Manager's Bond Fund... What do we Think?
Ok, I wanted to clear my idea for my Roth 401k with the lovely and intelligent ladies of the Dollar Den before I went ahead and started investing. I found the Manager's Bond Fund http://www.managersinvest.com/mutual...bond_fund.html on Morningstar a while ago, under "funds to watch," and it looked teriffic.... I've been following it for about six months now, and I'm about to put 2500 into it. I'm so excited to be planning for my retirement- every day the news about people losing out on pensions/medical plans while they approach old age scares the hell out of me- I want to be well prepared.
So what do we think? I know mutuals often perform a bit below the general stock market, but this one looks great... and has had a 15 yr history of fairly high returns... Yet it's safe because it's a bond fund. The fund manager, Dan Fuss, also seems to know what he's doing. If there's another mutual out there that I should consider instead, please let me know... Thanks ladies!
Re: Manager's Bond Fund... What do we Think?
well, Manager's Bond Fund certainly has their hands into a little bit of everything ...
It would appear that about 1/3rd of the fund's assets are invested in US treasuries, perhaps 10% invested in gov't and corporate bonds denominated in currencies other than the US dollar, and the balance invested in a tremendously diversified mix of US corporate bonds.
from it would appear that the value of this fund has neither lost or gained much over the past 6 months, and it has paid a 4.5% dividend. Additionally some of this fund's holdings like Pulte, Wells Fargo, Toll Brothers, Colonial, HSBC etc. carry a fairly high risk of default. In point of fact, bonds are only as 'safe' as the company or gov't entity who sold them !
Beyond that, the value (i.e. market price) of bonds is inversely proportional to interest rates / inflation rate. Therefore one needs to evaluate the potential for US interest rate / inflation rate increases in the near future, and the general negative impact any increases will have on the value of bonds.
As a matter of general principle, US gov't bonds provide a low rate of return in exchange for a whole lot of safety plus the dividends are often are tax exempt. Thus putting an investment that is already tax exempt into an IRA doesn't improve the tax picture one bit, but DOES attach a lot of strings to the investment in terms of withdrawl penalties etc. You can get the safety and tax exempt dividends without strings attached simply by buying the US gov't bonds (or shares of a US gov't / state gov't bond fund like VCAIX ) and forgetting about the IRA.
Lastly, you can now get a 5.25% return on a CD which is guaranteed against loss of (principal) value. This fund provides a 4.5% return which is not guaranteed against loss of (share) value. Either can receive tax deferred status by placing them under the umbrella of an IRA.
A post script to any IRA discussion is of course the ability of the US Gov't to 'change the rules after the game has started'. There is major speculation that 'means testing' will eventually applied to Social Security benefits. Thus it is possible that IRA money that you have saved will actually cause you to lose money in terms of future Social Security checks.
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Re: Manager's Bond Fund... What do we Think?
Thank you so much for your response... I was unaware of the inverse relationship between bonds and the rate of inflation... yucky. I may very well go with a CD then, but I've read a lot about how you recommend having many CD's with consecutive rollover dates... can I find one (for under 10000) that will simply allow me to keep my $$ in it until I retire?? I could theoretically put about 3000 in there now... wish I could do the ten grand, but not right yet. Is there a good CD that I can designate a 401k with a smaller minimal deposit, or would you just recommend doing a small-cap mutual/money-market fund instead (for the 401k?)
Re: Manager's Bond Fund... What do we Think?
well, if you're looking for 'premium' interest rates on CD's, you do have to deal with a fairly high minimum buy-in. Take a look at the tiers vs minimum amounts at
As to CD maturities, it's really not a good idea to lock in interest rates / terms that span decades. After all, should US dollar inflation rates rise to 10% and US interest rates also rise to 10%, being saddled with a 6% CD would amount to a 4% LOSS every year !
At the moment, my advice would be to simply continue your normal savings plan until you have at least $5000 accumulated, so that you can take advantage of premium CD interest rates. At this point in the tax year, making a 401k contribution right now versus making the same 401k contribution in December won't make any difference in terms of income tax.
I would also be somewhat leery of going too long on the term of the CD, because US interest rates are very likely to continue moving upward in the near future. Also, be aware that these premium IRA CD's are NOT REDEEMABLE under any circumstances until they mature, meaning that signing on to a 5 year CD means that the money is absolutely untouchable for the next 5 years even if you were willing to pay early withdrawl penalties. I would also add that this particular bank also offers CD's denominated in Euros, Swiss Francs, Canadian Dollars etc. which can provide some extra earning power while the US dollar is in a downtrend.
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Re: Manager's Bond Fund... What do we Think?
Quote:
Originally Posted by
Melonie
As a matter of general principle, US gov't bonds provide a low rate of return in exchange for a whole lot of safety plus the dividends are often are tax exempt. Thus putting an investment that is already tax exempt into an IRA doesn't improve the tax picture one bit, but DOES attach a lot of strings to the investment in terms of withdrawl penalties etc. You can get the safety and tax exempt dividends without strings attached simply by buying the US gov't bonds (or shares of a US gov't / state gov't bond fund like VCAIX ) and forgetting about the IRA.
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I just wanted to highlight this because it's such an important and well made point and it could be lost within the long response
I.E DON'T invest in preferentially-tax-treated investments if you're not in a position to take advantage of the preferential tax treatment. The return you're getting on such investments are discounted against the market rate of return (taking into account the relevant risk) so if the tax advantages can't justify the investment for you it's generally a poor investment.
Personally, I don't believe in IRAs/superannuation plans, but that's a topic for another day
Re: Manager's Bond Fund... What do we Think?
^^^ as I have discussed in many other threads, I am also not a big fan of IRAs ... for the simple reason that it represents a '30 year bet' that the income tax picture and gov't retirement benefit eligibility rules which will apply when the person reaches retirement age and starts withdrawing IRA funds (and starts paying taxes on those withdrawls, and also attempts to collect gov't retirement benefits) are more favorable than they are today.
Re: Manager's Bond Fund... What do we Think?
Quote:
Originally Posted by
Embyr
Ok, I wanted to clear my idea for my Roth 401k with the lovely and intelligent ladies of the Dollar Den before I went ahead and started investing. I found the Manager's Bond Fund
http://www.managersinvest.com/mutual...bond_fund.html on Morningstar a while ago, under "funds to watch," and it looked teriffic.... I've been following it for about six months now, and I'm about to put 2500 into it. I'm so excited to be planning for my retirement- every day the news about people losing out on pensions/medical plans while they approach old age scares the hell out of me- I want to be well prepared.
So what do we think? I know mutuals often perform a bit below the general stock market, but this one looks great... and has had a 15 yr history of fairly high returns... Yet it's safe because it's a bond fund. The fund manager, Dan Fuss, also seems to know what he's doing. If there's another mutual out there that I should consider instead, please let me know... Thanks ladies!
You are young, why are you putting your Roth into a Bond fund? You have until age 59.5 to resolve losses. I wouldn't put more than 10% of your retirement into bonds unless you are very risk-averse. That is ok too. About half of mutual funds beat the "stock market index." Bond funds are not correlated to the S&P500, which most people think of when they think of a stock market index. Instead, they use somethining like the Lehman Aggregate Bond Index.
When stocks do well, bonds perform blah. When stocks are in the shitter, that blah bond performance looks pretty good. They have an inverse relationship.
There are lots of awesome mutual funds out there, but I can't make specific recomendations. Take a risk-tolerance questionnaire online so we know how risky you are willing to be for the amount of return.
Re: Manager's Bond Fund... What do we Think?
Update- (and thank you everyone for the advice) until we get a better sense of where the market is going (like, *cough* post-election, etc...) I put 2,000 in a high-yield (4.75) Capital one Money Market fund. Hell, more liquid and with better rates than some mutuals right now, and about .5 better than many cd's. I'm sure I'll find some riskier mutuals/stocks in the future, but I'm gonna wait a bit to see where everything's heading, like people are advising. ;)
Re: Manager's Bond Fund... What do we Think?
^^^ strictly my personal opinion, but I consider this to be a very smart move given the current state of the US economy / US dollar ! The only thing better that I can think of is putting the money into a money market fund denominated in a different currency than the US dollar !
Not to trend too far towards the political, but the aftereffects of the last election are starting to weigh on global economic sentiment towards the US economy (proposed tax increases, proposed tariffs, that sort of stuff) - thus for the moment the further away from the US economy / US dollar your investment is the better it will probably fare.