Not much of a mathematician but looking at 10 year graph it seems that the vast majority of time was spent with a NAV of 6 or more. It certainly appears that since the huge dip of 6 months or so ago we have been on a steady trajectory back to that long term trend line. Reversion to the mean if you will. Thus, if you are one of the lucky ones to have gotten into this fund in the low or mid 4s or even more fortunate enough in the high 3s then waiting patiently for NAV of 6 or even more is a smart move.(Disclosure; bought about half at 4.12 and half at about 4.91) At that point one would need to decide where if anyplace a better and more secure yield would be available. My financial planner thinks I should sell some in that this fund now represents about 12-13% of my total portfolio but I am feeling bold and lucky and besides I don't want to sell just yet and incur the small but annoying 1% penalty. I'm not that clever but it sure seems likely that a NAV of 6 is coming over the next 6 months. All intelligent comments and critiques welcome. GLL
With a very steady dividend and compounding it has been a bit of a surrogate for equity advances: about 27% YTD. getting back to 6, maybe. What will happen to high yield when treasury raises rates?
I don't think junk always follows the inverse relationship between rates and bond prices. When rates went to zero junk prices actually fell. Shouldn't they have gone up? In any case I don't think you will have to worry about a rate increase for some time. The FED is looking at the unemployment rate. Rising rates would certainly quash any recovery that most analysts say we are now in. Also,we have elections in 2010. If unemployment is still high woe be it to the Dems. Bernanke won't raise rates with Obama just having appointed him and still facing confirmation from the Senate.
That depends by how much they go up, what happens to the spread. Also, onecna make the case that fed money is not risk free. Look into the future, considering the money they are spending, and default can be reality. I contend, gov debt is not risk free now and getting riskier by the second. This is not good but could push the spread closer than anyone would think. We now have a president that is against us and wants the system to overload a break so we have the level of life as in Africa or North Korea.
I wouldn't worry too much about VWEHX comprising 12% to 13% of your portfolio(mine is 20%)PROVIDED there is little chance you might need the money within the next 5 years. I am the same age as you (year older actually)and a conservative investor. This fund has 321 individual bonds, so the risk is very spread.
However, if your VWEHX allocation is money you might possibly need sometime in the next 5 years then you might want to reconsider if it should be in VWEHX at all, just like the stock market, because of a chance you might need it the most when the NAV is way down like last December. Just my opinion but if your investment advisor is not saying this then he should be.
PS: I hope you are right about a NAV of $6, but I personally don't think VWEHX will make it back to $6. Just my opinion, but if you look at its chart you will see what I mean. It seldom recovers fully after a steep drop. When it dropped to below $4 I bought some more and I figured its maximum upside would be $5.25 to $5.50. However, I also thought it would take a year and a half to do this, and it happened sooner. So, what do I know?
Ken, I made my first buy at 5.50 and was happy to get it there. Of course i rode it to 3.90 and wasn't experienced enough to buy more there, but i bought more as it went higher and am quite happy. It is one of my best performers YTD. Thanks for all your excellent posts. Brooks
subscribe to www.dowtheoryletters.com by Richard Russell for $300 a YEAR. It is online and by mail, he has a newsletter about every three weeks and writes a blog every market day. If you are asking these kind of questions on a Yahoo mb, Russell can help you.
For example to todays blog he writes about bonds and a lot of other things. I am not going to re-write all of his comments today, but here is a sample:
9/22/09: "How long can the Fed continue to keep up the liquidity flood? They can do it until the bond market says 'they can't.'" So we watch the bond market like a hawk watches a field mouse.
"If there's any trouble ahead, the bond market should spot it first, and the bonds, with Fed help, have been holding up remarkably well-- so far. Below we see a daily chart of the bellwether 10-year T-note with my blue trendline depicting support"( $UST @ stockcharts. com). ... if 118 is violated, the T-note could be in the process of topping.