No. of Recommendations: 0
I am researching this area as a possible defense against the inevitable rise in interest rates. As part of a balanced portfolio of funds I manage on behalf of a retiree, I am concerned about the duration of one fund, namely, Vanguard Insured LT Tax Exempt. This fund has done extremely well for us but the warning signs are very clear that it's time to trim the sails on the bond funds.

I understand that high-yield corporate bonds absorb interest rate increases fairly well because their prices tend to react somewhat similarly to stocks, i.e., good economy/higher rates = higher prices and vice versa. Does the same hold true in the high-yield municipal sector? Is there an article or two that anyone can point me to?

(It probably seems counter-intuitive to consider switching from an insured to a high-yield muni fund, but this is part of a well-diversified portfolio. Besides, Vanguard is extremely conservative in their bond management so even their high-yield funds stay clear of the obviously dangerous stuff, and they fill in much of the yield gap this leaves versus the competition with their lower costs.)

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.