Why/how has VBTLX yielded 8.71% YTD?

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DecoyDave
Posts: 29
Joined: Sat Jan 05, 2019 3:21 pm

Why/how has VBTLX yielded 8.71% YTD?

Post by DecoyDave » Mon Jan 13, 2020 4:39 pm

Dumb questions are my specialty, as many of you already know. I am happily surprised to see my VBTLX at 8.71%, after hearing all this about how bonds are yielding less than the inflation rate. Am I reading this wrong? If not, what is driving this? I like it, but need to understand what type of bonds are carrying the index and as always: THANKYOU for ANY comments. DD

Elysium
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Joined: Mon Apr 02, 2007 6:22 pm

Re: Why/how has VBTLX yielded 8.71% YTD?

Post by Elysium » Mon Jan 13, 2020 4:48 pm

Rates went down price went up. Total return not yield. You can do some basic reading on the wiki pages about the inverse relationship between rates and value of bonds, and you'll get it. When rates go up expect values to fall, reducing total return.
Last edited by Elysium on Mon Jan 13, 2020 4:50 pm, edited 1 time in total.

DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Re: Why/how has VBTLX yielded 8.71% YTD?

Post by DSInvestor » Mon Jan 13, 2020 4:50 pm

I believe 8.71% is the 2019 return for VBTLX (Total Bond Market Index). I wonder if the table you're looking is showing YTD as of DEC 31, 2019. I checked Vanguard's fund lists today and the YTD as of 1/10/20 for VBTLX is 0.52%.

On the fund page for Total Bond, the price/performance tab shows YTD as of 1/10/2020 as well as YTD as of 12/31/2019.
Wiki

dbr
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Re: Why/how has VBTLX yielded 8.71% YTD?

Post by dbr » Mon Jan 13, 2020 4:54 pm

It is very important to distinguish yield from total return. Total return includes yield plus the gain or loss in asset value of the bonds. Asset value is determined in the market and can go up or down. As pointed out above, the asset value went up some because interest rates went down.

For investors return is the complete picture and yield only a piece. If you want asset value to be constant you can invest in a money market fund, savings account or CD. Even these will not be constant after inflation. The only constant real dollar investment in the US is I bonds.

Topic Author
DecoyDave
Posts: 29
Joined: Sat Jan 05, 2019 3:21 pm

Re: Why/how has VBTLX yielded 8.71% YTD?

Post by DecoyDave » Mon Jan 13, 2020 4:58 pm

OK I am getting it and I have some terminology way off as usual, too. Now I know where I can do more research- this is all foreign to me, but I am SO GRATEFUL for the kind responses DD

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