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Saturday, April 11, 2009

Bob Brinker on Ginnie Mae Funds: Vanguard vs. Fidelity

Bob Brinker told a caller today he likes Vanguard's Ginnie Mae fund over Fidelity's Ginnie Mae fund. A quick comparison of the two funds (below) shows the Fund from Fidelity has done better than the fund from Vanguard over the last 1 and 3 years.

Bob told the caller he likes the fund from Vanguard due to the lower cost basis.

Both funds are actively managed. Fidelity gets away with charging more because they currently offer better performance even with the higher fees. If you go to their web sites, it looks like the two funds have quite different average maturities and durations which probably accounts for the 7.64% return for Fidelity compared to 6.96% return at Vanguard for the past year.

GNMA means Government National Mortgage Association

From Vanguard GNMA Fund Investor Shares (VFIIX Charts)
  • Seeks to provide a moderate level of current income.
  • Invests primarily in Government National Mortgage Association (”Ginnie Mae”) securities. These securities are backed by the U.S. government to provide timely payment of principal and interest.
  • Follows no specific maturity guidelines but typically maintains a dollar-weighted average maturity of 3 to 10 years.

Performance
Average annual returns—updated monthly as of 03/31/2009
Vanguard
1 Yr 3 Yr 5 Yr 10 Yr
GNMA Fund Investor Shares 6.96% 6.91% 5.27% 5.91%
Barclays US GNMA Index 7.49% 7.26% 5.50% 6.06%

VFIIX Characteristics
as of 02/28/2009:
Average maturity 2.3 years

average maturity

An average of the maturity dates for all securities in a money market or bond fund. (The maturity date is the date that a bond or money market instrument buyer will be repaid by the security's issuer.) The longer the average maturity, the more a fund's share price will move up or down in response to changes in interest rates.

Average duration 1.8 years

Fidelity Ginnie Mae Fund (FGMNX)

Expense Ratio = 0.45%

Performance:
Average Annual Total Returns (%) as of 03/31/2009

Fidelity GNMA
FGMNX

1 Year 7.64

3 Year 7.10

5 Year 5.16

10 Year 5.66


Years
Weighted Average Maturity as of 03/31/2009 4
Option Adjusted Duration as of 03/31/2009 1

Note: Performance data shown represents past performance and is no guarantee of future results. Investment return and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted.

Vangaurd Equity Index Funds::

Total Stock Market (VTSMX)
S&P500(VFINX)
Extended Market (VEXMX)

Vangaurd Fixed Income Funds:
GNMA (VFIIX)
Total Bond (VBMFX)
TIPS (VIPSX)
High-Yield/Junk Bond (VWEAX)

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