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I have used this category of fund for a number of purposes. Historically, funds like these (government back mortgage securities) have had very little downside risk and provide a nice dividend that, when reinvested, creates a very pretty investment picture..chart...checkout your funds 25 year chart results.
My concern is how well will funds like these do as interest rates reverse and rise.
Strategies:
In a trend following strategy one could pair a fund like FGMNX with a more aggressive fund(s) allocating more into the aggressive fund(s) in a positive trending market and back out (return to FGMNX) when the aggressive fund underperformed. Also, one could use FGMNX as the signal to buy and sell the more aggressive fund. Usually a 6-12 month chart will provide the trend (up or down) and a 1-3 month chart would provide the timing signal of when you would buy or sell. Use the link above and chart FGMNX with one of your favorite more aggressive funds. Add your fund into the compare box. Set the time frame to 6 months or 1 year to get the trend. Set the chart to 1-3 month to get the timing.
Finally, in a long term trending market or in a buy and hold strategy reallocating over decades would have an aging investor moving a greater percentage into conservative holding such as FGMNX and others.
Hopefully Catch and others will chime in here with additional thoughts.
I would not consider this fund as a stupid choice related to conservative bond funds and it has a decent near term and longer term record. I would find this fund to be a nice add to other bond area holdings; but it is a narrow sector, yes? This is only, of course; my preference as how to mix and match funds in various sectors. Our house has considered this or a similar fund with our other bond funds; but if we had a bond fund to choose; without many other supporting bond funds, we would likely opt for a total/strategic type bond fund for a core. One such Fido offering is their FTBFX. It has the flex to move around in bond sectors and does include some GNMA holdings. With your current holding of EM bonds and then adding another narrow sector without a more broad based bond fund; would not be my recommendation. I would still prefer the broad based bond fund and then add other sectors as one may see appropriate.
I like GNMA funds. I've been in VFIJX, Vanguard's version, since 2008, and DCA in every month. I like the fact that in a "bad" year (when interest rates rise, such as 1994), GNMA funds will go flat, or perhaps a tiny loss, but you won't lose you shirt; rarely will they have a negative year. And usually the following year makes up for lost time. Their returns, based on government-guaranteed mortgage bonds, are as good as a broad-based bond market fund, such as VBMFX Vanguard Bond Market. I don't see any sharp rise in interest rates soon, knock on wood.
All of your thoughts are very helpful in evaluating this fund for my situation. I like the government guarantee, but it is a narrow moat, yes. I'm still leaning toward DODIX, but can't stop looking and gathering all the new information I can. DODIX has a great long-term reputation, but is it not bloated? It's holding $24 BILLION? That's a ton of money!
Max -- don't do sector funds. for your portfolio, which one might confuse with an emerging market allocation of a more diversified asset allocation, you need something little correlated with equities. May i suggest, GULP, something that has a dose of treasurys? or, better yet, some TIPS? also, you seem to get hangup on recent performance on all of your choices. I again suggest that you spend an hour or two with the professional.
...."May i suggest, GULP, something that has a dose of treasurys? or, better yet, some TIPS?"
I will suspect there may be a few folks here who feel I may have tripped, fallen down and banged my head too hard......the bond thing in this current market condition.
GULPING is allowed and healthy when one is an investor, yes?
Our house will stay and play in the fields of bonds, until they show us it is time to leave.
Good conversation. What about my DODIX question, though? It's intermediate-term, big, established, broad, core, conservative, prudent. But is it not also already bloated?
Per the prospectus: " PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a diversified portfolio of high-quality bonds and other fixed income securities. At least 65% of the Fund’s total assets will be invested in U.S. government obligations, mortgage and asset-backed securities, corporate and municipal bonds, collateralized mortgage obligations (CMOs), and other fixed income securities rated A or better by either Standard & Poor’s Ratings Group (S&P), Fitch Ratings (Fitch), or Moody’s Investors Service (Moody’s), or equivalently rated by any other nationally recognized statistical rating organization (NRSRO). Up to 20% of the Fund’s total assets may be invested in below investment-grade fixed income securities, commonly referred to as high-yield or “junk” bonds, if they have a minimum rating of B by Moody’s, Fitch, or S&P, are equivalently rated by any NRSRO, or, if unrated, are deemed to be of similar quality by Dodge & Cox.
The proportions held in the various fixed income securities will be revised in light of Dodge & Cox’s appraisal of the economy, the relative yields of securities in the various market sectors, the investment prospects for issuers, and other factors. In selecting securities, Dodge & Cox considers many factors, including yield-to-maturity, quality, liquidity, call risk, current yield, and capital appreciation potential."
Also indicated is up to 20% may be invested in high yield bonds.
As to bloat, well; I guess that is all relative. PTTRX is at $244 billion.
DODIX returns are not out of line from what I peeked, and is similar to PTTRX. Also, if I recall properly, the fund held up well in 2008.
So, what do you think about this fund, and what drew your attention?
Beautiful. Then I'm "sold." Thanks, Catch, Fundalarm, Maurice, Randynevin and bee. Catch, what attracted me to DODIX is its pedigree, reputation, performance and history. I don't want a fund manager or managers who are trying to "shoot the moon." This one is ESTABLISHED and RELIABLE and will balance-out my riskier PREMX. Thanks for your interest, everyone. In July, 2013, a single bond I bought in '03 will mature at a face value of $6,000.00 and that will NOT be going anywhere speculative or specialized. By THEN, my holdings will have been added to and the face of things will look less edgy and risky. For the time being, I'm satisfied with where I'm at, and I can recall the reasons why my holdings look the way they do at present. And the Pfizer stock? "Thank you, auntie!"
It could be that GNMA funds will continue to do well. We have followed Federated GNMA for more than 15 years, and it has been a decent place to have some dollars. At some point, however, the 30-year bull market for bonds will end. I don't know when, nor does anyone else. When that occurs, it could be prudent to have some diversification. So other relative short-duration funds, or funds that can adjust their models, could be options. FGMAX has a duration of 2.5, which is lower than average. Others that might fit this mold, and still have decent yields, are ESIIX, EILDX, BSIIX, OSTIX, GSZIX, IVSYX, and a few others. Just some thoughts.
Reply to @MaxBialystock: My I suggest BND or VBMFX. AGG, SCHZ or FBIDX are alternates. The plain old bond index has done much better than the majority of managers over time. DODIX has done well as well but index did better when it mattered most and is less correlated with equities.
I like GNMA's for their safety. I have USGNX, but at the end of the month they are changing to be a Government bond fund instead of just GNMA's. Actually government bond funds are a slightly less narrow sleeve than GNMA's. Something like SNGVX could be nice. It holds a bunch of GNMA's, but also has others - Fannie, Freddie, etc
Of the ones mentioned I think DODIX and OSTIX are solid choices. OSTIX is a little quirky, but that's what makes it good - short term high yield to spice things up.
Comments
I have used this category of fund for a number of purposes. Historically, funds like these (government back mortgage securities) have had very little downside risk and provide a nice dividend that, when reinvested, creates a very pretty investment picture..chart...checkout your funds 25 year chart results.
(you may have to click Maximum to see it in a 25 year time frame)
http://quote.morningstar.com/fund/chart.aspx?t=FGMNX®ion=USA&culture=en-US
My concern is how well will funds like these do as interest rates reverse and rise.
Strategies:
In a trend following strategy one could pair a fund like FGMNX with a more aggressive fund(s) allocating more into the aggressive fund(s) in a positive trending market and back out (return to FGMNX) when the aggressive fund underperformed. Also, one could use FGMNX as the signal to buy and sell the more aggressive fund. Usually a 6-12 month chart will provide the trend (up or down) and a 1-3 month chart would provide the timing signal of when you would buy or sell. Use the link above and chart FGMNX with one of your favorite more aggressive funds. Add your fund into the compare box. Set the time frame to 6 months or 1 year to get the trend. Set the chart to 1-3 month to get the timing.
Finally, in a long term trending market or in a buy and hold strategy reallocating over decades would have an aging investor moving a greater percentage into conservative holding such as FGMNX and others.
Hopefully Catch and others will chime in here with additional thoughts.
I would not consider this fund as a stupid choice related to conservative bond funds and it has a decent near term and longer term record. I would find this fund to be a nice add to other bond area holdings; but it is a narrow sector, yes?
This is only, of course; my preference as how to mix and match funds in various sectors.
Our house has considered this or a similar fund with our other bond funds; but if we had a bond fund to choose; without many other supporting bond funds, we would likely opt for a total/strategic type bond fund for a core. One such Fido offering is their FTBFX. It has the flex to move around in bond sectors and does include some GNMA holdings.
With your current holding of EM bonds and then adding another narrow sector without a more broad based bond fund; would not be my recommendation. I would still prefer the broad based bond fund and then add other sectors as one may see appropriate.
Lastly, FGMNX is not a stupid or bad choice.
Me 2 cents worth.
Catch
...."May i suggest, GULP, something that has a dose of treasurys? or, better yet, some TIPS?"
I will suspect there may be a few folks here who feel I may have tripped, fallen down and banged my head too hard......the bond thing in this current market condition.
GULPING is allowed and healthy when one is an investor, yes?
Our house will stay and play in the fields of bonds, until they show us it is time to leave.
Take care of you and yours,
Mark
Per the prospectus: " PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a diversified portfolio of high-quality bonds and other fixed income securities. At least 65% of the Fund’s total assets will be invested in U.S. government obligations, mortgage and asset-backed securities, corporate and municipal bonds, collateralized mortgage obligations (CMOs), and other fixed income securities rated A or better by either Standard & Poor’s Ratings Group (S&P), Fitch Ratings (Fitch), or Moody’s Investors Service (Moody’s), or equivalently rated by any other nationally recognized statistical rating organization (NRSRO). Up to 20% of the Fund’s total assets may be invested in below investment-grade fixed income securities, commonly referred to as high-yield or “junk” bonds, if they have a minimum rating of B by Moody’s, Fitch, or S&P, are equivalently rated by any NRSRO, or, if unrated, are deemed to be of similar quality by Dodge & Cox.
The proportions held in the various fixed income securities will be revised in light of Dodge & Cox’s appraisal of the economy, the relative yields of securities in the various market sectors, the investment prospects for issuers, and other factors. In selecting securities, Dodge & Cox considers many factors, including yield-to-maturity, quality, liquidity, call risk, current yield, and capital appreciation potential."
Also indicated is up to 20% may be invested in high yield bonds.
As to bloat, well; I guess that is all relative. PTTRX is at $244 billion.
DODIX returns are not out of line from what I peeked, and is similar to PTTRX. Also, if I recall properly, the fund held up well in 2008.
So, what do you think about this fund, and what drew your attention?
Gotta run.....
Catch
Of the ones mentioned I think DODIX and OSTIX are solid choices. OSTIX is a little quirky, but that's what makes it good - short term high yield to spice things up.