Ask Rande

Top 1709. Aug 10, 1999 6:49 AM

» KirkL - IF you think the GNMA noise is telling, just think how loud the

IF you think the GNMA noise is telling, just think how loud the sounds from the Internet "investers" must be now that they found INVESTING doesn't mean toss some money at a stock and get a bunch more back a few months later!

I feel good about this group here as they seem very sophisticated and have not complained but have been looking to see if it is time to buy more or wait and see. Me, I'm still on cloud-9 with YTD gains of about 20% with my 80:20ish portfolio but feeling pretty silly over some recent purchases that prove how easy it is to be wrong on individual issues!

I must admit that the GNMA investment I made last fall....I didn't really think about it much and probably should have put half in MM Funds so I could buy on dips or DCA in the fairly large sum I had, but I did know it was a bond - I just didn't think interest rates would go so high. My suspicion is many complainers are in the same boat - just didn't think it through. Oh well...Now might be an opportunity to switch to a longer term bond and get higher capital gains if rates go the other way.

-- posted by KirkL

Top 1710. Aug 10, 1999 8:34 AM

» tele - GNMA Complainers

Actually many of them may have a point as BB has constantly hammered home the point that GNMAs yield more than treasuries, but are only have as volatile. They certainly do yield more, but we are in a period where GNMAs (and all other fixed income instruments) seem to be vastly more volatile (on the downside) than treasuries. I remember posting a question a few months back asking what could cause GNMAs to tank compared to trasuries (the specific question was comparing VBMFX to VFIIX) and nobody knew (or care) to answer. A lot of people probably put money into VFIIX or comparable funds based on what they hear BB say. Well you pays your money and you takes your chances. I keep thinking rates are about as high as they're gonna get, but my memory may be to short. Mortgage on my first house bought in 1985 was 12 pct (variable) so maybe they could move up quite a bit more.

BTW check out the latest issue of Wired for the bullish case on the next 20-30 years if you need some cheering up.

-- posted by tele

Chart comparing VBMFX, VFIIX & FTHRX

Top 1711. Aug 10, 1999 8:47 AM

» KirkL - The Data says.

The Data says....

I did look at this a bit before buying where I compared Fidelities Intermediate Term Bond fund...

The HARD part in doing comparisons with charts as they don't show the dividends.

My more recent conclusion for GNMA funds is they pay a bit more return for a given term and interest rate, but they suffer from more risk to being paid off early (similar to being CALLED if you buy individual bonds).

-- posted by KirkL

Top 1712. Aug 10, 1999 8:53 AM

» tele - Sorry About My Spelling

Just another product of the California educational system (g).

-- posted by tele

Top 1713. Aug 10, 1999 8:54 AM

» RandeS - GNMA fund at Vanguard is a great fund for fixed income investing

GNMA fund at Vanguard is a great fund for fixed income investing over the long term. The problem arises when the focus is on the short term -- buyer's remorse, etc. Best thing to do is focus on the fact that reinvested dividends are purchasing shares at a lower cost in the near term, and the long term purpose of the fund, which is relative stability and decent current income over time.

-- posted by RandeS

Top 1714. Aug 10, 1999 10:13 AM

» GoodGuy - GNMA

As Rande said these folks who have been getting nervous about GNMA dropping a few percent points did not belong in here anyway.

As far as I am concerned, I was never convinced when Bob was asking people to lumpsum money into GNMAs as an outright buy.

I needed to invest some money into Bonds portion of my allocation. At the same time I was not comfortable doing so when interest rates were at their lowest. So I was waiting patiently for market to come back to me. I did nibble onto some GNMAs (VFIIX) by DCAing. Last time end of June when rates went up in the 6.15 range I did some significant buy in GNMA. I am down from that point but not worrying a v-bit. After all this portion is meant to be allocated to Bonds which are not CDs and are bound to fluctuate in price. No risk, no riward.

Speaking for myself I feel this is an opportunity offered by the investment gods to get the allocated money in bonds which was patiently waiting on sidelines for this very situation.

-GG

-- posted by GoodGuy

Top 1715. Aug 10, 1999 12:01 PM

» RandeS - An hour left.

An hour left. Personally, decided to go with the long target maturity fund in the IRA today, switching out of short-term bond funds. Trigger pulled at 6.25%, as stated would likely do some time ago. Make your own call for your own reasons.

-- posted by RandeS

Top 1716. Aug 10, 1999 12:56 PM

» GoodGuy - Good Move Hopefully

Hi Rande,

I pulled the trigger too.

For information in general -

BTW in case you are using Schwab hope you pulled the trigger before 11:00 AM PST to get in today. BTTRX has a cut off time at 11:00 AM PST. Else your order will get a NAV of next day.

- GG

-- posted by GoodGuy

Top 1717. Aug 10, 1999 1:06 PM

» KirkL - Good Moves GG and Rande, hopefully.

Good Moves GG and Rande, hopefully.

All that research yesterday, and Fidelity wouldn't let me exchange directly from a their fund into BTTRX!!! I didn't want to go to cash so my IRA sits where it is. They really don't want short term trades, eh?

I did pull the trigger with the cash I got from selling some HWP at ~ $114 recently (now at $106 7/8) and stuck that into a GNMA fund. Sure is nice to sell into strength and buy on weakness... Lets just hope today was a good weakness day. Might do some more as this was just a small move today. CASH was to spend or buy bonds to generate income so I feel good whatever happens.

Thanks HP for the new airconditioner and furnace and some nice, shinny new GNMA shares!

-- posted by KirkL