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Author: dueyafa Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Question about Bond Funds Date: 4/21/2006 9:51 PM
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Hello to All,

I am diversifying the portfolio in my (actually my wife's), 401(k). Initially she had approx. 10% in bonds. Based on forseen economic and market indicators, I'm wondering if we should increase her bond exposure and in what funds.

These are the choices available and of course our tendency is to look at past performance and pick the bond fund with the best performance. Probably not the best idea, so I'd like some help understanding these funds in order learn and to make an educated decision about the funds available.

I've provided the profiles where available, but there were not profiles that I could find for the Lehman Brothers Aggregate Bond Index. This seems to be a standard against what others are measured...?

I would appreciate any help explaining each of these and moreso, any advice as to what choices might be best based on the forseen future, as well as whether or not to increase her weighting in bonds.

Thank you kindly,
duey
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Lehman Brothers Aggregate Bond Index
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Bond Index Fund

The Fund is invested in fixed income securities that in total approximate the price and yield performance of the market for debt securities in the U.S. as defined by the Lehman Brothers Aggregate Bond Index. The Aggregate Bond Index includes all fixed-rate U.S. dollar-denominated debt securities issued in the U.S. that are rated investment grade. Securities included in the Aggregate Bond Index also must have at least one year until maturity and an outstanding par value of at least $100 million. Fund assets are invested in a collective investment fund through Barclays Global Investors, N.A. Barclays funds use sophisticated sampling techniques to select from the Aggregate Bond Index a broad range of securities that are expected to perform very much like the full Aggregate Index. In addition, it is expected that the Trustee will hold about 1% to 2% of the Fund, on average, in short-term investments to provide liquidity for daily activity, but the percentage may be higher or lower, depending upon the expected liquidity requirements of the Fund. The value of your investment in the Fund may fluctuate with changes in interest rates or for other reasons.
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PIMCO Total Return Instl (PTTRX) - Morningstar Category Intermediate-Term Bond

PIMCO Total Return Fund seeks total return consistent with preservation of capital. The fund normally invests at least 65% of assets in debt securities, including U.S. government securities, corporate bonds, and mortgage-related securities. It may invest up to 30% of assets in securities denominated in foreign currencies. The fund may invest up to 10% of assets in high-yield securities rated B or higher. The portfolio duration generally ranges from three- to six-years.
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T. Rowe Price High-Yield (PRHYX) - Morningstar Category High Yield Bond

The investment seeks high current income; capital appreciation is a secondary consideration. The fund normally invests at least 80% of assets in high-yielding bonds and income-producing convertibles and preferred stocks. It may invest up to 20% of assets in both foreign securities and common stocks. The weighted average maturity normally ranges from six to 12 years
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PIMCO Real Return Instl (PRRIX) - Morningstar Category Inflation-Protected Bond

PIMCO Real Return Fund seeks real return consistent with preservation of capital. The fund normally invests at least 80% of assets in inflation-indexed bonds of varying maturities issued by the U.S. and non-U.S. governments, their agencies or instrumentalities, and corporations. It invests primarily in investment grade securities, but may also invest up to 10% of its total assets in high yield securities rated B or higher by Moody's or S&P or, if unrated, determined by PIMCO to be of comparable quality. The fund may also invest up to 20% of assets in securities denominated in foreign currencies. It is nondiversified.
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PIMCO Total Return III Instl (PTSAX) - Morningstar Category Intermediate-Term Bond

PIMCO Total Return III Fund seeks total return consistent with prudent social criteria. The fund invests primarily in corporate bonds, U.S. government securities, and mortgage-related securities. Portfolio duration ranges from three to six years. It may invest up to 30% of assets in foreign securities, and may invest without limit in dollar-denominated foreign securities. The fund may not invest in issuers engaged in the operation of gambling casinos, the provision of healthcare services, or the manufacture of alcohol, tobacco products, pharmaceuticals, pornography, or military equipment.
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