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Follower ○○

Re: Bond OEF Investing for More Conservative Investors

@Fishingrod

Did the Muni MM fare well in 2008?  The yield is great as long as they stay at $1.

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Re: Bond OEF Investing for More Conservative Investors

@WordGirl 

Did the Muni MM fare well in 2008?  The yield is great as long as they stay at $1.

___________________________________________________________________________________________

Yes the fear subsided and as it did so did the rates on the MM.

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Re: Bond OEF Investing for More Conservative Investors


@WordGirl wrote:

@Fishingrod

Did the Muni MM fare well in 2008?  The yield is great as long as they stay at $1.


There isn't going to be anything close to 2.8%.  The chart below shows VMSXX for 2 years 2008-2009 when rates were much higher and VMSXX made just 2.7% for 2 years.

vmsxx.PNG

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Explorer ○○

Re: Bond OEF Investing for More Conservative Investors


@yogibearbull wrote:

@FD1001 wrote:

I'm looking at SWTXX (Schwab Muni MM) and I don't see how the yield is 2.8%.  When I put it on a one (chart), the return is just 1.1%.  If I could get 2.8% on a MM the whole world would invest in that fund.


It is just a 7-day thing and may quickly pass by for muni m-mkt SWTXX, VMSXX, etc [these do have potential 2% redemption fee and/or 10-day gates]. I am watching these but for now I am sticking with gov m-mkt SNVXX, VMFXX, SPAXX, FZCXX.


YBB, et al.

Is all the stuff the FED is doing going to make VMMXX (prime) safe or is VMFXX (federal) the only cash armor?

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Re: Bond OEF Investing for More Conservative Investors

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Re: Bond OEF Investing for More Conservative Investors


@Poorfolio wrote:

@yogibearbull wrote:

@FD1001 wrote:

I'm looking at SWTXX (Schwab Muni MM) and I don't see how the yield is 2.8%.  When I put it on a one (chart), the return is just 1.1%.  If I could get 2.8% on a MM the whole world would invest in that fund.


It is just a 7-day thing and may quickly pass by for muni m-mkt SWTXX, VMSXX, etc [these do have potential 2% redemption fee and/or 10-day gates]. I am watching these but for now I am sticking with gov m-mkt SNVXX, VMFXX, SPAXX, FZCXX.


YBB, et al.

Is all the stuff the FED is doing going to make VMMXX (prime) safe or is VMFXX (federal) the only cash armor?


The Fed is more interested in protecting the liquidity of the markets.

From national policy perspective, 2% redemption fee and/or 10-day gate(s) for prime and muni m-mkt funds isn't a big deal - it is disclosed in fund prospectuses, websites and other literature; the SEC put it in place to begin with [2014 Rules, 2016-implementation]. Recently, GS and BK didn't want their prime m-mkt funds to be the first to have these limitations and they injected billions of their own money [not Fed's money] to avoid this. With so many prime and muni m-mkt funds around, it is just a matter of time when some such fund puts these limitations and there would be another run/panic in prime and muni m-mkt funds. Why not call Vanguard to ask whether it stands ready to inject its money into its prime m-mkt funds and where it holds that pool of money - get it in writing.

I want none this so I am now in gov m-mkt funds.

YBB
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Re: Bond OEF Investing for More Conservative Investors

I have been critical lately about SD. After reading the latest articles about IOFIX I have come to the conclusion to moderate my thinking on SD. SD is a measure of volatility not risk. They are 2 different things and are being confused. Risk is adjusted by credit, interest rates and portfolio quality. Also market climate like we have seen lately regarding redemptions. That was the biggest lesson for me in risk. Volatility is exactly as SD is defined; dispersion from the mean growth curve (shape of the growth curve).

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Explorer ○○

Re: Bond OEF Investing for More Conservative Investors


@yogibearbull wrote:

@Poorfolio wrote:

@yogibearbull wrote:

@FD1001 wrote:

I'm looking at SWTXX (Schwab Muni MM) and I don't see how the yield is 2.8%.  When I put it on a one (chart), the return is just 1.1%.  If I could get 2.8% on a MM the whole world would invest in that fund.


It is just a 7-day thing and may quickly pass by for muni m-mkt SWTXX, VMSXX, etc [these do have potential 2% redemption fee and/or 10-day gates]. I am watching these but for now I am sticking with gov m-mkt SNVXX, VMFXX, SPAXX, FZCXX.


YBB, et al.

Is all the stuff the FED is doing going to make VMMXX (prime) safe or is VMFXX (federal) the only cash armor?


The Fed is more interested in protecting the liquidity of the markets.

From national policy perspective, 2% redemption fee and/or 10-day gate(s) for prime and muni m-mkt funds isn't a big deal - it is disclosed in fund prospectuses, websites and other literature; the SEC put it in place to begin with [2014 Rules, 2016-implementation]. Recently, GS and BK didn't want their prime m-mkt funds to be the first to have these limitations and they injected billions of their own money [not Fed's money] to avoid this. With so many prime and muni m-mkt funds around, it is just a matter of time when some such fund puts these limitations and there would be another run/panic in prime and muni m-mkt funds. Why not call Vanguard to ask whether it stands ready to inject its money into its prime m-mkt funds and where it holds that pool of money - get it in writing.

I want none this so I am now in gov m-mkt funds.


Thanks for the reply. I hope a big house like VG follows through.

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Participant ○○

Re: Bond OEF Investing for More Conservative Investors


@yogibearbull wrote:
The Fed is more interested in protecting the liquidity of the markets.

From national policy perspective, 2% redemption fee and/or 10-day gate(s) for prime and muni m-mkt funds isn't a big deal - it is disclosed in fund prospectuses, websites and other literature; the SEC put it in place to begin with [2014 Rules, 2016-implementation]. Recently, GS and BK didn't want their prime m-mkt funds to be the first to have these limitations and they injected billions of their own money [not Fed's money] to avoid this. With so many prime and muni m-mkt funds around, it is just a matter of time when some such fund puts these limitations and there would be another run/panic in prime and muni m-mkt funds. Why not call Vanguard to ask whether it stands ready to inject its money into its prime m-mkt funds and where it holds that pool of money - get it in writing.

I want none this so I am now in gov m-mkt funds


Yogi,

I called Vanguard yesterday and spoke with my Flagship Rep. In typical Vanguard style, the best he could offer was that the objective was to preserve a share price of $1.

I could have read a more accurate product summary on their web site, not to mention that I was on hold for 35 minutes to hear this drivel.

Hootz

 

 

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Re: Bond OEF Investing for More Conservative Investors

@Hootz , I can believe you.

Not to go off-topic too much, stable-value funds [SVs] within 401k/403/457 are mostly offered by insurance companies that provide guarantees. Vanguard also offers SVs but there is no insurance company behind them. So I once wrote to Vanguard asking how does it guarantee its SVs and where is that guarantee-pool of money held? Unbelievably, Vanguard replied that it runs its SVs very conservatively and it doesn't think it will need to rescue it.

What it told you about its prime m-mkt just fits that attitude.

YBB
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Re: Bond OEF Investing for More Conservative Investors


@Gary1952 wrote:

I have been critical lately about SD. After reading the latest articles about IOFIX I have come to the conclusion to moderate my thinking on SD. SD is a measure of volatility not risk. They are 2 different things and are being confused. Risk is adjusted by credit, interest rates and portfolio quality. Also market climate like we have seen lately regarding redemptions. That was the biggest lesson for me in risk. Volatility is exactly as SD is defined; dispersion from the mean growth curve (shape of the growth curve).


You have been critical of SD as a measure of risk, but you have not yet told me what you will use in its place.  My observation of the M* Risk Rating (which is proprietary without a detailed explanation) is that SD and M* Risk Rating are almost always very close to each other.  If you pull up any individual bond oef, such as SEMMX, M* will give it a Low M* Risk Rating, and when you look under the Risk Icon for SEMMX, you will see risk and volatility detailed for the fund, and there a large number of Risk and Volatility measures, that include Standard Deviation, Sharpe Ratio, Upside/Downside Capture ratios, all of which look pretty good for SEMMX.  So, I ask again, besides you being "critical" of SD as a measure of risk (even though M* uses it as a measure of risk), exactly what will be your system of evaluating risk--curious minds want to know!

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Re: Bond OEF Investing for More Conservative Investors

Any thoughts on what to do with IOFIX at this point?   It is now down 30% and the managers have filed an SEC filing saying they have liquidity risk.  Wondering if I should go ahead and sell today or hang in there...  its a small position for me.

https://www.sec.gov/Archives/edgar/data/1355064/000158064220001282/alphacentric497s.htm

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Re: Bond OEF Investing for More Conservative Investors


@miketex wrote:

Any thoughts on what to do with IOFIX at this point?   It is now down 30% and the managers have filed an SEC filing saying they have liquidity risk.  Wondering if I should go ahead and sell today or hang in there...  its a small position for me.

https://www.sec.gov/Archives/edgar/data/1355064/000158064220001282/alphacentric497s.htm


Maybe you should post that on the Buy/Sell/Why thread?  I would be very reluctant to tell anyone what they should do with a specific bond oef, especially IOFIX and its precarious set of circumstances.  There is a specific thread on just IOFIX you might want to post on about your question.

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Re: Bond OEF Investing for More Conservative Investors

My last post was to state the point I was backing off criticizing SD due to the fact it is not risk. It is volatility. Risk showed it's ugly head this time. I understood that better once the IOFIX articles came out. As far as the future I will look closer at types of assets and quality more. I was too deep into MBS. Every fund I owed had them. I needed more diversification for my type of investing. I will always own equities so I need more ballast funds. Yes these funds I owned acted as ballast to some extent , but finally gave out after the first few weeks of this debacle.


@dtconroe wrote:


You have been critical of SD as a measure of risk, but you have not yet told me what you will use in its place.  My observation of the M* Risk Rating (which is proprietary without a detailed explanation) is that SD and M* Risk Rating are almost always very close to each other.  If you pull up any individual bond oef, such as SEMMX, M* will give it a Low M* Risk Rating, and when you look under the Risk Icon for SEMMX, you will see risk and volatility detailed for the fund, and there a large number of Risk and Volatility measures, that include Standard Deviation, Sharpe Ratio, Upside/Downside Capture ratios, all of which look pretty good for SEMMX.  So, I ask again, besides you being "critical" of SD as a measure of risk (even though M* uses it as a measure of risk), exactly what will be your system of evaluating risk--curious minds want to know!


 

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Re: Bond OEF Investing for More Conservative Investors

Gary: "My last post was to state the point I was backing off criticizing SD due to the fact it is not risk. It is volatility."

And my point is that "volatility" is a major component of risk measurement, as exemplified by its inclusion on the M* Risk section for various funds.  SD and volatility are both major components of risk measurement.  You can exclude them as you choose, but ignoring what it is considered major components of risk measurements seems rather far fetched.  What is clear is that standard measurement of risk, based largely on relatively normal markets, can be severely compromised in infrequent market crash periods, which will lead to panic selling, and redemption impact exacerbated by deep market crash periods.  I doubt we will ever be able to develop a risk metric measurement for deep market crash periods, complicated by liquidity measures--even funds with major components of cash in their portfolios, will use that up quickly in crash periods, and then start having these one day huge losses due to mass redemptions and liquidity impact.  

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Re: Bond OEF Investing for More Conservative Investors


@Gary1952 wrote:

My last post was to state the point I was backing off criticizing SD due to the fact it is not risk. It is volatility. Risk showed it's ugly head this time. I understood that better once the IOFIX articles came out. As far as the future I will look closer at types of assets and quality more. I was too deep into MBS. Every fund I owed had them. I needed more diversification for my type of investing. I will always own equities so I need more ballast funds. Yes these funds I owned acted as ballast to some extent , but finally gave out after the first few weeks of this debacle.



 


The above is similar to your complaints about "cash sub" and/or generic market ideas you stated above.  If you want to be 100% sure what you own then just own simple known wide range index funds.  Many managed funds can have positions you don't know and why they are managed.  Some of the best-managed funds (PRWCX,PIMIX) have higher flexibility than most.

" I was too deep into MBS." First, you knew that IOFIX and even SEMMX are the exceptions to the rule but most bond categories (except) treasuries lost 8-12% anyway, even ballast like DODIX lost over 5% YTD.

In a real meltdown most categories will give up, did you expect anything different? are you naive?

Just because we had a black swan doesn't mean you have to base everything in the next several years on that. Investing has lots of grey areas if you care and know how to use it

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Re: Bond OEF Investing for More Conservative Investors

My perception of M* including SD on the risk page is because people have different tolerances for volatility. That is a "risk" to some seeing NAVs bounce up and down. The risk being selling because something went down 1/2% is not a risk to me but may be to you. The true risk to me was not volatility...I can handle volatility in equities. It was the "liquidation risk" that was not apparent or thought about due to the black swan. 


@dtconroe wrote:........

And my point is that "volatility" is a major component of risk measurement, as exemplified by its inclusion on the M* Risk section for various funds.  SD and volatility are both major components of risk measurement.  You can exclude them as you choose, but ignoring what it is considered major components of risk measurements seems rather far fetched.  What is clear is that standard measurement of risk, based largely on relatively normal markets, can be severely compromised in infrequent market crash periods, which will lead to panic selling, and redemption impact exacerbated by deep market crash periods.  I doubt we will ever be able to develop a risk metric measurement for deep market crash periods, complicated by liquidity measures--even funds with major components of cash in their portfolios, will use that up quickly in crash periods, and then start having these one day huge losses due to mass redemptions and liquidity impact.  


 

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Re: Bond OEF Investing for More Conservative Investors

Gary: "My perception of M* including SD on the risk page is because people have different tolerances for volatility. That is a "risk" to some seeing NAVs bounce up and down. The risk being selling because something went down 1/2% is not a risk to me but may be to you. The true risk to me was not volatility...I can handle volatility in equities. It was the "liquidation risk" that was not apparent or thought about due to the black swan." 

I don't know of any measure that covers liquidation risk.  The M* Risk Rating correlates very closely to SD--Low M* Risk for a fund, correlates very closely to Low SD funds in that category.   The value I found in low SD funds, is the rate of drops were slower.  It gave me time to see a pattern that gave me a bit more time to evaluate.  I did not sell any fund because it went down 1/2%, but when a fund was dropping "only" 1/2% per day, I was able to make a more calculated decision with minimal emotion, than funds that were dropping 1 to 2% per day.  At any rate, each investor needs to believe in their fund selection criteria, but when I get into black swan markets, I know that the longer the market crash lasts, the greater the likelihood of liquidity redemption issues.  Funds tend to drop slower in the beginning of a crash because they can use cash, cash alternatives, or sells of less impacting  core assets.  But as soon as those assets are gone, then funds start facing painful redemption liquidations from assets they had hope to be able to hold longer--any risk measure that helps identify funds that give you more time to sort through that likelihood, can lower your risk of loss.  The key though is whether you are going to act on those risk measures, or if you are going to just watch your losses get deeper and deeper without any action--risk measures can flash warning signals but if you do not act on them, you face a more painful risk of major losses when you start facing liquidity issues of selling core assets that will cause steeper and more painful losses.  Of course, if you are a buy and hold investor, there is no reason to even look at risk measures--just trust time to fix the loss, regardless of how much time it takes.

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Re: Bond OEF Investing for More Conservative Investors

I do not believe "liquidation risk" has a metric to be judged, however it was recently added to the IOFIX/IOFAX prospectus as posted by YBB. But it is certainly something to be aware of for all of these 5 year old funds. I believe that another risk assessment for me will to look at funds with much more history. I hope to still be investing in 2030. The year is far from over but the 2020 TR% will be interesting for many funds. BTW, I did not own IOFIX.

None of my posts are directed at you or anyone in particular. The 1/2% drop is referencing investors in general that cannot handle volatility. 


@dtconroe wrote:

I don't know of any measure that covers liquidation risk.  The M* Risk Rating correlates very closely to SD--Low M* Risk for a fund, correlates very closely to Low SD funds in that category.   The value I found in low SD funds, is the rate of drops were slower.  It gave me time to see a pattern that gave me a bit more time to evaluate.  I did not sell any fund because it went down 1/2%, but when a fund was dropping "only" 1/2% per day, I was able to make a more calculated decision with minimal emotion, than funds that were dropping 1 to 2% per day.  At any rate, each investor needs to believe in their fund selection criteria, but when I get into black swan markets, I know that the longer the market crash lasts, the greater the likelihood of liquidity redemption issues.  Funds tend to drop slower in the beginning of a crash because they can use cash, cash alternatives, or sells of less impacting  core assets.  But as soon as those assets are gone, then funds start facing painful redemption liquidations from assets they had hope to be able to hold longer--any risk measure that helps identify funds that give you more time to sort through that likelihood, can lower your risk of loss.  The key though is whether you are going to act on those risk measures, or if you are going to just watch your losses get deeper and deeper without any action--risk measures can flash warning signals but if you do not act on them, you face a more painful risk of major losses when you start facing liquidity issues of selling core assets that will cause steeper and more painful losses.  Of course, if you are a buy and hold investor, there is no reason to even look at risk measures--just trust time to fix the loss, regardless of how much time it takes.


 

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Re: Bond OEF Investing for More Conservative Investors

It seems as if we keep going round and round on this.  'Risk' requires definition, and folks have different cutoff values for the levels.  I think most would define risk as the potential to lose significant money (variable cutoff) over a short period of time.  My personal feeling is that anything which is doing REALLY well is risky; largely because it is likely invested narrowly and heavily in an area which is working (and could STOP working).  Then it comes down to how quickly one can pull the trigger and change things up.  If one does NOT intend to make abrupt changes (this thread, I think), then high-flyers are problematic, imo.  I would have to agree, however, that one cannot plan based on exogenous events interfering.  We're all at the mercy of fate in that regard if we're invested.

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