As for GNMAs, Bob said he still recommends Vanguard's GNMA fund (Ticker VFIIX - VFIIX charts). Bob said he is still looking at the Vanguard GNMA fund trading between $9.50 and $10.50 which he says is no change in his outlook. He said if you are fine with that range and can accept the NAV variation, then he recommends holding.
Kirk's Comment: VFIIX closed at $10.54 Friday, down from its recent high of $10.72. It seems rather sloppy that Brinker has not adjusted his standard GNMA reply to reflect this new data above $10.50.
This chart shows VFIIX over the last six months clearly showing VFIIX well above $10.50.
This chart shows VFIIX back to 1987, when interest rates were much higher. You can see that the net asset value (NAV) of the fund fell under $9.50 for a significant period of time. I suspect it could go even lower if we were to get high inflation like we saw in the 1970s and early 1980s.
Lets say the NAV drops from $10.54 to $9.50. That would be a decline of $1.04. In percent, that decline would be:
- $1.04 / $10.54 x 100% = 9.9%
Also note that if interest rates soar, the fund could go much lower than $9.50.
To be safe, if you own the fund, you might ask yourself how you would feel if the NAV fell to $9.00 again.
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