I was looking at the turnover of bnd etf vanguard aggregate bond fund and it stated it had 80% annual turnover?http://finance.yahoo.com/q/pr?s=BND
Which seems high given its medium duration?
reason I was looking, and then asking, is that the whole thing with
"interest rates will rise, and bonds (bond funds) are not safe/not safe as you think/in a bubble"
that I just keep reading repeatedly, or at least seeing the headlines of articles, is that I just do not get how its going to be all that bad for a buy and hold investor.
Yeah, BND would fall, but then BND is going to be buying the new bonds, with money obtained from turnover of expiring bonds, those new bonds would have the higher interest rate.
Yeah, BND would have to sell prematurely, some bonds to investors who want to sell BND low, and get out, but I do not see how that is going to really affect me much. In the same way in a stock fund, when prices tanked in 2008, people sold out of VTI (vanguard TSM) at the low, yeah sure maybe some increase transactional cost, but the ETF effectively only sell out the shares that the person selling VTI basically owns.
I would seem to come out in the wash to me.
I just really fail to see the bated breath everyone has for the increase in interest rates, for an accumulator. Now for a decumulator, different thing I would expect.
But 80 percent annual turnover?
Seems high. If turnover is that fast, and interest rates move up slowly, so what? The bnd etf is turning over bonds with low interest rates and buying new ones with higher interest rates (if rates are going up at that time), at a rate of 80 percent a year? Its hard to me to get a feel for anything bursting in bnd.