The Justa and Lars Honors Bob Brinker Investment Club Thread Message Board

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Pastimes : The Justa and Lars Honors Bob Brinker Investment Club Thread

VTI 342.29

-0.2%

Jan 29 4:00 PM EST

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To: marc ultra who wrote (5690)	10/16/2010 5:05:48 PM
From: marc ultra	2 Recommendations Read Replies (2) of 10065

Is perceived interest rate risk reaching critical levels? So far those who ignored conventional logic that interest rates would rise have been rewarded by nice gains on Treasury funds and things like VFIIX as well as corporate bond funds. I include myself in those who assumed interest rates were likely to rise or at least concern that they would rise would increase. I didn't get hurt for being wrong because the floating rate note funds I have in the fixed income money I handle have done fine but as it turned out I would have also done OK in something with more interest rate risk (and in some cases a little lower expense ratio). I think the odds are increasing that interest rate risk may become more of an issue going forward. We now have the Fed targeting higher inflation rather than lower inflation. We also just had a bunch of rather mediocre at best Treasury auctions. On Friday we saw VFIIX e.g. falling 4 cents. I'm not telling anyone to panic and get out of conservative fixed income investments particularly those with low duration but I am happy I'm positioned in a way to not get hurt if rising interest rates or concern about it starts having more of an effect on things like most quality bond funds. There's also the way Bob said you can handle things if you're overly worried about interest rate risks which is to set a mental stop loss and just say if the NAV of my fund falls below a certain pre-determined level you can sell then and avoid any further large fall in NAV. There is of course also the CD option to preserve capital though one probably doesn't want to get stuck in any long-term CD that locks in a low rate.

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