Bond ETF Fund Performance (Update)

A Different Kind of Bonding

I last reported on bond ETF performance on 5/23.  Here is a year-to-date update on the performance of funds I follow based on Morningstar net asset value 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 the end of 2014.

An important dynamic in today's market is the rising dollar and the lower yields globally.  For example, the yield on the 10-year German Bund is 0.85%, 143 basis points below the 2.28% yield on the 10-year U.S. Treasury!

As you can see, the returns vary widely among the different funds.  Since the last update, long duration Treasury notes and bonds have outperformed high yield instruments; and the yield curve has flattened. International bonds have not fared as well in recent markets.

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 typically have the selection available below as well as many others - another reason in favor 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 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 4.10% to date.

Disclosure:  this post is for educational purposes.  Individuals should do their own research or consult a professional before making financial transactions.

ETF	YTD RET.	DESCRIPTION
HYG	2.43	HIGH YIELD
AGG	4.10	TOTAL MARKET
SCHZ	4.14	TOTAL MARKET
MBB	4.27	MBS
CSJ	0.69	1-3 YR. CORP.
IEI	1.81	3-7 YR. TREAS.
IEF	5.64	7-10 YR. TREAS.
EMB	7.36	EMERGING MKT.
BKLN	1.18	BANK LOANS
IHY	0.79	INT'L. HIGH YLD.
PFF	11.20	PREFERRED STK.
FLOT	0.55	FLOATING RATE
BSJF	1.51	2015 HIGH YLD.
LQD	6.33	INVEST GRADE CORP.
BAB	11.58	BUILD AMER.
BOND	4.82	PIMCO TOTAL RET.
HYS	0.93	0-5 YR. HIGH YLD.
VCIT	5.93	INTERM. CORP.

Posted by Robert Wasilewski at 9:14 AM