I am curious about this thinking, as this is something I am also considering.We don’t do corporate bonds as we take corporate risk on our the stock side of our portfolio.
VG rates the Short Term Treasury Index Fund (VSBSX/VGSH), comprised of 100% Treasuries, at a risk level of 1. It also rates my Short Term Investment Grade fund (VFSUX), comprised of 8% Treasuries, at a risk level of 1. The Treasury fund has 10-year returns of 0.99% and an SEC yield (best estimate of future return) of 4.88%. The IG fund has 10-year returns of 1.89% and an SEC yield of 5.21%.
As a retired investor, I would prefer my bond funds to have the highest risk adjusted return. Based on VG's rating, that would seem to be the IG fund.
Over the long run, why would would you avoid IG corporate bonds, and therefore give up this return difference? What scenario could you envision where holding the Treasury fund would provide a better long-term return than the IG fund?
Statistics: Posted by Ferd Burfel — Mon Jun 10, 2024 3:34 am — Replies 17 — Views 1953