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Post by Chahta on Jun 18, 2022 1:03:33 GMT
fishingrod, VGSH is currently $58.62. Did you get the wrong fund or maybe the OEF?
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Post by mozart522 on Jun 18, 2022 1:52:35 GMT
fishingrod , VGSH is currently $58.62. Did you get the wrong fund or maybe the OEF? VSBSX is the mutual fund version of VGSH and is priced in the 20's |
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Post by fishingrod on Jun 18, 2022 10:48:32 GMT
Chahta , Yes, I used the OEF share class of VGSH to look at the SEC yields.
Just for clarification.
The SEC yield DOES NOT tell a person what a fund is yielding. Unlike TTM (trailing twelve months) which can tell us what a fund HAS distributed in capital gains, interest and divis for the past 12 months or at least an average. The SEC yield is only a tool to compare funds and the assets inside the fund. SEC yield gives us a snapshot of the fund in one moment of time, and tells us what the fund WOULD yield if all of the assets(bonds) of the fund were held to maturity, and all interest reinvested for a year. This takes into acct. the over-par or under-par market price of bonds within the fund. Which will change the YTM (yield to maturity) of the bonds. It WILL NOT change the coupon yield of the existing bonds in the portfolio. The SEC yield is always 30 days behind in its' snapshot. Except for 7 day SEC yields which deal with money market funds. Of course funds do not hold all bonds to maturity, they are sold, and are always replenishing the fund with new bonds. So it is ever changing.
Using both TTM and SEC yield to evaluate funds gives one more info.
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Post by FD1000 on Jun 18, 2022 14:59:08 GMT
First, I look at previous monthly dist to see the pattern.
Second, I look at the last monthly dist.
Yahoo is an easy place to look and also see the NAV.
Last month had a big jump from 0.028 to 0.04. Let's assume 0.04 * 12 months = 0.48. Let's use NAV=59 ....(0.48 / 59) * 100 = 0.8% annually. That's the best I can get.
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Post by fishingrod on Jun 18, 2022 15:20:13 GMT
First, I look at previous monthly dist to see the pattern. Second, I look at the last monthly dist. Yahoo is an easy place to look and also see the NAV. Last month had a big jump from 0.028 to 0.04. Let's assume 0.04 * 12 months = 0.48. Let's use NAV=59 ....(0.48 / 59) * 100 = 0.8% annually. That's the best I can get. Not trying to argue but why assume .04 for 12 months. The pattern is raising rates. Do you think it is going to stay at .04?
I don't. The turnover ratio for VGSH is 66%. They are going to be rolling over bonds with higher rates to match the index.
This says nothing about total return. But it helps.
That is why shorter duration bond funds do better in rising rates, they can repopulate their portfolio faster with new higher yielding bonds.
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Post by retiredat48 on Jun 18, 2022 18:03:46 GMT
fishingrod,...who posted: "SEC yield gives us a snapshot of the fund in one moment of time, and tells us what the fund WOULD yield if all of the assets(bonds) of the fund were held to maturity, and all interest reinvested for a year. This takes into acct. the over-par or under-par market price of bonds within the fund. Which will change the YTM (yield to maturity) of the bonds. It WILL NOT change the coupon yield of the existing bonds in the portfolio. The SEC yield is always 30 days behind in its' snapshot. Except for 7 day SEC yields which deal with money market funds." Perhaps I wasn't clear enough, but what you state is precisely my understanding of SEC yield. Is it not also true that as each day marches on, the fund NAV will reflect the slowly rising bond prices as under-par bonds head towards maturity? As mark-to-market will have slow price increases as they approach maturity. The fund has to price in this increase daily...NO?? R48
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Post by fishingrod on Jun 18, 2022 18:41:26 GMT
fishingrod ,...who posted: "SEC yield gives us a snapshot of the fund in one moment of time, and tells us what the fund WOULD yield if all of the assets(bonds) of the fund were held to maturity, and all interest reinvested for a year. This takes into acct. the over-par or under-par market price of bonds within the fund. Which will change the YTM (yield to maturity) of the bonds. It WILL NOT change the coupon yield of the existing bonds in the portfolio. The SEC yield is always 30 days behind in its' snapshot. Except for 7 day SEC yields which deal with money market funds." Perhaps I wasn't clear enough, but what you state is precisely my understanding of SEC yield. Is it not also true that as each day marches on, the fund NAV will reflect the slowly rising bond prices as under-par bonds head towards maturity? As mark-to-market will have slow price increases as they approach maturity. The fund has to price in this increase daily...NO?? R48
Just giving my take also. And I know the SEC calculation is much more complicated than I stated.
yogibearbull will probably chime in and correct us both. lol
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Post by FD1000 on Jun 18, 2022 19:36:17 GMT
First, I look at previous monthly dist to see the pattern. Second, I look at the last monthly dist. Yahoo is an easy place to look and also see the NAV. Last month had a big jump from 0.028 to 0.04. Let's assume 0.04 * 12 months = 0.48. Let's use NAV=59 ....(0.48 / 59) * 100 = 0.8% annually. That's the best I can get. Not trying to argue but why assume .04 for 12 months. The pattern is raising rates. Do you think it is going to stay at .04?
I don't. The turnover ratio for VGSH is 66%. They are going to be rolling over bonds with higher rates to match the index.
This says nothing about total return. But it helps.
That is why shorter duration bond funds do better in rising rates, they can repopulate their portfolio faster with new higher yielding bonds.
Already posted about it before. We keep discussing the same. It will go up but it will not be anything close to 2.6% in the next 12 months. For that, the monthly has to increase 3 times. On the other hand, CD/Treasury already pays over 3% NOW. So, who want to use MAYBE and LOWER, while the bird in the hand is over 3%, which is what I have been saying.  |
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Post by retiredat48 on Jun 19, 2022 16:38:36 GMT
FD, I don’t think your math is quite right.
I will post more after discussing with Vanguard personnel who actually run VGSH.
R48
edit to add.
here’s my issue with the math. Let’s say a fund holds one 2yr treasury bond, 2 years to maturity, current coupon of 0.01%, divvy of 0.01%.
Rates in one day go to 3%. Bond price drops, and the SEC yield is 2.75%. Rate and bond price stays the same for next two years.
You, FD, are saying one needs to wait to two years to achieve that SEC return.
I suggest no. The bond is marked to market daily, with a slowly increasing NAV, such that the SEC yield/return is being earned each day. Sell after 60 days and you get 60/360 times 2.75%.
I’ll find out more on this topic…get Yogi here!
R48
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Post by Deleted on Jun 19, 2022 17:55:42 GMT
The weighted average coupon is 1.30%. We should not assume that the portfolio is trading daily, maturing, or replaced at higher yields. There is the friction of holding cash, expenses, and some non-bond holdings. The SEC yield is a target not a certainty.
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Post by fishingrod on Jun 19, 2022 20:56:35 GMT
VGSH may not be rebalancing every day. But with a turnover rate of 66% that means that 66% of the bonds of the portfolio are sold matured, or called every year. And VGSH holds no cash being an ETF. SEC yield is only a standard that bond funds can be compared with. It does not predict the Yield or return. It uses a YTW (yield to worst) standard in its' calculation, not YTM as I mentioned earlier. But with it going from .10% SEC yield a year ago to 2.70% now certainly gives a sense of the direction of things. Of course most of this rise in SEC yields is due to NAV movement down, but the portfolio is quickly populating the portfolio with new bonds with higher coupon rates.
Within a year and a half VGSH will have a completely different portfolio with all new holdings than it has right now.
I believe if the FED continues to raise rates then Money market cash will react quicker than any bond fund to rising rates and with no NAV loss.
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Post by FD1000 on Jun 19, 2022 21:11:23 GMT
FD, I don’t think your math is quite right. I will post more after discussing with Vanguard personnel who actually run VGSH. R48 edit to add. here’s my issue with the math. Let’s say a fund holds one 2yr treasury bond, 2 years to maturity, current coupon of 0.01%, divvy of 0.01%. Rates in one day go to 3%. Bond price drops, and the SEC yield is 2.75%. Rate and bond price stays the same for next two years. You, FD, are saying one needs to wait to two years to achieve that SEC return. I suggest no. The bond is marked to market daily, with a slowly increasing NAV, such that the SEC yield/return is being earned each day. Sell after 60 days and you get 60/360 times 2.75%. I’ll find out more on this topic…get Yogi here! R48 I never said you have to wait 2 years. I said you will not get 2.6% in the next 12 months, starting now, while you can buy a guaranteed 3+% 2 year treasury with no risk or volatility. Looks like a very simple choice. How many months it would take VGSH to triple it's monthly distributions? I don't have an idea and I doubt anybody knows. Turnover is 66 for the last 12 months. How do we know the turnover in the next 12 months? We don't. |
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Post by fishingrod on Jun 19, 2022 21:31:17 GMT
FD, I don’t think your math is quite right. I will post more after discussing with Vanguard personnel who actually run VGSH. R48 edit to add. here’s my issue with the math. Let’s say a fund holds one 2yr treasury bond, 2 years to maturity, current coupon of 0.01%, divvy of 0.01%. Rates in one day go to 3%. Bond price drops, and the SEC yield is 2.75%. Rate and bond price stays the same for next two years. You, FD, are saying one needs to wait to two years to achieve that SEC return. I suggest no. The bond is marked to market daily, with a slowly increasing NAV, such that the SEC yield/return is being earned each day. Sell after 60 days and you get 60/360 times 2.75%. I’ll find out more on this topic…get Yogi here! R48 I never said you have to wait 2 years. I said you will not get 2.6% in the next 12 months, starting now, while you can buy a guaranteed 3+% 2 year treasury with no risk or volatility. Looks like a very simple choice. How many months it would take VGSH to triple it's monthly distributions? I don't have an idea and I doubt anybody knows. Turnover is 66 for the last 12 months. How do we know the turnover in the next 12 months? We don't. VGSH is an index fund. It isn't going to change that much in its' process. It will try to mimic the index it tracks the Bloomberg Barclays U.S. Treasury 1-3 Year Index. The issuing activity of the Treasury Department ultimately determines the composition of the portfolio.
It is rebalanced monthly. It is strictly Treasuries.
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Post by fishingrod on Jun 19, 2022 22:06:44 GMT
" FD1000 ,0.8% annually. That's the best I can get." Referring to VGSH. _______________________________________________________________________________________________________________
"
Fishingrod
I don't think that it will stay at .0402 when it jumped by 43% last month alone."
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Post by mozart522 on Jun 19, 2022 22:07:25 GMT
"I never said you have to wait 2 years. I said you will not get 2.6% in the next 12 months, starting now, while you can buy a guaranteed 3+% 2 year treasury with no risk or volatility."
Well, there is the volatility of principal if you don't hold the entire 2 years, and with rates increasing, that volatility is likely downward at least in the next year or more. Selling T bonds is not as easy or clean as selling funds.
There also is opportunity risk if rates go way up.
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Post by fishingrod on Jun 19, 2022 22:13:28 GMT
It really is about willingness to compromise/acceptance with bonds, if one chooses to hold them. At least with individual bonds.
And if one wants to be a bond trader, then we better get a lot more knowledgeable about bonds than we are demonstrating in this thread.
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Post by Deleted on Jun 19, 2022 22:19:10 GMT
According to Fidelity, VGSH has 95 holdings, with Cash Equivalents of 0.20%, Govt 99.80%, and Short Position 0.23%
"ETP's Prospectus Stated Objectives:
The investment seeks to track the performance of a market-weighted Treasury index with a short-term dollar-weighted average maturity. The fund employs an indexing investment approach designed to track the performance of the Bloomberg US Treasury 1-3 Year Index. This index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected securities, floating rate securities and certain other security types), all with maturities between 1 and 3 years. At least 80% of the fund's assets will be invested in bonds included in the index."
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Post by fishingrod on Jun 19, 2022 22:35:18 GMT
According to Fidelity, VGSH has 95 holdings, with Cash Equivalents of 0.20%, Govt 99.80%, and Short Position 0.23% "ETP's Prospectus Stated Objectives: The investment seeks to track the performance of a market-weighted Treasury index with a short-term dollar-weighted average maturity. The fund employs an indexing investment approach designed to track the performance of the Bloomberg US Treasury 1-3 Year Index. This index includes fixed income securities issued by the U.S. Treasury (not including inflation-protected securities, floating rate securities and certain other security types), all with maturities between 1 and 3 years. At least 80% of the fund's assets will be invested in bonds included in the index."So VGSH has virtually no cash. And I will note that it has almost matched and only trailed its' index by roughly the expense ratio. |
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Post by fishingrod on Jun 19, 2022 23:15:12 GMT
In the past three months since the FED started raising rates VGSH has increased it payout from .0243/share to .0402/share.
I don't see how this won't keep happening. At least for a while. Wait until next month and we will see.
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Post by Deleted on Jun 19, 2022 23:26:45 GMT
VGSH YTD % change = -3.72
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Post by fishingrod on Jun 19, 2022 23:35:31 GMT
VGSH YTD % change = -3.72 Yes it is horrible.
What is worse than that is, it is down 5.56% of its' 52 week high.
Just think if you put money in at the peak thinking it would be a good cash stash. Not good, but predictable.
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Post by FD1000 on Jun 19, 2022 23:45:04 GMT
I like to make it simple which I have done thru this thread. The OP started on March 23 searching if it’s a good idea to start buying. VGSH was the chosen one. I said it was a bad idea. Since then, if you bought after 1-2-3-4-8 weeks, YOU LOST MONEY instead of MAKING MONEY. Most investors who hold stocks are looking for safer places in this bear markets. Good traders are not looking to make peanuts and gamble on maybe in 2 years, they are looking for a good entry for a much better performance. And investors who look for safe places, can use Treasuries who pay more. We have been discussing for months, an investment that can make at best 2.5% annually for 2 years, with volatility of more than 2% after supposedly lower risk, and it lost money since the OP.  BTW, I don't believe in thumb rules, they can be off, especially is risky markets. A simple chart says it all. Attachments:
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Post by fishingrod on Jun 20, 2022 0:10:36 GMT
"Lastly folks, remember the BOND RULE OF THUMB. Which is: If you buy a bond fund and hold to its duration (linked to maturity), your total return will closely approximate the starting yield, REGARDLESS OF THE DIRECTION OF INTEREST RATES. Meaning whether rates go up or down from here, ones total return will be close to 2.15%. It is like, if rates continue up, the fund buys more higher coupon bonds, offsetting the decline in bond prices; if rates go down, the bond prices go up, but one cannot buy higher coupon bonds. It all averages out!" This is a quote from retiredat48 , close to the beginning of this thread. I checked the SEC yld. back some 1.9 years ago roughly the duration of the fund VGSH. The SEC yield was around .10% almost 2 years ago. Since then(almost 2 years ago) until today the fund has a total return of roughly negative (4.04%). The rule did not work in this case.
I think it is mainly because we were starting from 0%, it has felt for so long, that the volatility was too much and broke the rule.
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Post by mozart522 on Jun 20, 2022 1:33:25 GMT
fishingrod, Agree. The rule can't work if there is a large rate increase at the end of the 2 year period as has happened now.
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Post by fishingrod on Jun 20, 2022 2:40:00 GMT
The rule also didn't work in the period of 6/2017 to 6/2019, another rough 2 year period. But this time it outperformed the rule. The SEC yield on VGSH was around 1.26% on 6/2017 and two years later, roughly the duration, the total return was 3.57%, way higher than the rule predicted. I believe the rule would work, if the price of the bonds in the portfolio, were ONLY moved by the influence of the direction of interest rates, be it up or down. But when one adds in another influence- FEAR, bonds prices move more, in both directions, whether it be the fear of rising rates or the fear of rates declining.
That is where the rule breaks down, I believe.
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Post by chang on Jun 20, 2022 12:05:06 GMT
This thread is running to 8 pages now ... what's the answer?
I am selling VEIPX in taxable and buying VDIGX in my IRA using new IRA money from a TOA. Hence, I will be freeing up some cash in my taxable.
I was planning to leave the cash as cash. Is there anything better? In my Fido taxable, I hold RPHIX. That would be my go-to alternative to cash.
TIA.
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Post by FD1000 on Jun 20, 2022 12:19:10 GMT
RPHIX is closed last time I checked. If you may need the money to buy then MM or the above are good choices. If you going to hold cash for longer term then CD/treasury.
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Post by fishingrod on Jun 20, 2022 12:46:35 GMT
I would leave cash as cash. It will be paying more any time, and won't lose anything. Vanguard MM already up to 1.19% SEC yld.
RPHIX looks like it opened.
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Post by Chahta on Jun 20, 2022 12:54:27 GMT
I year treasury ladder. 2.43% now and renew 3 mo. at 2.99% for 1 year.
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Post by mozart522 on Jun 20, 2022 13:37:38 GMT
Agree with Rod. Cash will move up within 30 days or so from any rate hike and stay there until rates come down. T-bills, 1,2 or 3 month laddered is also a good option. I'm hedging my bet and putting some in both camps. Anything longer ceases to be a cash park in my view and is a bond investment.
VGSH can work, but you time frame for getting your money back with interest is less knowable. My opinion is it is a decent option for perhaps longer term parking if one believes putting that cash to work (if the stock market turns around) is out 9 months or more.
My personal view is we will see some opportunities with rallies before the year is done, but a recession is likely in the cards after that. Some will play the rallies and some will wait until the recession ends.
Of course, all this could change with just one report; Great quarterly earnings, a 2% drop in inflation, a rise in inflation, end of the war, 3000 on the 500 index, and others.
Everyone is betting biggly now.
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