![]() ![]() In fact, investment grade bonds are often uncorrelated or negatively correlated to stocks (bonds zig when stocks zag, and vice versa). The prices of bonds and stocks don't always move in tandem. F Fund investors have the opportunity to earn higher long-term returns compared to investors in short-term securities such as the TSP G Fund. Income risk: the fund's income may decline because of falling interest rates.Īlthough there are several types of risks associated with the F Fund, the overall risk is relatively low, because the F Fund holds a very diversified portfolio of high grade (investment grade) bonds.Credit risk: a company or government's credit quality could wane, and you (as a bondholder) could lose some or all of your investment.Investors should carefully weigh this risk, since interest rates have been declining for decades and are currently near all-time lows. Interest rate risk: an increase in interest rates may lead to a decrease in the price of the bonds in the portfolio.Inflation risk: the bond portfolio's nominal return may not be sufficiently high enough to offset the reduction in purchasing power that results from inflation.Lets take a look at these in greater detail: Risks and Potential Rewards of Investing in the F Fundīond investors (including investors in the F Fund) are subject to several types of risk, including inflation risk, interest-rate increases, and a potential default by the issuer of one or more of the bonds in the portfolio. ![]() Many bond investors consider these funds to be their core bond holding (since they invest in all segments and maturities of the fixed income market). Popular examples include Vanguard's Total Bond Market Index Fund (VBMFX), Vanguard Total Bond Market ETF (BND), and iShares Core U.S. There are many other mutual funds and ETFs tracking the same index used by the F Fund (the Bloomberg U.S. For decades, the drawdowns were in the 4-6% range, but during the high inflation and rising interest rate environment of 2022 that changed dramatically! The worst drawdown since inception so far is -18.0%: The chart below shows the historical drawdowns for the TSP F Fund. An initial investment of $1,000 on would today be worth $5,251: As of, the fund has a compound annual growth rate of 5.2%, annualized standard deviation of 4.1%, and Sharpe Ratio of 0.24. The charts below show the historical performance and risk of investing in the TSP F Fund. Some funds tracking the Bloomberg Aggregate index sample the index and hold fewer bonds, but all important risk factors and other characteristics should track the index closely. The average maturity is 8.9 years, and the average duration is 6.7 years. Its yield to maturity hovers around 3.9%, and the average coupon is 2.6%. Aggregate Index contains over 10,000 bonds. ![]() Sign up for free TSP Fund price and performance updates via email.Īs of this writing, the Bloomberg U.S. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |