Lew,
"From the data I can find, the distributions have been in steady decline for at least 10 years."
Here is a table, from data provided by Vanguard, for VWEHX performance:
year Inflation Yield Cap Gain Tot Ret Real Yield
| 1979 | 13.3% | 9.99% | -6.56% | 3.43% | -3.31% |
| 1980 | 12.5% | 12.58% | -9.64% | 2.94% | 0.08% |
| 1981 | 8.9% | 14.04% | -5.68% | 8.35% | 5.14% |
| 1982 | 3.8% | 15.62% | 8.98% | 24.60% | 11.82% |
| 1983 | 3.8% | 14.45% | 0.68% | 15.12% | 10.65% |
| 1984 | 3.9% | 13.45% | -6.95% | 6.50% | 9.55% |
| 1985 | 3.8% | 14.22% | 6.51% | 20.72% | 10.42% |
| 1986 | 1.1% | 12.31% | 4.07% | 16.39% | 11.21% |
| 1987 | 4.4% | 10.96% | -9.57% | 1.40% | 6.56% |
| 1988 | 4.4% | 12.20% | 0.84% | 13.05% | 7.80% |
| 1989 | 4.6% | 12.03% | -10.01% | 2.01% | 7.43% |
| 1990 | 6.1% | 12.12% | -17.62% | -5.49% | 6.02% |
| 1991 | 3.1% | 12.51% | 15.11% | 27.62% | 9.41% |
| 1992 | 2.9% | 10.22% | 3.49% | 13.71% | 7.32% |
| 1993 | 2.7% | 7.51% | -7.11% | 0.40% | 4.81% |
| 1994 | 2.7% | 7.87% | -5.68% | 2.18% | 5.17% |
| 1995 | 2.5% | 8.35% | 8.98% | 17.33% | 5.85% |
| 1996 | 3.3% | 7.75% | 0.68% | 8.43% | 4.45% |
| 1997 | 1.7% | 7.70% | -6.95% | 0.75% | 6.00% |
| 1998 | 1.6% | 8.01% | 6.51% | 14.52% | 6.41% |
| 1999 | 2.7% | 7.15% | 4.07% | 11.22% | 4.45% |
All data was calculated based on fund NAVs and the amount of distributions for the year. I have monthly data, and calculated all of this stuff. Inflation was calculated from CPI changes.
Yes, distributions, and NAVs, have fallen over time.
Enjoy.
"While junk bond funds may provide higher current income to meet day-to-day living expenses, they are likely to do so only with a potential sacrifce of principal."
Since inception, VWEHX has provided a total yield distribution of $23.53167, through Dec 2007. The initial NAV of the fund was $10.21. So, within 8 years of inception, the fund had returned, as yield, the initial investment made in the fund. That is, by 1987, the total yield returned was $10.46, and the NAV was still at $8.32.
So, by 1987, ALL of the initial principal had been returned to investors in the fund, and each investor still had shares worth about 80% of what they originally invested. So Bogle's 'loss' is viewed in a slightly different light, right?
That is, by 1987, original investors no longer had THEIR money in the fund, since it had been returned.
"Even if you understand the speculative nature of junk bond funds and are willing to accept the considerable risks they entail, your weighting in these funds should be held to a modest weighting (say, no more than 20%)."
Why 20%? Why not 50%, or 5%, or nothing? The point is that the weighting of ANY asset has to be made on some specific risk assessment, rather then speculation! For me, I believe in equal weighting, and my portfolio is approximately 50/50 stocks/bonds. My bond asset class, of choice, is junk, specifically VWEHX. If I would take, say, half of that (and get down to something near Bogle's 20%), my overall portfolio yield would decline, and that would affect my withdrawal strategy.
"Junk bond funds are not for investors who cannot stomach both the inevitable fluctuations in the market value of junk bonds and the possible deterioration of their high initial income."
No investment is for anybody who doesn't understand it. You can expect the TR for VWEHX to be 9% (it's long term average), and that is comparable to expected equity returns of 10% or so. Now, fluctuations in market value are given by the standard deviation of the returns of each. Let me opine that the SD of VWEHX, at it's TR of 9%, is considerably less then the SD of your average stock fund, with it's TR of 10%.
Specifically, if you work the numbers, the SD of the TR of VWEHX, here is what you get:
| | Inflation | Yield | Cap Gain | Total Ret |
| Average | 4.47% | 11.00% | -1.23% | 9.77% |
| Std. Dev. | 3.18244% | 2.62745% | 7.98619% | 8.53687% |
Again, this was for 1979 through 2000.
Let me opine that the SD of your typical stock fund is usually a bit lower then double the return, that is, 18% or so.
"Thankfully, we live in this great country where we can accumulate the assets to have these discussion. Hopefully, we can keep it free. Have a great Independence Day!"
And you also!
