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Author: jbking 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 35442  
Subject: Re: VUSTX - IRA transfer?? Date: 12/26/2000 7:37 PM
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Well, I'd throw in some volitility measure as long-term bonds can and likely will have nasty years as if you look at 1994 or 1999 you have a -7% and -8.7% total return in those years(Data found at: http://quicktake.morningstar.com/Fund/TotalReturns.asp?Country=USA&Symbol=VUSTX) and that means you can lose money on the long-term bond as when interest rates RISE, those older bonds become worth less as newer bonds have better yields.

I'd consider the following if I wanted a bond fund in an IRA:

1) Vanguard Total Bond Market Index(VBMFX) - Simply put this holds everything in bonds and isn't that bad as a middle of the way type of fund.

2) Vanguard GNMA(VFIIX) - This is a fund that invests in mortgage-backed securities has a fairly reasonable yield and moderate risk.

3) Vanguard Inflation-protected Securities(VIPSX) - This fund invests in a bond that is indexed to inflation somewhat and may be a good choice in the long-haul.

4) Vanguard hi-yield corporate(VWEHX) - Now this is a risky bond fund and if you wanna play with some fire this may be the fund for that.

The keys on a bond fund are in my mind this: 1) Duration - Which of short, intermediate, or long-term are you looking for? The longer the duration the more principal risk you'll take better also possibly better the yield, 2) Which of Treasuries, GNMAs, or Corporates do you want in terms of type of bond? Treasuries are viewed as being risk-free, GNMAs have pre-payment risk and corporates of course have default risk, 3) Costs - How cheap or expensive is the fund?, 4) How long has the current manager been running the fund?

JB
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