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Contributor ○○○

Bond OEF Investing for More Conservative Investors

Given the recent turmoil in the markets, that has led to a correction, and threatens to become a recession, I thought it might be appropriate to start a thread for "more conservative investors".  The thread attempts to talk about Bond OEFs, that are lower risk, in their bond categories, that might be appropriate for longer term investors, who would like to stay as fully invested as possible.  To get started, I am listing a few funds, in the Multisector Bond, NonTraditional Bond, HY Muni Bond, and Short Term Bond categories.  All of these funds carry a M* Risk Rating of "Low" in their M* categories, and I am providing Total Returns for 2020 only to highlight the correction impact.  Please feel free to list Bond OEFs that you consider appropriate for more conservative investors, for longer term investing.

Multisector Bond OEFs

1. ANGIX/ANGLX: M* Risk Low, SD .96, 1wk/1mo/YTD Total Returns .60/.99/1.82

2. VCFAX/VCFIX: M* Risk Low, SD 1.56, 1wk/1mo/YTD Total Returns -.10/.46/1.70

3. TSIAX/TSIIX: M* Risk Low, SD 1.42, 1wk/1mo/YTD Total Returns .29/.60/1.29

NonTraditional Bond OEFs

1. SEMMX/SEMPX: M* Risk Low, SD .93, 1wk/1mo/YTD Total Returns -.13/.34/1.65

2. PMZIX/PMZAX: M* Risk Low, SD 1.06, 1wk/1mo/YTD Total Returns -.06/.53/1/22

3. MWCIX/MWCRX: M* Risk Low, SD 1.05, 1wk/1mo/YTD Total Returns .04/.28/1.01

HY Muni Bond OEFs

1. AAHMX: M* Risk Low, SD 1.29, 1wk/1mo/YTD Total Returns -.06/.60/1.55

2. PDSZX/PDSAX: M* Risk Low, SD 1.63, 1wk/1mo/YTD Total Returns .21/1.11/2.38

Short Term Bond OEFs

1. DHEAX: M* Risk Low, SD .71, 1wk/1mo/YTD Total Returns .20/.83/1.53

2. DBLSX: M* Risk Low, SD .65, 1wk/1m0/YTD Total Returns .10/.41/.85

205 Replies
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Valued Contributor

Re: Bond OEF Investing for More Conservative Investors

This is what I was shooting for when I posted in the A Conservative Bond Fund Thread recently, but a new thread is a good idea. Thanks.

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Contributor ○○

Re: Bond OEF Investing for More Conservative Investors

These would be some of the most conservative where ER alone can make the fund a poor choice.

 

With interest rates so low now I would buy short duration. One inexpensive fund which I think is better than cash is Vanguard ultra- short term VUSFX. Baird also has a low ER fund in the ultra-short category, BUBIX; this fund now yields a bit more than the short term fund, BSBIX. It has a slightly shorter duration than VUSFX, about half a year, If I were to choose a longer duration, such as a short term fund, and could invest a minimum of $50,000, I might choose Vanguard short term investment grade, VFSUX.

BBH Limited Duration I, BBBIX is another consideration, it does have a low ER and right now pays a bit over 2% yield (2.04); this may be a consideration? I prefer the Baird and Vanguard funds and personally hold VUSFX and VFSUX

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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors


@FatKat wrote:

These would be some of the most conservative where ER alone can make the fund a poor choice.

 

With interest rates so low now I would buy short duration. One inexpensive fund which I think is better than cash is Vanguard ultra- short term VUSFX. Baird also has a low ER fund in the ultra-short category, BUBIX; this fund now yields a bit more than the short term fund, BSBIX. It has a slightly shorter duration than VUSFX, about half a year, If I were to choose a longer duration, such as a short term fund, and could invest a minimum of $50,000, I might choose Vanguard short term investment grade, VFSUX.

BBH Limited Duration I, BBBIX is another consideration, it does have a low ER and right now pays a bit over 2% yield (2.04); this may be a consideration? I prefer the Baird and Vanguard funds and personally hold VUSFX and VFSUX


Fat Kat, a Baird Fund that I held all of 2019, and I really like is BTMIX. You mentioned BSBIX which is a fund I also like alot. There are many many more great low risk bond oefs, than just those I mentioned.  I purposely chose some of the more risk averse funds, just because of the current correction period that is leading some investors to sell and go to cash to a large extent.  If this thread attracts enough interest from other posters, I expected to broaden the criteria a little more, to include an even greater number of funds.  

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Contributor ○○

Re: Bond OEF Investing for More Conservative Investors

Thanks DT,

I also like BTMIX in a taxable account. BSBIX is a great fund for a long-term hold. I like VUSFX for my cash, as it pays close to 2%, while Vanguard Prime Money Market is now only yielding 1.54%.

The two short term funds you listed, I also hold.

I am still holding intermediate investment grade and corporate funds; they have done well, but with interests rates so low now, I might be trimming back and into these ultrashort, 'like cash' funds, for the near future.

 

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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors

The Short Term Bond Oef category is overall, a relative low risk category.  If you step up your risk in this category, to just "Average" M* risk, there are 3 other funds that are doing very well and worth considering:

1. ANFLX: M* Average risk, SD 1.12, 1wk/1mo/YTD Total Return .57/1.56/2.51

2. SDMZX: M* Average risk, SD 1.15, 1wk/1mo/YTD Total Return .24/.58/1.52

3. LALDX: M* Average risk, SD .96, 1wk/1mo/YTD Total Return .27/.73/1.27

Note: ANFLX Total Return is so good, it compares well to low risk multisector and nontraditional bond oefs.

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Follower ○○○

Re: Bond OEF Investing for More Conservative Investors

FPNIX low risk e/r .50, 1wk:.30%, 13wks:1.13%,YTD:1.32%. Glad you are back posting on Morningstar. You had a great post on  MFO on conservative bond OEF's.

MJK.
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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors


@klucsamj wrote:

FPNIX low risk e/r .50, 1wk:.30%, 13wks:1.13%,YTD:1.32%. Glad you are back posting on Morningstar. You had a great post on  MFO on conservative bond OEF's.


Yep, FPNIX is definitely one of the lower risk options for a conservative bond oef investor.  Hope you find this thread at M* offering some value to you.

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Valued Contributor

Re: Bond OEF Investing for More Conservative Investors

DT, welcome back home !!

ANGLX-I would be cautious about this fund. One week at 0.6% is fantastic but none of the other securitized funds (IOFIX,DPFNX,VCFAX,SEMMX) are up that much, only IOFIX was up 0.4%.  The low SD is also deceiving.  It's LT SD=3.1 see fund (link). Also, look at its longer term 5 year (chart) and how much it fell in 2015-6.  If you change it to 1-3 years it still trails all the funds above for 3 years and all funds, except SEMMX for 1 year.

ANFLX bond rating at 70+% lower than IG

qt.PNG

Another serious question (I'm not trying to stir anything).  Rates are down sharply and will stay low. Any fund that doesn't have a yield of 3+% is going to have an average performance of 2-3%. Example: AAHMX with 30 day SEC under 2% (and last month they cut their monthly dists) has a good chance to make about 2% (maybe 2.5%) average annually in the next several years.  What are your thoughts about it?

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Explorer ○○

Re: Bond OEF Investing for More Conservative Investors

dt,

Whether you post here or on MFO, your insight into bond fund activity is always appreciated. Your commentary is usually timely, actionable, and "believable", whether that is good or bad from a performance perspective. You also reveal what you own in real-time so there is no hiding or falsification of performance. Conversely, if I want to know what should have been owned (in hindsight), or trade funds like one changes their underwear, I can always read the other guy's self-adulation junk.

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Follower ○○

Re: Bond OEF Investing for More Conservative Investors

@dtconroe 

Glad to see you back.

One question, why have you not included RPHIX (M* 5y SD .67 and Maximum Drawdown -0.55), in the list of low risk funds being monitored?

 

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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors

FD, I started the thread, but I am not going to get into various investing or market scenarios, or funds that are appropriate for one investor vs another investor.  The 2015/2016 period was impacted by fears of rising interest rates, and what many investors thought was the end of a flat or falling interest rate period.  Bond oefs varied in how they performed in that period.  I do look at that period and look at peak to trough performance, but I am careful to not presume that a fund will perform similarly or differently in current market conditions.  Clearly 2015/2016 and 2020 are two very different market periods, and funds may perform very differently in those periods.  Who knows what will be the factors that lead to future market conditions--who would have predicted coronavirus as market impacting factor in 2020?  Your scenario regarding yield and total return may or may not be important going forward--I guess each investor can look at that scenario and determine how much emphasis they want to put on that scenario, when it comes to funds they want to hold.  

It is my hope that this thread will focus on bond oefs, that fit a lower risk and conservative investing style (I use Standard Deviation and M* Risk ratings extensively when I mention a fund).  It is my hope we can focus on bond oefs that could be appropriate for holding at least a year.  More than anything else, it is my hope that we can maintain a high degree of civility, and where there are differences of opinions, I hope those can be courteous and respectful differences of opinions.  It is my hope that if a fund mentioned on this thread appeals to a poster/lurker, they will implement their own due diligence process to determine if they want to invest in it, or not.

 

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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors


@guilhermes wrote:

@dtconroe 

Glad to see you back.

One question, why have you not included RPHIX (M* 5y SD .67 and Maximum Drawdown -0.55), in the list of low risk funds being monitored?

 


guilhermes, I was not attempting to list all bond oefs that would be appropriate for a conservative investor.  I just arbitrarily picked a few funds, from a few categories, to exemplify the kind of bond oefs that might fit this thread.  RPHIX is in the HY bond oef category, and is one of the most conservative/low risk funds in that category.  It has been around for many years, and I have read posts by other posters, who use it as a cash substitute.  I did not mention the HY bond category in my original post, but if I would have included HY bonds, I suspect it would have been one of the examples I would have listed.  I hope other posters will be willing to participate in the thread, as you have done, and mention funds they like/use to fit this thread subject matter.

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Participant ○○○

Re: Bond OEF Investing for More Conservative Investors

I understand conservative has different meanings regarding bonds. Me, I dumped all managed FI OEF except PIGIX. I went all in for BND. Once this mess is behind us I plan to return to managed funds. Compare previous mentioned funds to BND for YTD and one year. 

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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors


@VA-Tech wrote:

dt,

Whether you post here or on MFO, your insight into bond fund activity is always appreciated. Your commentary is usually timely, actionable, and "believable", whether that is good or bad from a performance perspective. You also reveal what you own in real-time so there is no hiding or falsification of performance. Conversely, if I want to know what should have been owned (in hindsight), or trade funds like one changes their underwear, I can always read the other guy's self-adulation junk.


VA-Tech, thanks for posting.  I hope this thread provides some value to you in your personal investing decisions.

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Re: Bond OEF Investing for More Conservative Investors


@rhythmmethod wrote:

I understand conservative has different meaning rhythm bonds. Me, I dumped all managed FI OEF except PIGIX. I went all in for BND. Once this mess is behind us I plan to return to managed funds. Compare previous mentioned funds to BND for YTD and one year. 


I too am still holding PIGIX. My Baird holding is quite similar to the make-up of BND. Most of my other bond OEFs are short term, due to low current interest rates.

I'm not interested in bond funds, which positively correlate with the stock market.

Agree, once the market is back to its 'somewhat usual variable' behavior, I will look at managed funds. Now, I am holding onto simple broad index and aggregate funds I already hold; these and short term funds make up my bond fund holdings.

This is a good time to for due diligence for future investments.

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Re: Bond OEF Investing for More Conservative Investors

I'm a little hesitant to mention LDUR because it's an ETF, not a OEF, but it might be a short term bond alternative for those trying to avoid brokerage unavailability, transaction fees, and short term holding penalties. YTD: +2.53%, 3yr SD :0.82, 5yr SD: 1.01

Apologies if this is off topic.

 

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Explorer ○○○

Re: Bond OEF Investing for More Conservative Investors

Has anyone found muni bond funds with SD <3,duration < 5 and distribution yield > 3% (or at least > 2.7%) which have held up well in the recent market?  BTMIX (and others that have been suggested) yield <2%).  My search on Schwab has not turned up anything but maybe I missed something.  I currently hold NVHAX, which fits the bill, but it showed some cracks like other HY munis last week.

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Valued Contributor

Re: Bond OEF Investing for More Conservative Investors


@rhythmmethod wrote:

I understand conservative has different meanings regarding bonds. Me, I dumped all managed FI OEF except PIGIX. I went all in for BND. Once this mess is behind us I plan to return to managed funds. Compare previous mentioned funds to BND for YTD and one year. 


Excellent observation, especially when the Fed are telling us they are going to decrease rates + the forecast verify it (see CME 100% 0.5% cut).

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Contributor ○○○

Re: Bond OEF Investing for More Conservative Investors


@perrywinkle wrote:

Has anyone found muni bond funds with SD <3,duration < 5 and distribution yield > 3% (or at least > 2.7%) which have held up well in the recent market?  BTMIX (and others that have been suggested) yield <2%).  My search on Schwab has not turned up anything but maybe I missed something.  I currently hold NVHAX, which fits the bill, but it showed some cracks like other HY munis last week.


Have you looked at AAHMX--its SD is 1.29, duration is 2.77, TTM distribution yield is 2.75%, has held up well in the recent market? I would also mention VWAHX--SD 2.88, Duration 6.13, TTM Distribution Yield is 3.20, and it has held up well in the recent market turmoil--I know the duration is a  bit longer than your criteria but it is a well known Muni fund that is highly regarded.

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