Suggestions for Low Duration Bond Fund

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Topic Author
maniminto
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Suggestions for Low Duration Bond Fund

Post by maniminto »

I would like to move cash in a qualified account to a short duration (1 to 1.5 yrs) bond fund with reasonable yield.
So far the best one I have come across is Doubleline's short duration bond fund DLSNX. Duration about 1 yr, yield 2.2% ER 0.7

Can anyone suggest a comparable or better short duration bond fund?

Many thanks in advance.
PFInterest
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Re: Suggestions for Low Duration Bond Fund

Post by PFInterest »

why not the vanguard fund?
Topic Author
maniminto
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Re: Suggestions for Low Duration Bond Fund

Post by maniminto »

Which one in particular?
livesoft
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Re: Suggestions for Low Duration Bond Fund

Post by livesoft »

Vanguard has about 9 different short-term bond funds. Can you find them all?
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jebmke
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Re: Suggestions for Low Duration Bond Fund

Post by jebmke »

Looking at the fact sheet - looks like a hodgepodge of some potentially risky stuff. Yield chasing?

http://www.doublelinefunds.com/wp-conte ... 1484501828

and the ER is pretty high for a bond fund.
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Taylor Larimore
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Re: Suggestions for Low Duration Bond Fund

Post by Taylor Larimore »

maniminto wrote:I would like to move cash in a qualified account to a short duration (1 to 1.5 yrs) bond fund with reasonable yield.
So far the best one I have come across is Doubleline's short duration bond fund DLSNX. Duration about 1 yr, yield 2.2% ER 0.7

Can anyone suggest a comparable or better short duration bond fund?

Many thanks in advance.
Maniminto:

No one will intentionally buy a bond with lower yield and higher risk. If you want to know the risk in a bond or bond fund, simply look at the yield. Higher yield nearly always reflects higher risk (but don't ignore the expense ratio).

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
Topic Author
maniminto
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Re: Suggestions for Low Duration Bond Fund

Post by maniminto »

livesoft wrote:Vanguard has about 9 different short-term bond funds. Can you find them all?
Thanks livesoft. Got it
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saltycaper
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Re: Suggestions for Low Duration Bond Fund

Post by saltycaper »

maniminto wrote:I would like to move cash in a qualified account to a short duration (1 to 1.5 yrs) bond fund with reasonable yield.
1-1.5 years is really short. Not going to happen unless you buy something like a floating-rate junk bond fund and take on substantial credit risk to make up for the negligible interest-rate risk. I'd redefine your parameters or just use a money market fund.

I'd avoid the 0.7 ER fund. You're essentially paying them for the extra risk you take.
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Quark
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Re: Suggestions for Low Duration Bond Fund

Post by Quark »

Taylor Larimore wrote:... No one will intentionally buy a bond with lower yield and higher risk. If you want to know the risk in a bond or bond fund, simply look at the yield. Higher yield nearly always reflects higher risk (but don't ignore the expense ratio).

Best wishes.
Taylor
Taylor,

Exactly. The bond market is very efficient. There's no free lunch. Make sure any chosen fund is well diversified, has low costs (expense ratio, trading costs, tax costs) and matches your desired maturity/duration.

Best wishes.
MtnBiker
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Re: Suggestions for Low Duration Bond Fund

Post by MtnBiker »

maniminto wrote:Doubleline's short duration bond fund DLSNX. Duration about 1 yr, yield 2.2% ER 0.7

Can anyone suggest a comparable or better short duration bond fund?
How about DBLSX (the I shares of the same fund)? Duration 1.1 yr, yield 2.45%, ER 0.44%. 5K min. purchase in an IRA. About 15% of assets are below investment grade or unrated.
supernova
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Re: Suggestions for Low Duration Bond Fund

Post by supernova »

I use VSCSX (Vanguard short term corporate bond index) for the third-tier of my EF.

http://www.morningstar.com/funds/xnas/vscsx/quote.html

It's 2.28% yield, 2.75 year duration, so probably a bit longer than you'd like, but I think it's a fair trade off
Topic Author
maniminto
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Re: Suggestions for Low Duration Bond Fund

Post by maniminto »

MtnBiker wrote:
maniminto wrote:Doubleline's short duration bond fund DLSNX. Duration about 1 yr, yield 2.2% ER 0.7

Can anyone suggest a comparable or better short duration bond fund?
How about DBLSX (the I shares of the same fund)? Duration 1.1 yr, yield 2.45%, ER 0.44%. 5K min. purchase in an IRA. About 15% of assets are below investment grade or unrated.
Thank you. That sounds better.
Do you own this fund?
Topic Author
maniminto
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Re: Suggestions for Low Duration Bond Fund

Post by maniminto »

supernova wrote:I use VSCSX (Vanguard short term corporate bond index) for the third-tier of my EF.

http://www.morningstar.com/funds/xnas/vscsx/quote.html

It's 2.28% yield, 2.75 year duration, so probably a bit longer than you'd like, but I think it's a fair trade off
Thank you. I was considering that too. Perhaps I'll do a split between this & the Doubleline fund
lack_ey
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Re: Suggestions for Low Duration Bond Fund

Post by lack_ey »

The DoubleLine Low Duration Bond Fund has been pretty good since inception, a large part from loading on non-agency asset-backed securities during a good period for those. Personally I'd not be comfortable relying on manager security selection in the future or this part of the market to generate consistent returns above fees even if you use a lower-cost share class.

After the ER, not much different from a short-term investment-grade bond fund, though, despite being in the right place over this period. For reference:
https://www.portfoliovisualizer.com/bac ... ion3_3=100

Vanguard's Short-Term Corporate Bond Index is a bit long for the category, being 1-5 yr maturities. Also consider iShares 0-5 Year Investment Grade Corporate Bond (SLQD) and especially SPDR Bloomberg Barclays Short Term Corporate Bond (SCPB), the latter of which tracks a 1-3 yr index.
MtnBiker
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Re: Suggestions for Low Duration Bond Fund

Post by MtnBiker »

maniminto wrote:
MtnBiker wrote:
maniminto wrote:Doubleline's short duration bond fund DLSNX. Duration about 1 yr, yield 2.2% ER 0.7

Can anyone suggest a comparable or better short duration bond fund?
How about DBLSX (the I shares of the same fund)? Duration 1.1 yr, yield 2.45%, ER 0.44%. 5K min. purchase in an IRA. About 15% of assets are below investment grade or unrated.
Thank you. That sounds better.
Do you own this fund?
Yes, I have about of a quarter of my fixed income allocation in this fund. Nobody knows, but seemed like a reasonable place to be with a portion while interest rates are normalizing.
VaR
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Re: Suggestions for Low Duration Bond Fund

Post by VaR »

Is there a principle of investing that says you should only invest in products whose risk you understand?

The Doubleline Low Duration Bond Fund has:
20% in Commercial MBS - I understand the product, but not the risk
20% in Collateralized Loan Obligations - complex and opaque product, risks not well understood or modeled
17% in Foreign Corporate Bonds - understandable, but lots of detail in country-specific risks, including foreign exchange risk
12% in non-agency CMO - product is understandable; dependent on ratings agency ratings to assess risk
10% in U.S. goverment bonds and notes - product and risks well understood
10% in U.S. corporate bonds - product and risks well understood

I think you're very dependent on Doubleline's management team in selecting issues and understanding 80% of these products. It may be a good niche if you are compensated for the specific risks in each of the categories above.

For an individual investor, I'd ask why bother assessing the complexities of this for the little juice that it's going to give your portfolio? I mean, maybe worth it if you're a family office or pension fund.

Is this a long-term investment or are you trying to time the interest rate markets - that is, do you intend to switch to longer duration holdings when rates go up?
Topic Author
maniminto
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Re: Suggestions for Low Duration Bond Fund

Post by maniminto »

Yes, an interim allocation until rates improve in lieu of cash or MM. I was trying to mimic a Fidelity target maturity fund with some enhancements.
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Aptenodytes
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Re: Suggestions for Low Duration Bond Fund

Post by Aptenodytes »

If you follow the signals in the yield curves, there are times when the market tells you to put your bond holdings in very short-term bonds for which there are seldom good mutual funds available. In those circumstances you may wish to switch to CDs, if they are available to you in your accounts.

I believe your average investor considers 2-3 years to be the lowest end of the duration pool they care about.
LSLover
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Re: Suggestions for Low Duration Bond Fund

Post by LSLover »

I see a 5yr duration as acceptable and invest in MDXBX
http://beta.morningstar.com/funds/xnas/mdxbx/quote.html

3.4% tax-free yield
0.46 ER
Average credit Quality - A
stlutz
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Re: Suggestions for Low Duration Bond Fund

Post by stlutz »

do you intend to switch to longer duration holdings when rates go up?
Yes, an interim allocation
As a heads up, the 10-year Treasury peaked back in mid-December and intermediate-to-longer term rates have since been going down.
Topic Author
maniminto
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Re: Suggestions for Low Duration Bond Fund

Post by maniminto »

True. I am no expert in this field. Merely a student.
Pundits like Jeff Gundlach and Bill Gross indicate this bond rally being temporary with 10 year ending at 3% on the first leg and then 6% in 3-4 years.
Bond cycles are fairly long relative to stock cycles. Bonds peaked in early 80's with yields over 20% in mid teens, declined to just over 1% in mid 2016 (took more than 30 years) and are now increasing. If the bond bull market is over, what are the consequences of holding intermediate or long term bonds? If bonds are to be the safe and sure investment in your AA, will they serve that purpose if the rates increase continually?
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