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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Bond NAV and derivatives Date: 4/23/2006 10:27 AM
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Here's another shrinking NAV data point. I tried the Intermediate Index Fund, because the Total Bond Fund is probably more variable with maturities. I'm also going to assume, like with a Treasury ladder, that you don't reinvest dividends, just take the dividends and spend them or save them elsewhere.

If you bought shares on the fund on 12/29/95 you would have paid $10.37. If you cashed out on 12/29/05 you would have gotten back $10.37. However, the fund yield went from 5.87% to 4.88%.

Now, there may have been some capital gains distributions, but with the index funds in particular these seem to be small. Looking at the income returns (which include compounding through reinvested dividends), the initial yield would be about the average dividend for 10 years. So with durations of around 6, I think this fund is leaking around .5% per year over 10 years compared to buying a 10 year bond at the end of '95 with a 5.87% yield.
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