Treasury fund vs treasury fund index?
Treasury fund vs treasury fund index?
Hello,
Last night my sister allocated some funds in a taxable account. Some money was allocated to the short term treasury fund, investor shares.
When we went to allocate it and started typing the name there was a short term treasury fund index in the list. We chose the fund, not the index, because it was first on the list. I see the index has a lower cost.
What is the difference? Why would you choose one or the other?
Thanks.
Added (thanks dukeblue):
Short term treasury fund VFISX, https://investor.vanguard.com/mutual-fu ... file/VFISX
Short term treasury index, VSBSx, https://investor.vanguard.com/mutual-fu ... file/VSBSX
VFISX does a bit better than VSBSX. Does it respond to interest rate changes sooner?
Last night my sister allocated some funds in a taxable account. Some money was allocated to the short term treasury fund, investor shares.
When we went to allocate it and started typing the name there was a short term treasury fund index in the list. We chose the fund, not the index, because it was first on the list. I see the index has a lower cost.
What is the difference? Why would you choose one or the other?
Thanks.
Added (thanks dukeblue):
Short term treasury fund VFISX, https://investor.vanguard.com/mutual-fu ... file/VFISX
Short term treasury index, VSBSx, https://investor.vanguard.com/mutual-fu ... file/VSBSX
VFISX does a bit better than VSBSX. Does it respond to interest rate changes sooner?
Last edited by kjsammy on Fri Sep 24, 2021 9:23 am, edited 3 times in total.
-
- Posts: 4074
- Joined: Fri Jan 29, 2016 11:40 am
Re: Treasury fund vs treasury fund index?
Possibly one is an active fund while one is indexed. Could you provide the tickers or fund names?
Re: Treasury fund vs treasury fund index?
Done, thanks,
- retired@50
- Posts: 12833
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Treasury fund vs treasury fund index?
The difference appears to be small. In this case, based on the PV link below, it appears the active managers are adding "something" worthwhile.
PV link: https://www.portfoliovisualizer.com/bac ... ion2_2=100
Given the current yield, you might consider finding a HYSA. Seems like less risk with higher yield.
Here's one example: https://www.marcus.com/us/en/savings/high-yield-savings
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
Re: Treasury fund vs treasury fund index?
Thanks for that. I will consider it.
Simplicity has a high value for me. I have done work to not have 2 or 3 bank accounts, funds in multiple places and too many funds. It feels fantastic.
I doubt that money in the treasury fund is at risk. Any earnings will not be taxed by the state. The difference between the st treasury fund and the bank would be about 0. If the money were at actual risk then that would make a difference.
Simplicity has a high value for me. I have done work to not have 2 or 3 bank accounts, funds in multiple places and too many funds. It feels fantastic.
I doubt that money in the treasury fund is at risk. Any earnings will not be taxed by the state. The difference between the st treasury fund and the bank would be about 0. If the money were at actual risk then that would make a difference.
- retired@50
- Posts: 12833
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Treasury fund vs treasury fund index?
I was referring to share price movement based on changes in interest rates, not default risk. I agree that treasury bonds are safe in that regard.
The current price of the Short Term Treasury Fund (VFISX) is $10.69, however, since the 1991 fund inception, the fund has traded between $9.78 and $11.04 per share.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Treasury fund vs treasury fund index?
Vanguard Short-Term Treasury Idx Admiral (VSBSX) had a better risk adjusted return (higher Sortino Ratio), and a lower correlation to the stock market.retired@50 wrote: ↑Fri Sep 24, 2021 9:37 amThe difference appears to be small. In this case, based on the PV link below, it appears the active managers are adding "something" worthwhile.
PV link: https://www.portfoliovisualizer.com/bac ... ion2_2=100
Given the current yield, you might consider finding a HYSA. Seems like less risk with higher yield.
Here's one example: https://www.marcus.com/us/en/savings/high-yield-savings
Regards,
My default general preference is for an index fund over an actively managed fund.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Treasury fund vs treasury fund index?
Thank you. Since this was just bought there should not be any consequences to exchanging it for a the index fund. I did not realize there would be multiple choices to a short term Treasury fund.
-
- Posts: 500
- Joined: Tue May 19, 2015 9:55 pm
- Location: Austin, TX
Re: Treasury fund vs treasury fund index?
I would use the index (0.07% ER) over the investor shares of the active fund (0.20% ER), but I would prefer the admiral shares of the active fund (0.10% ER) over either. There do seem to be enough bond market inefficiencies to reliably clear 0.03% ER.
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Treasury fund vs treasury fund index?
Both are good choices.
Vanguard offers so many good short-term and intermediate-term bond funds with good credit quality and low expense ratios that it just makes it hard to choose .
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Treasury fund vs treasury fund index?
The active fund had a slightly higher return and slightly higher volatility. The Sharpe ratio was higher for the index fund. I suspect that the active fund had, on average over the period, a longer duration. This worked out in the past while rates were falling. No assurance that it will work out in the future. No assurance that the active fund would continue to have a longer duration.
Both are low cost ways to get short term Treasurys. I would consider the two funds essentially the same.
Both are low cost ways to get short term Treasurys. I would consider the two funds essentially the same.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either |
--Swedroe |
We assume that markets are efficient, that prices are right |
--Fama
Re: Treasury fund vs treasury fund index?
I hope with the transition to ETFs there will be ETF versions of their active bond funds with the admiral ER.ruralavalon wrote: ↑Sat Sep 25, 2021 7:22 amBoth are good choices.
Vanguard offers so many good short-term and intermediate-term bond funds with good credit quality and low expense ratios that it just makes it hard to choose .
-
- Posts: 4074
- Joined: Fri Jan 29, 2016 11:40 am
Re: Treasury fund vs treasury fund index?
Actively-managed ETFs are exceedingly rare, however. See https://www.fidelity.com/learning-cente ... ly-managed000 wrote: ↑Sat Sep 25, 2021 4:38 pmI hope with the transition to ETFs there will be ETF versions of their active bond funds with the admiral ER.ruralavalon wrote: ↑Sat Sep 25, 2021 7:22 amBoth are good choices.
Vanguard offers so many good short-term and intermediate-term bond funds with good credit quality and low expense ratios that it just makes it hard to choose .
Re: Treasury fund vs treasury fund index?
I assume that will change over the next 10 years especially if Vanguard pushes investors away from its brokerage.dukeblue219 wrote: ↑Sat Sep 25, 2021 4:45 pmActively-managed ETFs are exceedingly rare, however. See https://www.fidelity.com/learning-cente ... ly-managed000 wrote: ↑Sat Sep 25, 2021 4:38 pmI hope with the transition to ETFs there will be ETF versions of their active bond funds with the admiral ER.ruralavalon wrote: ↑Sat Sep 25, 2021 7:22 amBoth are good choices.
Vanguard offers so many good short-term and intermediate-term bond funds with good credit quality and low expense ratios that it just makes it hard to choose .
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Treasury fund vs treasury fund index?
Why wait for Exchange Traded Funds (ETFs), if you prefer an actively managed fund why not buy the treasury bond fund you want in a regular mutual fund?000 wrote: ↑Sat Sep 25, 2021 4:38 pmI hope with the transition to ETFs there will be ETF versions of their active bond funds with the admiral ER.ruralavalon wrote: ↑Sat Sep 25, 2021 7:22 amBoth are good choices.
Vanguard offers so many good short-term and intermediate-term bond funds with good credit quality and low expense ratios that it just makes it hard to choose .
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: Treasury fund vs treasury fund index?
I was thinking more for small accounts or at other brokers.ruralavalon wrote: ↑Sat Sep 25, 2021 5:12 pmWhy wait for Exchange Traded Funds (ETFs), if you prefer an actively managed fund why not buy the treasury bond fund you want in a regular mutual fund?000 wrote: ↑Sat Sep 25, 2021 4:38 pmI hope with the transition to ETFs there will be ETF versions of their active bond funds with the admiral ER.ruralavalon wrote: ↑Sat Sep 25, 2021 7:22 amBoth are good choices.
Vanguard offers so many good short-term and intermediate-term bond funds with good credit quality and low expense ratios that it just makes it hard to choose .
Re: Treasury fund vs treasury fund index?
Thanks for the discussion.
Would like to ask what is the value of the short term treasury at vanguard instead of a high yield savings account? There are many many who have treasuries so their must be a reason.
Does the treasury fund react faster to interest rate changes? But that would mean that the yield would be lower yes?
Is it the ability to buy quickly at a dip?
Or might the bank change their interest rate and then the power of inertia allows them to keep most of their customers?
If my sister does switch to from the managed to the index soon hen the capital gains would be almost nothing I guess.
k
Would like to ask what is the value of the short term treasury at vanguard instead of a high yield savings account? There are many many who have treasuries so their must be a reason.
Does the treasury fund react faster to interest rate changes? But that would mean that the yield would be lower yes?
Is it the ability to buy quickly at a dip?
Or might the bank change their interest rate and then the power of inertia allows them to keep most of their customers?
If my sister does switch to from the managed to the index soon hen the capital gains would be almost nothing I guess.
k
-
- Posts: 4074
- Joined: Fri Jan 29, 2016 11:40 am
Re: Treasury fund vs treasury fund index?
If you have "normal" amounts to invest a HYSA might well be better even though the yield is still low. However, if you have millions or billions (think corporations, foundations, etc) then there's no alternative with safety. You don't want to keep $5B in short term financing in a business checking account or gold coins. Short term treasuries are at least a safe holding place,, and virtually every 401k has one as an option as well.
-
- Posts: 9479
- Joined: Sun Oct 08, 2017 7:16 pm
Re: Treasury fund vs treasury fund index?
I think ETFs are the future. Be prepared for your "soreness" to increase.UpperNwGuy wrote: ↑Sun Sep 26, 2021 9:20 amMost of Vanguard's ETFs have ERs that are lower than the admiral ERs. In fact, that's a sore point with many of us who use admiral funds at Vanguard.
-
- Posts: 9479
- Joined: Sun Oct 08, 2017 7:16 pm
Re: Treasury fund vs treasury fund index?
I agree with you that ETFs are the future, so I've started buying non-Vanguard ETFs at Schwab and Fidelity. I view these as my future portfolio. I'm putting no new money into my mutual funds at Vanguard.000 wrote: ↑Sun Sep 26, 2021 3:42 pmI think ETFs are the future. Be prepared for your "soreness" to increase.UpperNwGuy wrote: ↑Sun Sep 26, 2021 9:20 amMost of Vanguard's ETFs have ERs that are lower than the admiral ERs. In fact, that's a sore point with many of us who use admiral funds at Vanguard.
Re: Treasury fund vs treasury fund index?
UpperNwGuy wrote: ↑Sun Sep 26, 2021 7:51 pm I agree with you that ETFs are the future, so I've started buying non-Vanguard ETFs at Schwab and Fidelity. I view these as my future portfolio. I'm putting no new money into my mutual funds at Vanguard.
You went overboard the ship altogether?!?!
What ETF families are you using for your new portfolio?
-
- Posts: 9479
- Joined: Sun Oct 08, 2017 7:16 pm
Re: Treasury fund vs treasury fund index?
A mix of BlackRock iShares, State Street SPDR, and Schwab.000 wrote: ↑Sun Sep 26, 2021 7:53 pmUpperNwGuy wrote: ↑Sun Sep 26, 2021 7:51 pm I agree with you that ETFs are the future, so I've started buying non-Vanguard ETFs at Schwab and Fidelity. I view these as my future portfolio. I'm putting no new money into my mutual funds at Vanguard.
You went overboard the ship altogether?!?!
What ETF families are you using for your new portfolio?
- arcticpineapplecorp.
- Posts: 15081
- Joined: Tue Mar 06, 2012 8:22 pm
Re: Treasury fund vs treasury fund index?
are adding? or have added?retired@50 wrote: ↑Fri Sep 24, 2021 9:37 amIn this case, based on the PV link below, it appears the active managers are adding "something" worthwhile.
PV link: https://www.portfoliovisualizer.com/bac ... ion2_2=100
we don't know what the future holds. we only know what happened in the past. but we should never assume an active manager who has outperformed an index in the past will necessarily do so in the future. maybe, maybe not. we don't know and shouldn't assume.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions |
- retired@50
- Posts: 12833
- Joined: Tue Oct 01, 2019 2:36 pm
- Location: Living in the U.S.A.
Re: Treasury fund vs treasury fund index?
Touchéarcticpineapplecorp. wrote: ↑Sun Sep 26, 2021 8:55 pmare adding? or have added?retired@50 wrote: ↑Fri Sep 24, 2021 9:37 amIn this case, based on the PV link below, it appears the active managers are adding "something" worthwhile.
PV link: https://www.portfoliovisualizer.com/bac ... ion2_2=100
we don't know what the future holds. we only know what happened in the past. but we should never assume an active manager who has outperformed an index in the past will necessarily do so in the future. maybe, maybe not. we don't know and shouldn't assume.
Have added.
Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Treasury fund vs treasury fund index?
Exchange Traded Funds (ETFs) may be "the future", but they won't overtake regular mutual funds anytime soon. Perhaps in several more decades. Morningstar (9/2/2021), "Farewell, Mutual Funds", link.UpperNwGuy wrote: ↑Sun Sep 26, 2021 7:51 pmI agree with you that ETFs are the future, so I've started buying non-Vanguard ETFs at Schwab and Fidelity. I view these as my future portfolio. I'm putting no new money into my mutual funds at Vanguard.000 wrote: ↑Sun Sep 26, 2021 3:42 pmI think ETFs are the future. Be prepared for your "soreness" to increase.UpperNwGuy wrote: ↑Sun Sep 26, 2021 9:20 amMost of Vanguard's ETFs have ERs that are lower than the admiral ERs. In fact, that's a sore point with many of us who use admiral funds at Vanguard.
"Currently, U.S. mutual funds hold $18.2 trillion in assets, as opposed to $5.5 trillion for ETFs."
"Mutual funds will not disappear. They will survive on sheer inertia for at least several decades, as their annual net redemption rate is but a fraction of their enormous bulk. Furthermore, they will remain a mainstay of 401(k) plans for the foreseeable future, because 401(k) recordkeepers struggle to handle ETFs. (This difficulty is largely operational rather than fundamental.)"
I am not sore about the 0.01% difference in expense ratios between Vanguard Total Stock Market ETF (VTI) and Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). Even with a large holding in total stock market the 0.01% difference is meaningless, it wouldn't change my retirement lifestyle one bit.
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
- ruralavalon
- Posts: 26353
- Joined: Sat Feb 02, 2008 9:29 am
- Location: Illinois
Re: Treasury fund vs treasury fund index?
All three offer some good, very diversified, index ETFs with low expense ratios.UpperNwGuy wrote: ↑Sun Sep 26, 2021 7:56 pmA mix of BlackRock iShares, State Street SPDR, and Schwab.000 wrote: ↑Sun Sep 26, 2021 7:53 pmUpperNwGuy wrote: ↑Sun Sep 26, 2021 7:51 pm I agree with you that ETFs are the future, so I've started buying non-Vanguard ETFs at Schwab and Fidelity. I view these as my future portfolio. I'm putting no new money into my mutual funds at Vanguard.
You went overboard the ship altogether?!?!
What ETF families are you using for your new portfolio?
But why would anyone concerned about tiny differences in expense ratios want to use SPDR S&P 500 ETF Trust (SPY) with an expense ratio of 0.09%?
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
-
- Posts: 9479
- Joined: Sun Oct 08, 2017 7:16 pm
Re: Treasury fund vs treasury fund index?
I dunno. I certainly don't use SPY.ruralavalon wrote: ↑Mon Sep 27, 2021 7:51 amAll three offer some good, very diversified, index ETFs with low expense ratios.UpperNwGuy wrote: ↑Sun Sep 26, 2021 7:56 pmA mix of BlackRock iShares, State Street SPDR, and Schwab.000 wrote: ↑Sun Sep 26, 2021 7:53 pmUpperNwGuy wrote: ↑Sun Sep 26, 2021 7:51 pm I agree with you that ETFs are the future, so I've started buying non-Vanguard ETFs at Schwab and Fidelity. I view these as my future portfolio. I'm putting no new money into my mutual funds at Vanguard.
You went overboard the ship altogether?!?!
What ETF families are you using for your new portfolio?
But why would anyone concerned about tiny differences in expense ratios want to use SPDR S&P 500 ETF Trust (SPY) with an expense ratio of 0.09%?