42

Morningstar's definition of cash includes "cash equivalents (fixed-income securities with a maturity of one year or less)". So I'm guessing 81% of its holdings are short-term enough to fall into this category.


19

It's not just about the ethics of investing in these companies. What if you believe (either hypothetically or with supporting evidence) that companies that show good environmental and social citizenship will tend to perform better that those that do not? Then you would consider a fund that is based off of high ESG ratings to be a good investment. The ...


12

If you hold a stock in a company you stand to benefit directly from the activities of the company via dividends or stock buy backs. You also benefit indirectly from the company's profitability. The stock price of a company will tend to be correlated with its profitability, since there will be more demand for the stock in attempt to capture a slice of the ...


11

A bond ETF will hold a basket of many, many bonds. As individual bonds mature, the fund reinvests in newer ones. These can be newly issued bonds or existing ones in the secondary market with time till maturity.


8

Because stock markets don't always go up, sometimes they go down. Sometimes they go way down. Between 2007 and 2009 the S&P 500 lost over half its value. So if in 2007 you thought you had just enough to retire on, in 2009 you'd suddenly find you had only half of what you needed! Of course over the next few years, many of the stocks recovered value, but ...


8

Bond ETFs are just another way to buy a bond mutual fund. An ETF lets you trade mutual fund shares the way you trade stocks, in small share-size increments. The content of this answer applies equally to both stock and bond funds. Feature Mutual Fund ETF __________ ____________ ...


8

No, you are not quite correct. Assume you have a simple bond that costs you $100. There are 2 ways the bond provides you money: It might provide you with interest every month/quarter/year, or it might provide you with a future repayment of, say $105. Either way, this bond would be considered 'fixed income' because the value you receive is not based on ...


7

For most people, you don't want individual bonds. Unless you are investing very significant amounts of money, you are best off with bond funds (or ETFs). Here in Canada, I chose TDB909, a mutual fund which seeks to roughly track the DEX Universe Bond index. See the Canadian Couch Potato's recommended funds. Now, you live in the U.S. so would most likely ...


7

First, I would push back some on your premise. Yes investments add some complications to tax, but it needn't be much hassle. As long as you stick to the mainstream -- US-based retail funds, or "normal" stocks and bonds (and ETFs and UITs and such) through a domestic brokerage -- they'll keep the needed records for you. Practically all have done so as a "...


7

The price of a traditional mutual fund is determined by something called the Net Asset Value (NAV). Each day after the market closes, this value is calculated by adding up everything that the fund owns and dividing by the number of shares. This NAV is then the price that you can buy into the fund for. ETFs are mutual funds that trade like a stock on the ...


6

When you invest in an ETF or mutual fund, you're not investing in stocks or bonds. You're buying shares of a company that invests in stocks or bonds. This level of indirection is what makes it so bond funds do not 'mature.' Bonds inside of ETFs or mutual funds do have a maturity date. When they mature, the fund manager uses the principal value that is ...


6

The Fed sets the overnight borrowing costs by setting its overnight target rate. The markets determine the rates at which the treasury can borrow through the issuance of bonds. The Fed's actions will certainly influence the price of very short term bonds, but the Fed's influence on anything other than very short term bonds in the current environment is ...


6

I wrote about this a while back, and it boils down to risk profile. If you hold the bond to maturity, then you minimize your capital risk: if you bought a $1,000 bond, once it matures, you are guaranteed the capital back (i.e., your $1,000). However, with a bond ETF, because the ETF is made up of underlying bonds, if interest rates go up, the aggregate ...


6

Is this tax withheld before the dividend is paid out to the investor? Only if you've been naughty. https://www.irs.gov/taxtopics/tc307 Topic Number: 307 - Backup Withholding When it applies, backup withholding requires a payer to withhold tax from income not otherwise subject to withholding. You may be subject to backup withholding if you fail to provide a ...


6

Owning stock (and owning a fund which owns stock is owning stock as far as I'm concerned) directly gives power to a company. As a result of your ownership of the company (or, of your ownership of the fund, and its ownership of the company), the company's stock price increases (due to higher demand), and thus the company is able to: Sell additional shares ...


6

I handle bonds similar to how I do stocks, which is to say I assume the rest of the market knows more than me, so I pick the cheapest, most generic index funds available. Just like I don't overweight small caps or mid caps or large caps, I don't overweight Treasuries or municipal bonds or corporate bonds. So AGG is a great choice for me, as is BND at ...


5

Yes, even though interest might be tax free, a capital gain or loss on sale of the fund is taxable.


5

Unless stated otherwise, these terms apply to all bonds. Par value vs purchase price The par value or face value of a bond refers to the value of the bond when it's redeemed at maturity. A bond with a par value of $10,000 simply means that if you purchase the bond and hold it until the maturity date specified in the contract, you receive $10,000. The ...


5

I think you're taking "fixed income" a bit too literally. They are funds that consist of fixed-income investments. They provide nothing unless you're able to sell for a higher price than you bought, is this correct? When the interest is re-invested, the total value of the fund will increase. So the fund will grow by reinvesting the coupons (all else ...


4

A bond fund will typically own a range of bonds of various durations, in your specific fund: The fund holds high-quality long-term New York municipal bonds with an average duration of approximately 6–10 years So through this fund you get to own a range of bonds and the fund price will behave similar to you owning the bonds directly. The fund gives you ...


4

This is just a pedestrian (my) opinion: Yes, It is wise to invest in bond funds even in a low interest environment. Check out the lazy man's portfolio on bogleheads. The reason is: You cannot time the market. Hence diversification (with stock funds and bond funds). in the long run will balance your losses against extreme market moves. If you are ...


4

No, they do not. Stock funds and bonds funds collect income dividends in different ways. Stock funds collect dividends (as well as any capital gains that are realized) from the underlying stocks and incorporates these into the funds’ net asset value, or daily share price. That’s why a stock fund’s share price drops when the fund makes a ...


4

Bond funds go up and down depending on whether the underlying bonds go up or down in value. One reason that bonds may go down is, as you said, the risk of default. Besides defaults, the other main risk is interest rate risk. Bonds pay interest rates prevailing on the day that they were issued. If interest rates suddenly go up, the bonds have to go down ...


4

Remember that funds are backed by actual stocks. It might not give you access to the general meeting of the companies, but when you buy into EvilFund, they go out and buys evil-stocks for the money. This again increases the value of those companies (slightly), enabling them to e.g. borrow more. If the price of evil-stocks started plummeting their boards of ...


4

I've been doing some research on this, and found a great answer on a Bogleheads forum: I think the value of bond diversification is frequently over-estimated by simple (and flawed) analogy with stocks. Bonds are most definitely not stocks. First off, in fixed income we have several assets that are for all intents and purposes 100% safe: ...


3

I couldn't find historical data either, so I contacted Vanguard Canada and Barclays; Vanguard replied that This index was developed for Vanguard, and thus historical information is available as of the inception of the fund. Unfortunately, that means that the only existing data on historical returns are in the link in your question. Vanguard also sent me ...


3

An investment trust is quoted just like a share. You just compare what you paid (your book cost) with its current share price, not the NAV, as a trust's price can be at a premium greater than the actual share price or a discount.


3

I would like to specifically address your second question. There are a number of great resources available online, but I found that when I was first starting out the website Investopedia was a very helpful resource. There you will find a wide range of information regarding investing, investment vehicles, and glossaries of key terms with robust definitions ...


3

You would need to see the weight of each position in the fund. Then you just calculate the price change of each bond and calculate according to weight. Formula for each bond i attached from investopedia


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