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Rekenthaler Report

Intermediate-Term Bond Managers Pull Ahead

Their 10-year total return now exceeds those of index funds.


At Long Last
Morningstar’s Miriam Sjoblom caught my attention. For the first time in since forever, she surmised, the 10-year average return for intermediate-term bond funds was above that of  Vanguard Total Bond Market Index (VBMFX). (This article uses that fund as its example, but it applies to all funds that index investment-grade U.S. bonds.)

Cleverly, I feigned skepticism, thereby spurring Miriam to run the numbers. She returned, vindicated. As shown below, until this summer, Vanguard Total Bond Market Index had beaten its actively run competitors in every trailing 10-year period since December 1999. In June, though, its relative-strength line crossed into the red, and it has been headed down ever since.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.