Income Investors: Low Duration Bond Funds

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With average yields, probably around 2-3% on low/limited/short-duration bond funds,

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What is the asset quality of those bonds? They have to be junk bonds.

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Let's take PTLCX,

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If that is an example of what you referenced in the OP, you might need to do a little more research.

That fund has a 1% front load, a 1.1% expense ratio, its 30-day SEC yield is only .42%, not 2-3%, it does not reveal the credit quality of its holdings but over 50% of its holdings are euro bonds. Europe is having some economic problems these days.

What was your question again?

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but Yahoo/Google finance show yields of around 2%.

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then it must be true

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Let's use another low duration fund. BLDCX. Definitely has heavy junk bond exposure, a Yield of around 1-2%, and an expense ratio of 1.5%. What the hell. There is no way these investors have real return after expenses??

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yield is net of these internal expenses

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whodatigahbait

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Don't get snooty with me sir. That's why I posted. This is healthy conversation.

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quote:whodatigahbait Don't get snooty with me sir. That's why I posted. This is healthy conversation.

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ok so my point is that even after these expenses the client is still getting said yield, the expense dont eat into the indicated yield. however, with being said if you can get an ETF that is buying the same paper the yield will be greater bc of the lower expenses.

however, i'm not a big fan of bond ETFs especially ones that are buying lower rated bonds, if you get any type of credit risk you want an active manager instead of an index that buys the market

if you are looking for a safe short term yield prudential short term corporate bond fund is a great fund (PIFZX in the ishare not sure of A share ticker) buys short term high quality paper and is yieldng around 3%

The 30 days SEC yield is how much income the fund has received over the previous 30 dyas net of expenses. this can fluctuate depending on the lumpiness of the payouts.

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As previous posters have pointed out, credit quality and fees are the two primary considerations. Yield should not be a major factor right now. I know that sounds crazy but sooner or later we are going to enter a period of QE easing. When that happens your credit quality is going to far more important than simple duration. Remember, lower quality issues act more like equities than bonds during market volatility. If you need more yield, your better risk / reward choice would be to go into equities.

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agreed however with that being said given an economy that has stabilized and excess cash on corporate balance sheets i'd rather take credit risk right now than duration risk