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Yes, Bogle is winning a lot of people over to his viewpoint. And in a year like 2014, active funds are generally doing very poorly in relation to index funds. Something like 30% of all fund assets are now indexed [?or is that 30% of all stock market assets, don't recall], compared to hardly anything in the 1990's. When you can get a fund like VTI at 5 basis points expense ratio, it's hard to beat. The Admiral shares of the same fund also have a 5 basis points expense ratio. Buffett is a big fan of the Vanguard S&P 500 index fund.That is the argument of indexers. It is indeed hard to find active fund managers who can beat the index over long term.
Charles I think those -50% one day losses we saw yesterday on Fannie and Freddie could just as easily be +50% and much more one day gains if the courts change their mind and rule in favor of shareholders. The stock prices on those seem to be 100% tied to court and government decisions about Fannie and Freddie. The stocks could really go thru the roof if the decision is made to return the companies to shareholders and allowed to funnel their profits to them.Something tells me this one headed to Supreme Court.
Taking the second question first, since it's easier to explain - defaults can change the NAV. Just think Reserve Fund. Its Lehman bonds defaulted, and the NAV of this MMF dropped immediately (broke a buck). That's because the bonds became worth pennies on the dollar, and the interest rate on the bonds fell (not rose) to zero - all money that the bond holders got was repayment of principal - no interest.it wasn't... bond funds accrue daily dividends in their NAV, not like stock funds.
@fundalarm and other MFOers, in that case, the daily dividends increase the NAV?
Take a fund like the Vanguard Total Bond Market Index fund, what can change the NAV besides interest rates going up or down? [note: supply/demand will change bond prices, but that will raise or lower interest rates/yields on those bonds]
I am hoping I have to pay off my wager to you if Treasuries close at 2%. A narrowing channel? With new YTD highs on multiple occasions recently in EIHYX/ABTYX/NHMRX among others? As for "staying too long, ya know" you obviously haven't a clue how I trade/invest as I never ever overstay a position when the tide turns as dictated by price. I will be gone before these things react by 1.25% to 1.50% maybe even less. EIHYX hasn't so much had even a 1% decline YTD on its march higher. Big price declines begin by small price declines. I fall in love with nothing in this "fickle" game, least of all my opinions. At the beginning of the year I was looking for rising rates and thought the place to be was floating rate/ bank loan funds@Junkster
Yeah, well, mind that channel. Last time I took a glance, it was narrowing (or is it? it's hard to tell). :)
Junk munis a fickle lover be.
The lack of attractive alternatives could dupe you into staying too long, ya know?
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