- If someone moves from a money market fund yielding 0.11% into a bond fund yielding 2.52%, he or she would pick up 2.41 percentage points in current yield. On a $10,000 investment, that equates to $241 a year, assuming interest rates remain steady.
- If rates were to increase by, say, 4 percentage points to 6.52%, the impact to a bond fund with an average duration of 4.3 years means the share price would drop by 17.2% (for a total drop in account balance of $1,720 on the $10,000 investment), all else equal.
In 2009 Vanguard's TIPS fund, VIPSX, gained 10.8%
In 2009 Vanguard's GNMA fund, VFIIX, gained 5.3%
As of yesterday (10/6/10)
VIPSX is up 9.05% YTD
VFIIX is up 7.08% YTD
I dumped my Vanguard GNMA (VFIIX) fund almost 2 yrs ago in my Vanguard ROTH and bought the TIPS fund VIPSX. Total gain as of yesterday for VIPSX was 22.5%!
The REIT index fund at Vanguard, part of my core portfolios recommended for conservative and aggressive investors, is up 22.55% YTD! It gained 29.6% in 2009 but lost 38% in 2008 so it is volatile.
Also make sure you read Vanguard Lowers Admiral Shares Minimum to $10,000
- Vanguard has reduced the minimum amount required to qualify for Admiral™ Shares to $10,000 for most of our broad-market index funds and $50,000 for actively managed funds, down from the previous $100,000 minimum.
- Admiral Shares cost significantly less than traditional fund shares, and their expense ratios are among the lowest in the mutual fund marketplace.