- Dec. 16 Update on Bob Brinker's Asset Allocation History Scroll to bottom for latest update
Moneytalk with Bob Brinker Commentary for December 16, 2012 Radio Show
The following commentary is from my "Retirement Advisor" writing partner, David Korn.
Caller: This caller owns the Vanguard High-Yield Tax-Exempt bond fund (VWALX) which has a net asset value of $11.37.
Bob said the highest that fund has been at any point this year is $11.40 so it is within 1% of its high for the year.
Caller: What¹s your forecast on the fund?
Bob said when you are dealing with high yield securities, you are dealing with a level of credit risk. Bob said watch how investors react to the quality of the holdings in the fund. If they get worried about the quality that can impact how much they are willing to pay for shares. The other thing to watch is interest rates. We haven¹t seen much movement in the interest rate arena since they came off their lows.
Kirk Comment: Hmmmm... I seemed to have missed the answer to this question. I went back to the show archives and didn't hear Bob give an answer.
EC (David Korn): The Vanguard High-Yield Tax-Exempt bond fund (VWALX) is up 13.02% for the year ending 11/30/2012. Read more about the fund at this url: http://tinyurl.com/ch34xwv
Kirk Comment: Note that this fund is known as a "junk bond fund" and it has risk similar to stocks during bear markets for equities. I prefer to own stocks since the upside is better (unlimited) for stocks while the downside is very similar. From Vanguard:
Vanguard High-Yield Tax-Exempt Fund Admiral Shares This low-cost municipal bond fund seeks to provide a high level of federally tax- exempt income and typically appeals to investors in higher tax brackets. The fund’s lower credit quality may provide a higher yield, but it makes the fund more susceptible to price volatility due to uncertain prospects for the bond issuers. Investors who are looking for a fund that may provide sustainable federal tax-exempt interest income and can tolerate moderate risk to principal may wish to consider this fund as a complement to an already diversified fixed income portfolio.Kirk Comment: Read: Best Retirement Portfolio For You