UnThreaded | Threaded | Whole Thread (21) | Ignore Thread Prev | Next
Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Re: Bonds vs Bond Funds--Again Date: 12/31/2009 1:06 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 6
The more you trade, the more you lose.

The more you trade the more expenses you generate. If one can overcome the friction costs, and not everyone can, trade away. Wal-Mart makes its money on very low margins with exceedingly high turnover. Fast Food stores are built on a similar model. It is one of many valid business plans and one that may not work for many people because they are time intensive models.

what does a bond hyper-trader like Junkie's TOR look like
Less than BND if you read what he has posted. Primarily because Charlie tends to buy long on the maturity date, when he can, and he holds to maturity, he isn't a trader he is a buyer. By holding bonds directly he creates an income stream that can be reinvested much as many reinvest dividends in their funds; purchases made from that income stream are not part of a portfolios turn over.

BND's is following an index which is a thermometer for that market segment, it adjusts to paint the picture of that market segment. When the index adjusts, the fund follows creating turn over. Certainly some bonds held in the fund may mature but I read in their strategy that they don't hold many bonds under 1 year in maturity. In reality that turn over rate is mostly noise to the holder of the fund, the expense ratio - the cost of the TOR is far more important.

The Barclays index that this fund follows has a 10 year return of 6.45% a nice and reasonable bull run. The fund has an expense ratio of .14%. 6.45 - .14 = 6.31%. If I can build a portfolio with an "expense ratio" of .5% and generate a return of 7% or better I'm ahead. I only need to win by 55 basis points. We can agree to disagree on how plausible that is which does not change the math.

jack
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (21) | Ignore Thread Prev | Next

Announcements

Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Managing Your Wealth
Our own TMFHockeypop from Rule Your Retirement fame on the TV show Managing Your Wealth.
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.
Post of the Day:
Apple

The Saddest Place on iPhone Day
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! 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.
Advertisement