Fixed income investing

motmot

Asking this question under two hats, one personal and the other for a non-profit organization. We both have had investments in Certificates of Deposit that have/will mature in the coming months. The question is what do we do with the available cash going forward as the interest returns on the CDs are next to nothing. Fiduciary concerns with the non-profit make investments in equity/bond funds a touchy issue, though on a personal level that is not a particular concern. My wife and I are well into our retirement years with an adequate pension and social security and willing to undertake some risk on future investments, though the current investment climate suggests staying in cash until we see what happens in the next three months or so. Your collective comments and suggestions are most welcome (from a long time reader of the MFO discussions). Thanks.

Mark

Check out the seekingalpha link provided by davfor in this earlier MFO discussion thread.

davfor said:

Lipper categories with low risk and moderate to high yields are listed. Top-ranked funds within the categories are listed.

Over a thousand funds are ranked using Mutual Fund Observer Screens based on risk, risk-adjusted returns, quality, momentum and yield.

Top-ranked funds from Charles Schwab, Fidelity, and Vanguard are listed as well as other mutual fund families, exchange traded funds and closed end funds.

Funds with low risk and yields above 2% are highlighted.

https://seekingalpha.com/article/4378592-seeking-yield-safety

davidrmoran

@msf and some others including FD1k have posted solid thoughts about this area, the former in particular giving lists of current CD links and similar

BUT ... if you really have enough for current cashflow (plus some years of equivalent savings, or maybe that is taken into account), then I would do what I am doing, so to speak: wait for future dips and DCA back into all equities.

I intend to do VONE and CAPE 40-40 w some aggressive Akres ETFs, and pray that the overpriced market does not simply keep chugging upward ...
(I ruled out VONG, since as everyone knows the tech big six have carried the day for this year and longer)

If my take is too rich, then DCA into VLAAX, VALIX, JABAX, and/or FPURX.

WABAC

There are ESG style bond funds that might be more acceptable to your non-profit. TIAA-CREF has at least one. Parnassus has one. There are probably others.

It really depends on how much risk your non-profit wants to take. What the money is being set aside for. Under what conditions would your org need to get its hands on the money to spend. What happens if the bond fund has lost value due to whatever?

Crash

two hats, one personal and the other for a non-profit organization..Fiduciary concerns with the non-profit.....

In an ideal world, you'd be able to get at least decent returns on CDs and bond funds. I too have researched VLAAX and think that's a great choice. Both stocks and bonds in that one. I understand the hesitancy about putting non-profit money into the Market. And there are no gov't guarantees. I'm thinking that you might need to be concerned more about either growth or yield. Or maybe you'd be happy with middling performance in both respects? DODIX comes to mind. Rock solid, over decades. Having a good year in 2020, if that's any kind of indicator. Its portfolio (per Morningstar) is about 90% investment-grade paper. Another hybrid which has not yet been mentioned is BRUFX. Only 15% turnover there. (PRWCX is closed.)

Graust

An aside @davidrmoran ....what are “some aggressive Akres ETFs”? Thanks

catch22

@Crash
You noted: In an ideal world, you'd be able to get at least decent returns on CDs and bond funds.

Four decent bond etf's/fund, BAGIX being active managed.

--- FBND, Fido Total Bd., Credit Qual. = AAA-BBB, E.R. = .36%. YTD = +7.98%

--- AGG, I shares U.S. Aggregate, Credit Qual. = AAA-BBB, E.R. = .04%. YTD = +6.73%

--- BND, Vang. Total Bd., Credit Qual. = AAA-BBB, E.R. = .035%. YTD = +6.86%

--- BAGIX, Baird Aggregate, Credit Qual. = AAA-BBB, E.R. = .30%. YTD = +7.57%

If one chooses to not be a short term trader, the above 4 cruise along. Not unlike most bonds, if interest rates have a reason to travel higher for a sustained period, then the price performance will begin to suffer.
Otherwise, @Crash , I don't know what else you would want to discover for performance, from a fairly stable grouping of bonds.

davidrmoran

Graust said:

An aside @davidrmoran ....what are “some aggressive Akres ETFs”? Thanks

apologies for totally spazzing in senile elderly style

ARK is what I meant

https://ark-funds.com/

I have been analyzing k/q/w, less g and f

again, sorry

much written up here and in the monthly discussion

Graust

Thank you! I didn’t think they “ETFified” AKREX haha.

And thanks to you for bringing up the Vanguard Russel 1K ETFs....I hadn’t known of their existence before.

I own ARKK and ARKF (the latter bc I think disruption in financial industry is well underway, but in early innings) in small pieces.....but I try to add to it on drops in the NASDAQ.

Sorry for the “far afield”!

linter

i bought one share each of all the ARK funds, just for the hell of it, in a zero commission world, about three months ago. obviously, i wish i'd put lots more into them. lots and lots more.

wxman123

Just mentioned in another thread, TCW Total Return Bond Fund. Turns out Gundlach did not bottle that secret sauce. 20 years of positive returns.

davidrmoran

Why would you choose this over say BIV? or the more volatile FTBFX?

Gary1952

motmot said:

Asking this question under two hats, one personal and the other for a non-profit organization. We both have had investments in Certificates of Deposit that have/will mature in the coming months. The question is what do we do with the available cash going forward as the interest returns on the CDs are next to nothing. Fiduciary concerns with the non-profit make investments in equity/bond funds a touchy issue, though on a personal level that is not a particular concern. My wife and I are well into our retirement years with an adequate pension and social security and willing to undertake some risk on future investments, though the current investment climate suggests staying in cash until we see what happens in the next three months or so. Your collective comments and suggestions are most welcome (from a long time reader of the MFO discussions). Thanks.

I would suggest some should be in short term bonds like BSV or SWSBX.

wxman123

davidrmoran said:

Why would you choose this over say BIV? or the more volatile FTBFX?

Plug the symbols into Portfolio Visualizer and you'll see why. Not only does TCW have the best returns dating back to 2007 (with no down years) but lowest SD and highest Sharp. It's not even really close.

bee

For people playing at home TCW Total Return Bond Fund ticker is TGMNX (TGLMX) and Portfolio Visualizer can be accessed here:

https://portfoliovisualizer.com/backtest-portfolio

davidrmoran

wxman123 said:

davidrmoran said:

Why would you choose this over say BIV? or the more volatile FTBFX?

Plug the symbols into Portfolio Visualizer and you'll see why. Not only does TCW have the best returns dating back to 2007 (with no down years) but lowest SD and highest Sharp. It's not even really close.

Huh? Do you also graph them $10k growth for 10-9-8-7-6-5-4-3-2-1y-ytd? That's the first thing I do.

From 8y on in, the other two match or much more often outperform TGMLX, except for ytd.

Same 4* rating as Fido bond too.

TGMLX has rather nicer behavior last March, but that's it.

Check it out:
http://quotes.morningstar.com/chart/fund/chart.action?t=TGLMX

So I was just asking what the compelling argument is.

Good outperformance by it 2007-2011, yes. A long time ago.

wxman123

Yes, I go back as far back as PV allows, to fund inception if possible. This is extremely relevant absent a change in how the fund operates over that period. How funds perform in Black Swan events (like '08 and Covid) is as and maybe more important then everything else. Just look at IOFAX, years of gains wiped out in a few sessions. So, yes, back to inception matters particularly if you go back to '08. Scroll down to the drawdowns on PV and you'll see...TCW has the lowest drawdowns, and overtime losing less matters, quite a lot. As I noted elsewhere, I'm a big fan of BIV (and BSV) but active management and portfolio mix can add value over a long period of time. TCW and Metwest Total Return share similar mngt yet the securitized portion of the market that TCW focused on back to Gundlach has paid off big in sell offs.