"TooTall" <marion_blair[at]bellsouth.net> wrote
- quote -

It is from the fund profile at yahoo, denoting its goals. If
English is not your first language, try to home in on the
words "may be." I presume one will find these same words in
the fund prospectus and quite possibly at Morningstar as
well, with realistic effort. In other words, RBFFX's manager
takes risks to increase the yield from what a conventional,
intermediate term, investment grade, corporate bond fund
would provide right now.

- quote -

You were the one who stated earlier that you were talking
about "decent" "corporate bond" funds of "intermediate
term."

I have no objection if you want to point out bond/bond-type
funds that do better than investment grade, intermediate
term, corporate bond funds. But the funds you listed are not
the latter.

- quote -

The funds you cited are yielding more than, say, Vanguard's
investment grade intermediate term corp bond fund VWITX
because they are different in kind, ultimately taking on
more risk.

- quote -


We also disagree that the mechanism by which a mutual fund
is said to be laddered is the same as that of a hand picked
collection of individual bonds/CDs.

- quote -

individual bonds that paid monthly interest. <

Yea, I'm wrong about that. I've never had any that pay on a monthly
basic but you're right, there are some.

- quote -

No, that's not right. RBFFX breakdown below. This is from
Morningstar. Yahoo Finance sometimes has some inaccuracies.
Bond Quality
Government 22.9
AAA 17.6
AA 7.1
A 23.8
BBB 19.6
BB 3.0
B 4.5
Below B 1.5
Not Rated 0.0
Bond Data through 03-31-05

I don't want to go thru every one but let's not get bogged down over
this or whether it's a corporate, mortgage backed etc... There's many,
many more if you do a search.

I have both mutual funds and individuals so I don't really have a
preference but from what I'm seeing, the mutual funds are yielding
better than individuals mainly cause of bid/ask. Forget the fee to buy
them, that's nothing. Take a look at dealer cost vs retail cost (which
is what you pay)and you'll see what I'm talking about. You lose a good
.2%. We just can't buy them at the price the fund manager can. It's a
myth that you can buy bonds a $20/1000. Figure out what that .2% comes
out to at maturity. And as far as just investing in just new issues,
that's not pratical.

Also, You can buy a mutal fund yield over 5% which is already laddered.
Your laddered individual bonds will not yield 5% because you own a
bunch that are yielding much less. A fund is also a safer investment
since you have many more bonds in the fund.

"TooTall" <marion_blair[at]bellsouth.net> wrote
- quote -

Just Fidelity's own individual bond offerings indicate
otherwise. Many pay monthly. I have most certainly held
individual bonds that paid monthly interest.

- quote -


The yields are not at all necessarily higher than an
invididual bond or collection of individual bonds.

- quote -

No individual bonds never pay monthly, usually 6 months. Mutual Funds
pay monthly.

- quote -


But the Ask/Bid will be much higher for you than the fund manager.
That's one reason for the higher yields of the mutual fund.

Well I guess it would depend on which way you think yields are headed.
There's much talk of the Fed halting rate increases and if that happens
then what the next move? Down? I don't know but higher rates is not a
given?

"TooTall" <marion_blair[at]bellsouth.net> wrote
- quote -


- quote -

finance.yahoo, HIABX "may also invest up to 30% of assets in
debt of foreign issuers, 20% of assets in securities rated
in the highest category of junk bonds, 15% of assets in
preferreds, convertibles... "

- quote -

bond fund.

- quote -

Not a corporate bond fund.

- quote -

grade bond fund.

You first said, "Talking about Corporates here... The yield
on a decent intermediate term mutal funds is close to 5
1/4%." Then I asked for two intermediate, investment grade
bond funds that are currently yielding over 5%.

I guess I would say that the above might be "decent" funds
for a long term allocation plan. They certainly add an
element of diversity to just straight up investment grade
intermediate term corporate bond funds.

Here ya go.


RBFFX 5.4% Morningstar 5 Star.
HIABX, 7.75% Morningstar 5 star rated
TGLMX 5.14% Morningstar 5 star rated
ACITX 5.53% Morningstar 5 star rated
PYGNX 5.3% Morningstar 5 star rated (GNMA fund)

"TooTall" <marion_blair[at]bellsouth.net> wrote
- quote -

Bond mutual funds should permit reinvestment every month.
ISTM individual bonds pay mostly either monthly or
semi-annually.

- quote -

One may also pay $2 per $1000, secondary market, bond at
Fidelity, with a possible minimum of $20 required.

New issues at Fidelity have no commission charge.

- quote -

Name two intermediate, investment grade bond funds that are
currently yielding over 5%.

One rational argument against individual bonds is
reinvestment is more difficult. But if one only wants the
bond allocation for income, reinvestment is irrelevant.

Agree. But Do these advantages offset the stability of owning an
individual bond: Talking about Corporates here.

1. You can reinvest on a monthly basis vs by the quarter.
2. Fund managers get a much better price on bonds than we do. (you
may pay $20/bond but you are paying much higher spreads)
3. The yield on a decent intermediate term mutal funds is close to 5
1/4%. You can do that with individual bonds but you are going to have
lower quality stuff. IE;; The Auto companies.

Thoughts?

"Bucky" <uw_badgers[at]email.com> wrote
- quote -

But one has no idea "how much longer." In addition, interest
rates have been at record lows. None of us can predict the
future, but I for one do not expect the NAV of intermediate
(and longer)
term funds to go all that higher than in the last couple of
years.

So there's a degree of certainty with individual bonds,
about getting back principal, that one does not have with
bond funds right now. One knows that, if one holds a high
quality
bond to maturity, one is likely going to get all the
principal back.

- quote -

What's surprising about that? One's bond ladder should have
appreciated, too.

I don't see any kind of comparison here. To me, the question
is where are interest rates in the interest rate "cycle"
right now?

Again, bond funds and bond ladders each have their pros and
cons.

WHAT is there to choose from, in such a rogue's gallery of
intermediocrity; bond funds that cancel out half of their meagre yield
with a chronic sagging of their share value:
http://news.morningstar.com/fundReturns/FundReturns.html?category=$FOCA$CI

Is some change expected to prevent bank loan funds from being such
better performers, getting about the same yield and almost no erosion
of share value?
http://news.morningstar.com/fundReturns/FundReturns.html?category=$FOCA$BL

But looking forward, now there are clever hybrid funds like
http://finance.yahoo.com/q/pr?s=FSRRX that use strategies that would
have given over 10% returns over the last 30 years. It combines TIPS,
REITS, Bank Loans, and Commodities.

"Tess Millay" <elle_navorski[at]earthlink.net> writes:

- quote -

For all bond trades aside from Treasuries bought at auction,
a $19.95 minimum and $500 maximum charge applies (max is
reduced to $50 for securities with less than a year to go).
The per bond fees (subject to the overriding min and max) are:
Treasuries: $0.50
GSEs: $1.00
Munis: $1.50
Corps: $2.00

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

zxcvbob wrote:
- quote -

I think this was discussed last year. Even though you don't have direct
control over a bond fund of holding to maturity to get the principal
back, the fund manager will do so if they think that holding to
maturity will result in the best performance. You can indirectly "hold
a bond fund to maturity" by holding the bond fund longer.

Here's an example comparing Vanguard Intermediate (5-10 yrs) Treasury
Bond Fund to an individual bond. In Oct 98, treasury yields were at a
low. The 7 yr treasury yield was at 4.46%. In Feb 2000, yields were at
a peak. 7-yr yield was at 6.72%. No way you're going to sell early,
you're holding to maturity. Even the bond fund's total return was down
-4.6% since Oct 98. You're glad you didn't invest in the bond fund,
because you can't hold that to maturity.

Skip forward to Oct 01. 7-yr yield is back to original levels, 4.31%.
Your individual bond has yielded 14% over the past 3 years. Out of
curiosity, you check how the bond fund is doing. To your surprise, the
bond fund has returned 21.7% total over the past 3 years!

http://www.federalreserve.gov/releas..._TCMNOM_Y7.txt
http://flagship4.vanguard.com/VGApp/...BarChart=false

"Bucky" <uw_badgers[at]email.com> wrote
- quote -


- quote -

Well, no, I am willing to trade off the so-called AAA rating
of treasuries for a slightly lower rating, especially on
shorter-term bonds. (Treasuries and high grade corporates
may be extremely close at the moment. I haven't checked
recently. I am aware CDs are competing well with treasuries,
as you point out. Not sure if that's always been the case or
not, though.)

- quote -

Sure. It's a matter of taste.

- quote -


Hey now, Fidelity's current commission is $2 per secondary
market corporate bond, which are typically sold in $1000
increments. New issues are free, IIRC. (Last I heard there
was a $20 minimum for secondary bond market purchases/sales,
which maybe is to what you're referring, but I don't see
even that, at the moment, at Fidelity's site. Interested
people can check.) Its bond trading structure and fees ISTM
have changed a lot in a few years, so I can understand the
mistake.

- quote -

0.4% expense load per $10k purchase/sale of secondary market
bonds. Compare to VWITX, with a 0.14% expense load, every
year, IF VWITX is the fund you want. There certainly are
funds with higher expense ratios. VWITX is yielding a 4.24%
(marketwatch). That's going to be pretty much locked in tfor
the life of the fund.

Two-year CDs are higher now, and those are closer to short
term than long term, which is an advantage. Plus, one
doesn't lock in a yield.

I agree there are pros and cons, and they're rationally
based. So we're having this exchange... For some, a bond
ladder will be better. For others, a bond fund is better.

Bucky wrote:

- quote -


There is another consideration with corporate bonds. If the price of
your bond drops (the bond gets downgraded or the Fed raises interest
rates, or...), you have the option of holding it until maturity to get
your principal back. Bond funds do not have a maturity.

If you buy bonds at the initial offerings (not sure that's the right
terminology) you might not have to pay any commission -- the bond issuer
usually pays that commission. You only pay a commission if you buy or
sell bonds in a secondary market.

But (on the bright side) no matter what you do, you *might* get hosed.
HTH :-)

Bob

Tess Millay wrote:
- quote -

Speaking for myself, there are some disadvantages of individual bonds:

- You probably don't want to hold any individual bonds other than
treasury bonds. Otherwise, one default and you're hosed. So if you want
the higher yield with some corporate bonds mixed in, then I'd feel
safer with a bond fund.

- Bond laddering sounds good on paper, but in reality the commission
kills you. I don't know if there are cheaper ways to buy bonds on the
secondary market, but Fidelity charges $20 per transaction. If you're
doing laddering, you may be buying $1000 bonds every 6 months. $20 on a
1 yr $1000 bond is a 2% expense load!

- The only way I know of to avoid commission is to buy from treasury
auctions. But then you're constrained to buying on the auction dates.
And you won't even know the exact yield beforehand.

- If you want to store away $100 of your income each month in bonds,
then bond laddering is not cost effective or possible. On the other
hand, a bond mutual fund would allow you to do that.

- But the biggest reason against individual bonds is that the highest
CDs yield more than treasury bonds. With great sites like bankrate.com,
you can now easily find the highest CD yields. So if I wanted to
ladder, I'd do a CD ladder rather than bond.

TooTall wrote:
- quote -

Maybe I am missing something, but with the yeild curve flat or inverted
at historically pretty low levels, what is to be gained by investing in
a intermediate bond fund as compared to just buying 6 month T-bills
through Treasury Direct? Last time I checked intermediate bonds are
paying about the same as a 6 month T-bill, and no matter how low the
expense ratio is on a fund, its going to be something, which will eat
into your return. What am I missing?

Andy

What are your objections to a bond ladder, going about no
more than two or three years, with rungs six months apart?

"TooTall" <marion_blair[at]bellsouth.net> wrote
- quote -

I'm looking for some recommendations on a intermediate bond fund with
low expenses. Presently, most of my money is in Vanguard's
intermediate fund however I'm looking for some alternatives. I'm also
looking at the TCW GALILEO TOTAL Return which looked really good in 05.
thanks.