Are you really down 1.45, if you include dividends?  M* lists total returns for 1 month at -.028% and 3 months at -0.49%.

Regardless, VFSTX is a high-quality, short term bond fund that is perfectly suitable for emergency funds.  I'd hold tight. 
 

I bought in on  March  7th  ($10.73) and it's now at $10.58.  And yes, I did  include dividends.

-Sam 

samjuno:

I bought in on  March  7th  ($10.73) and it's now at $10.58.  And yes, I did  include dividends.

-Sam 

You bought high.  I wouldn't say that means the fund is a bad idea, it was the time you bought the fund that was a bad idea.  I know that the Diehards try to say otherwise, but let this be your lesson.  There really is something to this market timing stuff despite what the Diehards say.  You bought into a bond fund when people were freaking out about the credit/financial crisis right before Bear Stearns failed and the Fed came in and changed the rules of the game.  That is when people were in a panic flight to quality.  So they bid up treasuries and other safer investments.  Consequently, you bought this fund close to its peak.  See, this asset allocation thing works best if you time it right, lol!

Now, I believe that the Fed is going to start raising interest rates in the near future, so although short term funds have less interest rate volatility, they don't go up in value when interest rates rise. 

http://finance.google.com/finance?q=VFSTX

When will the fund pay you a dividend and does the fund NAV decrease in value when the dividend is paid?

FWIW -- Last year I transferred a considerable amount of my portfolio into Vanguard Prime Money Market as a temporary safe haven.  I had the choice of the short term bond funds or money markets , and chose Prime MM.  At the time Prime MM was yielding over 5%.  Since then the yield has dropped to around 2%... yielding only 1.18% YTD.  The short bonds are a bit worse in YTD but I see the MM continuing down and the short bonds beginning to get better in total return... and am considering gradually moving my fixed portion back to 50%short termbond and 50% TBMkt.   No real great choices right now :)

Regards, mth

Yes, I seem to have made the wrong move at the wrong time, guess I should have let my Roth CD rollover at 3.5% APY.

They just paid a dividend today, but I'm still down around 1.38%.

-Sam 

samjuno:

Yes, I seem to have made the wrong move at the wrong time, guess I should have let my Roth CD rollover at 3.5% APY.

They just paid a dividend today, but I'm still down around 1.38%.

-Sam 

If I were you, I would move the money out to a money market fund and let the 1.38% loss be a lesson learned - market timing does matter and you can take a loss when you performance chase by buying when assets' past performance has been hot because you are buying high.  You can get yourself quite informed about when and when not to buy/sell a particular asset class by reading the paper and watching the news.  Market timing pays and failure to pay attention to the market when you make your buy/sell decisions can cost you. 

Well?

1st> What is Emergency Fund $ Mean?

1.$5k for skipping out out town on the wife and kids?  LOL

2. To cover what ? Bills, and for how long? 3,6, 12 mos?

3. Do you have some Credit cards? Have $10k LOC on them? Keep one on the side ( and away from the Wife ) just for emergencies..or even a American Express card. and Invest that " EM" $ . Do you own a home and have a ELOC on it?

4. You can always sell it with in a day , transfer it to a MMkt Account and write cks. Thus stay with Higher Rtn Bonds.. or Even a Balanced Fund? With 0 Loss yrs during the last Bear yrs...to increase your odds..

5. Or just stay were you are now? What's 1-2% down on the total Amt.? A couple of hundred Bucks on $10,000? Big deal..chump change.. what's the Upside? + 6%?

6. Or if your That Worried? Go buy some CD's...and forget the crazy bond markets..If Bill Gross/Pimoc doesn't know where to go, what chance to do we have at being right?

LOL

VFSTX is a great fund for your liquidity needs. However, given that it is a bond fund, the NAV is going to fluctuate. If you look at its historical returns, the fund hasn't lost money in a calendar year since 1994 when it came in at -0.08%. I'd say that's pretty doggone safe. It more than made up for that performance the next year when it earned 12.74%. Try getting double-digit returns with a money market fund.

 If you compare its ten-year record with Vanguard Prime, VFSTX is hands down the winner. Granted, most short-term reserve funds don't stay dormant for ten years, but it gives you an idea of how VFSTX will outperform any money market fund over time.

 You must not need these funds at a moment's notice if you were tying them up in CDs, so I wouldn't worry about being down just 1% in less than 2 months. Let VFSTX's higher yield work its magic and in 12 to 18 months it will give you a better return than Prime Money Market.

Hi Sam:

"About a month ago, I made the mistake of transferring some Roth IRA  CD money into VFSTX (Short-term Investment grade bond  fund) & now realize that was a mistake. I'm now down 1.4%."

I don't think you made a mistake.  One month's return is meaningless.  You undoubtedly knew when you purchased it that a bond fund goes down as well as up.  When you purchased VFSTX you had no way of knowing it would go down first (forget market timing).   Morningstar reports that VFSTX 1-month return is actually +.19% and it was in the top 19% of its category during that period:

http://quicktake.morningstar.com/FundNet/TotalReturns.aspx?Country=USA&Symbol=VFSTX

VFSTX continues to be a good source for emergency funds.  The money is there, right?.  However, if you are really troubled by its volatility, a CD or money market fund may be a better emergency fund for you (and you don't have to worry about reporting capital gains or losses to the IRS every time you withdraw).

Best wishes.
Taylor

for emergency funds held in taxable account, the short-term tax exempt fund is also a good alternative for the higher tax brackets.  Duration is approximately 1 year so volatility is minimal.  The fund does not hold private activity bonds so it is AMT neutral.  The current yield on the ST TE is higher than the yield on Prime MM which is taxed.

samjuno:

Yes, I seem to have made the wrong move at the wrong time, guess I should have let my Roth CD rollover at 3.5% APY.

They just paid a dividend today, but I'm still down around 1.38%.

You would have had the same loss on the CD; it's just that your bank wouldn't have told you.  If you buy a five-year CD for $10,000 with a 3.5% rate, this is a promise to pay you $11,877 in five years.  If interest rates go up to 3.8%, the value of the CD drops to $9856 because a new CD costing $9856 would be worth $11,877 in five years.  The bank doesn't report the market value of the CD, which remains $10,000, but it won't let you withdraw the CD funds without a penalty, so it isn't really worth $10,000. 

In contrast, if your bond fund buys a five-year bond and interest rates go up by 0.3%, the value of the bond drops by 1.4%, and you see this immediately because there is a market for these bonds.  If the fund keeps the bond to maturity, it will get the returns it expected from the initial yield; the bond yield has increased because of the lower price.

A short-term bond fund is usually fine for an emergency fund, as long as you recognize that there will be occasional 1-2% losses in the short run as interest rates rise. 

Well, I feel better about it now. Guess I should forget about watching it too closely.

I also parked it in my Roth & am old enough to be able to access the money w/o penalty.

-Sam