Duration of this bond fund is 5.8 I believe. Therefore every 1% rise in interest rates drops the NAV of this bond fund by 5.8%. 2% rise, then 11.6% drop, etc. Could take some years to break even.
windwalker:
Below are U.S. inflation figures, and Vanguard Total Bond Market returns, since Mr. Bogle introduced TBM in 1986:
YEAR..
INFLATION....
RETURN
1986-------1.1%--------15.2%
1987-------4.4-----------2.8
1988-------4.4-----------7.9
1989-------4.6----------14.5
1990-------6.1-----------8.9 (Inflation increased 5.0% -- TBM average return 9.86%)
1991-------3.1----------16.0
1992-------2.9-----------7.4
1993-------2.7-----------9.7
1994-------2.7---------(-2.7)
1995-------2.5----------18.5
1996-------3.3-----------3.6
1997-------1.7-----------9.7
1998-------1.6-----------8.7
1999-------2.7---------(-0.8)
2000-------3.4----------11.6 (Inflation increased 1.7% --TBM average return 7.3%)
2001-------1.6-----------8.4
2002-------2.4----------10.3
2003-------1.9-----------4.1
2004-------3.3-----------4.3
2005-------3.4-----------2.4 (Inflation increased 1.8% -- TBM average return 5.9%)
2006-------2.5-----------4.3
2007-------4.1-----------7.0
2008-------0.1-----------5.2
2009-------2.7-----------5.9
2010-------1.5-----------6.5
2011-------3.0-----------7.7 (Inflation increased 2.9% -- TBM average return 6.3%)
2012-------1.7-----------4.3
2013-------1.5---------(-2.0)
2014-------0.8-----------6.0
2015-------0.7-----------0.5
Observations:
* During ALL four periods of rising inflation since 1986, Total Bond Market enjoyed positive returns.
* Total Bond Market's worst annual loss was -2.7% in 1994
Best wishes.
Taylor