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Looking At The Risk-Reward Characteristics Of BNDX In Light Of Its Low SEC Yield

Published Wed, 09 Oct 2019 10:03:09 -0400 on Seeking Alpha

This follow-up piece to my latest post on the Vanguard International Total Bond Fund (BNDX) focuses on the risk-return characteristics of the fund, mostly carrying back to its May 2013 inception.
In theory, investors should make decisions about an assets future prospects based on analysis about cash flows, economic outlook, and so on. To be clear, I think that is often exactly what goes into an investment thesis.
Often, however, we take our cues about the future based on the asset's behavior in the past. I don't believe that this methodology is altogether unwarranted, especially as it relates to risk profiles.
I will make the case in this piece that BNDX has demonstrated a healthy risk-return performance over the last several years, and that there is no imminent reason that needs to change. The second point that I hope to build is that, over long enough horizons, past can actually serve as the mirror image of prologue.
5-Year Total Return Performance

SA Essential
Over the last five years, the BNDX has offered a very smooth ride with a grand total return of almost 25%. We'll take a look at the volatility investors suffered along the way to achieve that performance, but the orange line above likely gives a basic sense of how the investment played out: decent returns with ultra-low risk.
Please note that a decent chunk of the total return performance for BNDX took place in late 2015 through late 2016, as well as the past year or so. During each of... Read more