No. of Recommendations: 1
yobria writes,

Anyone think this is a good time to be investing in Bond Funds?

If you're retired and need principal protection plus a steady income, I'd say now is a fine time to be investing in bond funds. If you're 25, and 40 years away from retirement, I'd wouldn't find them as interesting.

Disagree with Cliff- I think bond funds are excellent vehicles for low cost, diversified fixed income exposure.


For corporate bonds, a mutual fund may be a necessary evil. But for Gov't bonds they make little sense. Here's an analysis of what you'll lose to fees in a low-cost Vanguard TIPS fund over 10 years versus just buying a 10-Year TIPS and holding to maturity.

Vanguard's TIPS bond fund has a 0.22% expense ratio.

Here's the 10-year expenses for a $100,000 investment in the 3 alternatives.

Buy one $100,000 10-Year TIPS at auction -- 10-Year expenses = $25 or less

Put $100,000 into the Vanguard TIPS fund -- 10-Year expenses = more than $2,200.

Put $100,000 into the iShares TIPS ETF fund -- 10-Year expenses = more than $2,000.

As low as Vanguard's expenses are, you still get hosed to the tune of thousands of dollars over time.


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