On August 1, Fidelity took direct aim at index fund competitors Vanguard, Blackrock’s iShares ...
Two Funds for a Weak Economy
04/11/2016 9:00 am EST
Two strong trends of late are deflation and a flight to safety; those trends benefit treasury bonds, especially long-term treasuries, explains Bob Carlson, editor of Retirement Watch.
We see that in the results of Wasatch-Hoisington US Government Bond (WHOSX); the fund is up 9.4% year to date; the yield is down to 2.05%.
Van Hoisington and Lacy Hunt manage the fund and have the ability to own treasuries of any duration and also some synthetics and derivatives related to treasury bonds.
The duos have been convinced that QE and other Fed policies weren't going to improve economic growth. As a result, they've own long-term treasuries for some time; the duration of the fund is more than 20 years.
There probably will be ups and downs in the future as investor sentiment changes. However, the fund's economic analysis agrees with mine; economic growth will be slow, help down by poor policies and too much debt.
This is not a long-bond-only fund. It has a flexible investment policy, so it can changes its holdings whenever management decides the outlook is different. So far, they don't plan to change.
Another beneficiary of recent trends is DoubleLine Total Return Bond (DBLTX).
Manager Jeffrey Gundlach believes the economy is very weak and won't be able to withstand additional interest rate increases. The Fed, he says, is likely to reverse the December 2015 increase rate increase.
The fund owns primarily mortgage securities. Almost half are agency mortgage securities, which are backed by mortgages that are insured by government of quasi-government agencies. These have low yields and low duration, so their values are fairly stable.
Another 22% of the fund is in non-agency securities; these aren't guaranteed but were bought at discounts to face value.
About 10% of the fund is in cash, while the balance moves in and out of other income investments as Gundlach sees opportunities. The fund yields 4.03%.
Meet Bob Carlson at the upcoming MoneyShow in Las Vegas, May 9th-12th. Bob will be discussing the strategies you need to know to manage your IRA; he will also offer seminars on the “new rules” of retirement and how to create safe and secure income. Register here.
By Bob Carlson, Editor of Retirement Watch
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