No. of Recommendations: 0
here is a fundamental difference in the holdings between the 2 funds.

PTTRX has > 80% in cash and has lower % holdings of Mortgage Pass Thru (dont understand what it is). PTTRX also has higher overall average yield and lower duration compared to FGOVX.

seeems like PTTRX is a safer bond with higher return due to the amount of cash holdings. is there any tradeoff i am missing ?

ofcourse the reason for higher yield with PTTRX is higher average maturity compared with FGOVX and lower exposure to treasuries.

do i need to be worried about exposure to mortgage pass thrus ? I am worried about exposure to Mortgage backed Securities (MBS) due to the current financial crisis.

We're all worried about mortgage securities. You would need to investigate a lot more closely (i.e., detailed, up to date, holdings list) to see what they have. In principle, the Fidelity fund should only hold ones now explicitly guaranteed by the government. I don't know about Pimco.

Overall, the Pimco fund is market timing. If they time it well, they will be not only safer, but a much better return. If they time it wrong, not a good place to be. (Today, apparently, a lot of market timers guessed wrong about Fed action and Treasury prices fell a lot.)

With the Fidelity fund, it is easier to make an educated guess about what will happen. If it were a strict Treasury fund (Vanguard has one) with that duration and Treasury yields went up to something around historical averages by time you sold your shares, you'd be look at at about a 10% loss on share price (NAV). So, presuming money market rates go back up fairly soon, you'd probably be better off in 5 years keeping the money in a money market. (Of course, if interest rates stay low, my educated guess will be wrong, as will Pimco's.)
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.