Tuesday February 07, 2012
by Marvin Appel, editor Systems & ForecastsOne investment-grade bond fund I recommend for 2012 is the
Vanguard GNMA Fund (
VFIIX). Its SEC yield is currently 2.9%, which is competitive with corporate bond offerings.
GNMA funds continue to offer the best balance between risk and reward this year among the investment-grade options.
During 2008, Vanguard GNMA was safer than the total bond market (drawdown of 3.5% for VFIIX versus 5.3% for the total bond market).
Vanguard GNMA was far safer than corporate bond funds, which had drawdowns exceeding 16% that year.
Vanguard does not like mutual fund trading, so I anticipate holding onto this position for the entire year with the goal of outperforming the Barclays U.S. Aggregate Bond Index. (This benchmark, in turn, has outperformed the majority of investment-grade bond funds over the years.)
Meanwhile, ETFs of low volatility have been lagging in 2012. However, conservative investors should continue to seek out sustainable, high dividend yields in the expectation (not guaranteed of course) that in the event of a market correction, these types of stocks will hold their value better than the overall market.
If the objective is ongoing income, it remains reasonable for conservative investors to seek that out, even at the expect of some near-term gains in the current rally.
Learn more about this financial newsletter at Marvin Appel's Systems & Forecasts.
