Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

What to Do about Vanguard GNMA

October 25, 2017 By E.J. Smith

You don’t want to sell Vanguard GNMA. I know its price is down. And often, when investors see share prices go down, they sell. They follow the herd. Resisting that impulse isn’t easy.

But the herd forgets that stocks were slaughtered in 2008 while GNMA was a port in the storm. You can bet there will be another stock market crash as bad as or worse than 2008. It’s really just a matter of when.

2008 wasn’t a bloodbath for everyone. The average GNMA fund tracked by Morningstar was up 6.6%. It was a terrific year. Unfortunately, it seems you can count on one hand the lucky few who stuck around with their boring GNMA position and didn’t get greedy leading up to 2008.

Investors, not you of course, pulled money out of GNMA funds for five consecutive years, from 2003 to 2007, according to Morningstar. This was when GNMA funds yielded a mouthwatering 5%. But investors were giddy about the stock market. Sure, they took a beating with Internet stocks in 2000, but now it was time to make up for those losses and ride that market into the sunset, where retirement dreams come true—until they don’t.

It’s hard for investors today to get excited about a 2.3% yield—I get it. But that’s the reality of the day. Relatively speaking, it’s a whole lot more than the 0.14% yield for the Vanguard Short-Term Treasury fund. You need to find income where you can.

Think about your GNMA fund as you would a piece of income property. For a landlord, it’s a waste of time to worry about the price you could get for the property from month to month. The monthly rents are what pay the bills. GNMA is your triple-decker. Why sell it? You need the rent money.

You shouldn’t be alarmed about a fund with an average duration of 4.3 years and explicit backing by the government. I still view prepayment risk—the risk of a mortgage being refinanced or prepaid and replaced with a lower-yielding mortgage at a lower rate—as low. You still need a credit score near 800 and a dump truck full of cash to do a refinancing, and the Fed’s going to do everything in its power to prevent dislocation in mortgage-backed securities, announcing last week that it might hold mortgage-backed securities until maturity. The waters may be choppy with Vanguard GNMA, but it’s an anchor to windward that you may need to fall back on someday.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Vanguard GNMA and Your Retirement Years
  • Vanguard GNMA Anchor to Windward
  • Happy New Year!
  • Author
  • Recent Posts
E.J. Smith
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@youngresearch.com
Latest posts by E.J. Smith (see all)
  • Smith Family Robinson in Live Free or Die, NH - January 19, 2021
  • The Fed is Sacrificing Retirees to Save the Banks - January 15, 2021
  • February RAGE Gauge: Americans Focusing on What’s In Front of Them - January 14, 2021

Search Young Research

Most Popular

  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Do You Remember When NASDAQ Dropped by 82%?
  • The Power of a Compound Interest Table
  • Gavekal Chairman: Renewables Bubble is "Stupidest" Ever
  • The Highest Yielding S&P 500 Stocks
  • Don’t Be on Their Radar, Get Out of Debt Now
  • Overtaken By Nvidia, Intel Fires Bob Swan
  • There's Always a Way Forward for Americans Like YOU
  • Stocks: Are You Sticking Your Neck Out Too Far?
  • Democrats Eager to Get Back to Protecting the Rich by Ending SALT Deduction Cap

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • The Recklessness of Arnold Schwarzenegger
  • Warmongering Firestarters Victoria Nuland and Samantha Powers Back
  • Smith Family Robinson in Live Free or Die, NH
  • Dick Young’s Safe America: Chapter 1, Part I
  • RCY’s Brand New Investing Program – 100% Swiss
  • Swiss Francs, a Store of Value
  • Insurrection Was the Furthest Thing from Trump’s Mind
  • Who Are Those Urging Violence?
  • Are $2,000 Checks Going to Rebuild NYC?
  • An Alert for Warm Weather, Wine Loving Mavens.

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Social Media

  • Facebook
  • Twitter
  • Youtube
  • Pinterest

Copyright © 2021 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.