Posted: 2/19/2016 12:34:48 PM EDT
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I am no expert on bonds what so ever but was wanting some opinions on two that are offered by my 401k.
Since I was in a target date fund when this 401k started part of that fund allocation went to a Pimco bond fund. A couple of years ago they dropped the fund and brought in Prudential's Total Bond Fund;Q (PTRQX). I have recently gotten out of the target fund and so I am now invested in three stocks but I still own a considerable amount of the Prudential bonds. They also brought in this year Vanguard's Intermediate-Term Bond Index Fund-Admiral (VBILX) So my question is which of the two would be the better investment? The cost of the Vanguard currently is $11.52 a share vs the Prudential that is $14.09 a share. They both pay a daily dividend of 0.03 The big difference is the fees. The Vanguard being $1.00 per $1000 vs the Prudential of $4.90 per $1000. That in itself is pretty big with the amount of shares that I own. The yield on the Vanguard bond is 2.69% vs Prudential's 3.24%. Those figures of yields was what I read on Market Watch this morning. From what I have read both are good bonds but they are invested in different ways and I am unsure if one carry's more risk than the other. I know this part of the forum doesn't get a lot of attention but any ideas on the matter are appreciated. |
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Quoted:
So my question is which of the two would be the better investment? The cost of the Vanguard currently is $11.52 a share vs the Prudential that is $14.09 a share. This is irrelevant. Price per share has nothing to do with your decision. They both pay a daily dividend of 0.03 The big difference is the fees. The Vanguard being $1.00 per $1000 vs the Prudential of $4.90 per $1000. Vanguard is a clear winner. That in itself is pretty big with the amount of shares that I own. The yield on the Vanguard bond is 2.69% vs Prudential's 3.24%. This just underscores that Vanguard is the winner after expenses are taken in to account. Of the choices you presented I would be in the Vanguard bond fund. My plan has a fixed income alternative that is paying guaranteed 3.5%, which works out better than any bond fund for the time being, it's not a bad option if available. |
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Quoted:
Of the choices you presented I would be in the Vanguard bond fund. My plan has a fixed income alternative that is paying guaranteed 3.5%, which works out better than any bond fund for the time being, it's not a bad option if available. Quoted:
Quoted:
So my question is which of the two would be the better investment? The cost of the Vanguard currently is $11.52 a share vs the Prudential that is $14.09 a share. This is irrelevant. Price per share has nothing to do with your decision. They both pay a daily dividend of 0.03 The big difference is the fees. The Vanguard being $1.00 per $1000 vs the Prudential of $4.90 per $1000. Vanguard is a clear winner. That in itself is pretty big with the amount of shares that I own. The yield on the Vanguard bond is 2.69% vs Prudential's 3.24%. This just underscores that Vanguard is the winner after expenses are taken in to account. Of the choices you presented I would be in the Vanguard bond fund. My plan has a fixed income alternative that is paying guaranteed 3.5%, which works out better than any bond fund for the time being, it's not a bad option if available. Thanks for your input Nick. One of the reasons I mentioned the share price difference was that if I did sell the Prudential Bonds to purchase the Vanguard Bonds I would be getting more shares for less money. If both bonds are reasonably in the same risk range as well as the consideration of lower fees then it's clearly a no brainer to purchase the Vanguard. I am not really sure how much if any the pay out difference would be between the two over the next 2-3 years when I finally retire and carry the 401k to another place. However,there is the much higher fee I am forced to pay for my current holdings. 
My 401k also has a Guaranteed Income fund that carries almost no risk at all and pays a guaranteed 2% a year. I keep 30% of my portfolio there and I can use it instead of shares from another fund to buy more stock or bonds depending on the prices. I currently have 34% in the Prudential bond fund and so at age 63 the two funds are my 64% security blanket so to speak. |