Funds for Bond Market Tilts

Having looked at bond market tilts, we also looked for funds that could be used to make them. Here are some that we liked:

For TIPS, we like the Vanguard Inflation Protected Securities Fund (VIPSX). It was introduced last June, and carries a very low .25% of total expenses. Another fund we liked in this category is the PIMCO Real Return Bond Fund (PRRDX), although its expense ratio was higher at .93%.

In the high yield category, we liked the Vanguard High Yield Corporate Fund (VWEHX) not only because of its low .27% expense ratio, but also because of a ten year record of outperforming the Lehman High Yield Index against which it is benchmarked. In this sector, credit quality assessment is critical, and Vanguard is apparently quite good at it.

For REITs, which we’ve discussed in past issues, we prefer the Vanguard Real Estate Index fund (VGSIX). We also liked their convertibles offering (VCVSX) because of its low expense loading (.59% versus and average of 1.49% for the convertible bond fund category).

Finally, for an intermediate duration tilt, we liked the Vanguard Intermediate Term Bond Index Fund (VBIIX). Its .20% total expense ratio is well below the category average, and its performance is regularly above it. You simply can’t do better than that.

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