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Vanguard Readies ‘Ultra-Short-Term’ Bond Mutual Fund

FYI: Vanguard Group on Tuesday rolled out a low-cost, short-term bond mutual fund its says will thread the needle between safety and yield.
Regards,
Ted
http://blogs.barrons.com/focusonfunds/2015/02/10/vanguard-readies-ultra-short-term-bond-mutual-fund/tab/print/

Comments

  • edited February 2015
    "Vanguard will launch with two share classes: the “Investor” class (VUSFX) will sport of ratio of 0.2% and an initial investment of $3,000; Vanguard’s “Admiral” share class (VUSFX) will carry a 0.12% expense ratio and a minimum investment of $50,000."
    -

    Interesting. Price came out with same concept two-three years ago. I own TRBUX and was surprised to see tonight that its ER Is only .35%. Vanguard wins on cost - but not by much.

    Minimums appear similar. At Price it's $2500 for a regular account and $1,000 for an IRA.

    I realize folks won't be pounding a path in the ground racing to get into these things at current rates. Currently, TRBUX yields only slightly more than a money market fund - or effectively nothing.

  • edited February 2015
    Fidelity has had this one, FCONX since March of 2011 (when interest rates were going to increase :) ); but it is too expensive at .40 ER, which wipes out the yield currently at, .20%, 30 day SEC yield.
    Negative cash flow like some of the central banks, eh?

    Fido fund view link
  • Is there that much benefit on holding these funds once you account for the ER over a money market fund? As mentioned already, the expense ratio eats up any interest/gains.
  • edited February 2015
    @Catch

    TRBUX actually returned .51% to investors over the past year.
    The .35% ER is the result of a fee waiver. Otherwise, it would be .49%

    Since the one year "yield" is posted as .66%, I'm not sure how they managed to return that .51% after expenses. Magic? Or perhaps a bit of capital appreciation.

    By contrast, their Prime Reserve money market fund returned only .01% to investors over the past year,

    I see two reasons for these funds coming out at this time.

    First, they may forsee a rising rate environment (which Catch alludes to) in which even short-term bond funds will experience the size losses that conservative investors won't want to bear. Such an environment is, of course, alien to anyone under the age of 40 or 45.

    Second, they want to gain experience running what is essentially a floating NAV money market fund, as the SEC has been pushing them to move in this direction with their traditional money market funds.





  • IMHO...As rates adjust (when this happens is the key) these funds will not provide adequate downside protection. Instead, hold a good multi-sector bond fund and focus on other opportunities as they arise.
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