end load isn't a concern (i.e. it's already been paid :roll:).
fredd
Posts: 248
Joined: Sun May 27, 2007 11:43 am

bond funds

Post by fredd »

Fixed Income is a weak link, in this otherwise fine company. I just read an article showing how actively managed bond funds are uniformly trounced by their indexes. With that said the Bond Fund of America and The World Bond is where I would invest. The government fund due to costs and low yields I would not chose.

On the Equity side is where the AF really shine. Over the past ten years ending July 31 every AF had a positive return at mop, while the Vanguard 500 and Total Markets were negative.

Best regards,
fredd
mike10
Posts: 18
Joined: Sat Mar 03, 2007 4:15 pm

Simple IRA

Post by mike10 »

I also hold an American Funds Simple IRA. I was wanting to invest in bonds but did not think the bonds available in the American Funds Simple IRA were what I was looking for. To overcome this, I opened and IRA with Vanguard and transferred my bond allocation from my Simple IRA to Vanguard where the options are far greater. You must have had your Simple IRA for two years before you can do this.

The process was extremely easy and quick. Obtaining the Medallion Signature Guarantee was the only inconvenience.
flyfisher
Posts: 42
Joined: Thu Jun 21, 2007 12:31 am

Post by flyfisher »

roll your IRA over to Vanguard and use the bond index funds with low espense ratio's...maybe Total Bond Market.
Roy
Posts: 970
Joined: Wed Sep 10, 2008 9:34 am

Post by Roy »

flyfisher wrote:roll your IRA over to Vanguard and use the bond index funds with low espense ratio's...
eengstro,

This is the best advice for your fixed income and equities compared with where you are now.

Don't worry about having paid the front load--that is a "sunk cost". You'll have lots of good funds at Vanguard with far lower ERs. Read Swedroe's books and you'll know exactly what to do.

Best,

Roy
Eureka
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Location: Illinois

Post by Eureka »

Keeping expenses low is really important in a bond fund. ABNDX has an expense ratio about three times that of any of the Vanguard bond funds I own. As for paying a 3.75 percent load to buy a bond fund? Just say NO! The word "obscene" comes to mind. All that suckage comes out of your return.
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eengstro
Posts: 22
Joined: Sun Apr 12, 2009 5:22 pm
Location: Central Coast, CA

Post by eengstro »

Thanks for the replies so far. Unfortunately, rolling the account over to Vanguard is not an option at this time, although it is something I may do in the future.
flyfisher_work
Posts: 69
Joined: Tue Feb 05, 2008 12:23 pm

Post by flyfisher_work »

I have ABNDX in my current 401k for my fixed portion of my AA...ABNDX has slashed it's dividend from $.056 to $.038 per share this year. This has brought it's yeld down to roughly match VBMFX...so roll over to Vanguard and get the lower ER.
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