I last reported on bond ETF performance on 12/21. Here is an update on the performance of funds I follow based on Morningstar performance data.
Allocating the fixed income portion of invested assets has been a challenge for investors over the past few years and continues as rates refuse to rise in tandem with experts' expectations. Not long ago, investors could put the bulk of fixed income assets in an index fund tracking the Barclay's Aggregate Index and then go to thinking about the stock portion of assets. Not true in 2013 and still not true as we approach mid-2014.
As you can see, the returns vary widely among the different funds. Unfortunately, most 401(k)s do not offer a decent selection of bond funds - you are forced to select from a couple. On the other hand, if you have an IRA, you have the selection available below as well as many others - another reason on the side of rolling over 401(k)s.
In general, you want to limit, to the extent it makes sense, the bond exposure of your investable assets in your taxable accounts--where they will get hit with your marginal tax rate as ordinary income--and invest your bond allocation in qualified accounts like 401(k)s, 403(b)s and Roths.
The Table shows the longer duration or longer maturity funds performed best as would be expected in a declining yield environment. Spreads tightened, as shown by the better performance of corporate bond funds, including high yield, compared to Treasury bond funds. Note also the strong performance of emerging market bonds (EMB) and international in general.
The bogey in the bond market is AGG, the Barclay's Aggregate Bond Index - it is to the bond market what the S&P 500 is to stocks. Thus, the overall market has achieved a return of 3.30% to date. FLOT and BKLN are essentially money market substitutes. Their returns, therefore, although meager relative to the overall market, were quite good compared to anemic money yields.
Disclosure: this post is for educational purposes. Individuals should do their own research or consult a professional before making financial transactions.
|CSJ||0.55||1-3 YR. CORP.|
|IEI||1.90||3-7 YR. TREAS.|
|IEF||4.91||7-10 YR. TREAS.|
|IHY||3.82||INT'L. HIGH YLD.|
|BSJF||1.97||2015 HIGH YLD.|
|LQD||5.27||INVEST GRADE CORP.|
|BOND||3.53||PIMCO TOTAL RET.|
|HYS||1.89||0-5 YR. HIGH YLD.|