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April 21, 2014

Andrew Silow-Carroll: Passoverkill? Suggestions to make next year's seders even more culturally sensitive

Sara Israelsen Hartley: Seeking the Divine: An ancient connection in a new context

Christine M. Flowers: Priest's execution in Syria should be call to action

Courtnie Erickson: How to help kids accept the poor decisions of others

Lizette Borreli: A Glass Of Milk A Day Keeps Knee Arthritis At Bay

Lizette Borreli: 5 Health Conditions Your Breath Knows Before You Do

The Kosher Gourmet by Betty Rosbottom Coconut Walnut Bars' golden brown morsels are a beautifully balanced delectable delight

April 18, 2014

Rabbi Yonason Goldson: Clarifying one of the greatest philosophical conundrums in theology

Caroline B. Glick: The disappearance of US will

Megan Wallgren: 10 things I've learned from my teenagers

Lizette Borreli: Green Tea Boosts Brain Power, May Help Treat Dementia

John Ericson: Trying hard to be 'positive' but never succeeding? Blame Your Brain

The Kosher Gourmet by Julie Rothman Almondy, flourless torta del re (Italian king's cake), has royal roots, is simple to make, . . . but devour it because it's simply delicious

April 14, 2014

Rabbi Dr Naftali Brawer: Passover frees us from the tyranny of time

Greg Crosby: Passing Over Religion

Eric Schulzke: First degree: How America really recovered from a murder epidemic

Georgia Lee: When love is not enough: Teaching your kids about the realities of adult relationships

Cameron Huddleston: Freebies for Your Lawn and Garden

Gordon Pape: How you can tell if your financial adviser is setting you up for potential ruin

Dana Dovey: Up to 500,000 people die each year from hepatitis C-related liver disease. New Treatment Has Over 90% Success Rate

Justin Caba: Eating Watermelon Can Help Control High Blood Pressure

The Kosher Gourmet by Joshua E. London and Lou Marmon Don't dare pass over these Pesach picks for Manischewitz!

April 11, 2014

Rabbi Hillel Goldberg: Silence is much more than golden

Caroline B. Glick: Forgetting freedom at Passover

Susan Swann: How to value a child for who he is, not just what he does

Cameron Huddleston: 7 Financial Tasks You Should Tackle Right Now

Sandra Block and Lisa Gerstner: How to Profit From Your Passion

Susan Scutti: A Simple Blood Test Might Soon Diagnose Cancer

Chris Weller: Have A Slow Metabolism? Let Science Speed It Up For You

The Kosher Gourmet by Diane Rossen Worthington Whitefish Terrine: A French take on gefilte fish

April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review

Why You Should Avoid Most Bond Index Funds

By Steven Goldberg





Most of these funds are larded with securities issued by heavily indebted countries, including the U.S


JewishWorldReview.com | There's a lot to like about index funds. Over the long term, stock index funds have beaten about two-thirds of actively managed funds -- largely because index funds generally charge much less. But bond index funds are a different story. Indeed, Vanguard Total Bond Market (symbol VBMFX), with assets of $118 billion, has lagged slightly more than half of actively managed funds in its category over the past 15 years despite charging much less than the average taxable bond fund. Over the past five years, the fund trails 81% of active funds.

Why? The biggest factor is the enormous amount of government debt. Most stock indexes weight securities by their market value (share price times number of shares outstanding). An example: Apple (AAPL) has some 6 billion shares outstanding and recently traded at $95.97. Multiply the two numbers and you get its market value of $579 billion. (All prices and returns in this article are through July 7.) Apple has the highest market capitalization of any U.S. company, so it accounts for 3.3% of Standard & Poor's 500-stock index.

A company's stock market value is influenced slightly by how many shares it issues. But the much bigger factor is how popular the stock is with investors. Since going public in 1980, Apple has climbed nearly 200-fold.

Bonds are different. Yes, they rise and fall in price, but not nearly as much as stocks do. The price of an investment-grade bond typically doesn't deviate much from the price on the day it was issued. That means the most important factor in its market value, and thus its weighting in an index fund, is the size of a particular issue.

And herein lies the rub: The federal government is $17 trillion-plus in debt. No U.S. company -- or companies in aggregate, for that matter -- has issued anywhere near $17 trillion worth of bonds.

The Vanguard fund, which tracks Barclay's U.S. Aggregate Float Adjusted index, has 65% of its assets in U.S. government debt. The biggest share of that is in Treasury securities, but the fund also has 21% in government- backed mortgage securities. (The float-adjusted index excludes bonds held by the Federal Reserve, which has been trying to depress bond yields and other interest rates through its massive government-bond purchases.)

So when you buy the Vanguard index fund or a similar fund sponsored by another firm, you're investing 70% of your money in government debt. That's a giant allocation -- way too much, in my view.

Even Vanguard founder Jack Bogle, who practically invented index funds, says 70% in U.S. government bonds is too much. He's proposed that the index be reworked to increase its exposure to corporate bonds.

One caveat: Because bond index funds own so much U.S. government debt, where there is little risk of default, these funds should hold up well in financial meltdowns. For instance, in 2008, the Vanguard index fund returned 5.1%, beating its peers -- funds that invest mainly in taxable investment-grade, intermediate-term bonds -- by an average of 9.8 percentage points.

The same government-debt bugaboo holds for foreign and global bond index funds, says Sarah Bush, a Morningstar analyst. Vanguard Total International Bond Index (VTIBX) has 81% of its assets in foreign-government bonds, topped by a 22% weighting in Japanese government securities, whose 10-year bond yields about 0.6%. Her advice on bond funds: "I lean toward actively managed and low-cost funds."

What to do? Following are three options -- from my favorite to least favorite.

The first strategy is outlined in The Four Best Bond Funds to Own Now, which recommends minimizing the risk of rising bond yields (and their accompanying falling prices).


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Second strategy: Among more-conventional bond funds, Fidelity Total Bond (FTBFX) is a solid choice. Over the past five years, the fund, a member of the Kiplinger 25, returned an annualized 6.7% -- 2.0 percentage points per year more than Barclay's U.S. Aggregate Bond index. The fund's average credit quality is triple-B. If interest rates rise by one percentage point, figure on the fund losing about 5% of its value. (Bond prices move in the opposite direction of rates.) Expenses are 0.45% annually.

Third strategy: If you're a dyed-in-the-wool indexer, focus on funds that own high-quality corporate bonds. Vanguard Intermediate-Term Investment Grade (VFICX) has only about 6% of its assets in government bonds. Almost all the rest is invested in corporate bonds. Because the bonds are all high-quality, the fund steers away from overly indebted companies. Over the past ten years, the fund, which charges just 0.20%, returned an annualized 5.8% -- putting it ahead of only half of its peers. Be aware, too, that the fund has about 70% of its assets in bonds issued by industrial and financials companies, which tend to rise and fall with the economic cycle.

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Steven Goldberg is a Contributing Columnist for Kiplinger.



All contents copyright 2014 The Kiplinger Washington Editors, Inc. Distributed by Tribune Content Agency, LLC

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