A Bond Fund for Uncertain Times (PTTDX)

February 11, 2009 by  
Filed under Commentary, Mutual Funds, Pick of the Week

On Tuesday President Obama told ABC’s Nightline, “Wall Street, I think, is hoping for an easy way out of this thing and there is no easy way out.” Although he’s pushing a nearly trillion dollar stimulus package, the newly-elected chief executive is still suggesting tough times are ahead. The markets reacted by heading lower. The lack of confidence in the stock market is almost palpable. Without a strong reassurance, it’s difficult for everyday investors to bet on a positive short-term direction.

Markets Still Uncertain: Where to Go Next

As we mentioned last week, we are still partial to cash-like options. If you hold relatively stable assets in your investment accounts, you won’t expect giant swings in either direction. Your principal is safe and maybe even a little boring, but at least you will sleep better at night. You won’t be unpleasantly surprised next January when you open your end-of-year statements. Right now we like low-risk options. Cash is one of those options, but there are others.For instance, high quality bonds could meet your risk tolerance. Granted, bonds carry more risk than CDs or money market funds. However, quality fixed-income assets add a new dimension to your portfolio, especially if you’re only investing in stocks right now. Yes, you must be willing to lose 4% to gain 4%, but that’s a small price to pay to get a return in this environment. In fact, it may be one of the better plays right now.

A Total Return Fund in Bonds

If you’re ready to dip your toe in the fixed income side of the pool, you should consider PIMCO’s Total Return Class D Fund (PTTDX). This 5-Star Morningstar rated fund holds high-quality, intermediate-term bonds. The fund seeks to maintain capital while seeking a modest return goal in interest, capital gains, dividends, and distributions. Managed by Bill Gross himself, PTTDX is PIMCO’s flagship mutual fund available for everyday investors. There are two compelling reasons you should consider PTTDX for your portfolio.

#1 Bill Gross Knows The Fed

If you’re going to buy a bond fund, there’s no better place to go than PIMCO. Founded by the “King of Bonds”, Bill Gross, the Pacific Investment Management Company knows fixed income. Moreover, former-Fed Chairman Alan Greenspan is now a consultant for PIMCO. In addition, Gross is in regular deliberations with the current Fed chairman. Given that bonds are directly tied to interest rates, it only seems prudent for PIMCO to be privy to such conversations. Bill Gross makes full use of his connections in Washington.

#2 Stable Returns in Difficult Environment

At a time when many funds are reeling from market blows, PTTDX has weathered the storm. Last year, as the S&P 500 dropped -37%, PTTDX gained +4.5%. Most of us would have been very pleased with those results. Since inception, PTTDX has gained in nine out of ten full years. This year, PTTDX is up +0.59%. Although this fund cannot boast many double-digit return years, it hasn’t suffered the way most equity-based funds have. To go with a bond-based, total return fund in an uncertain market, buy PTTDX.

Comments

5 Responses to “A Bond Fund for Uncertain Times (PTTDX)”

  1. neal eisner on May 28th, 2009 8:03 pm

    In comparing PTTAX, with PTTCX with PTTDX, I am a bit confused as to why PTTDX has no commission or deferred load charge and is rated 5***** vs the other which have 4**** plus it appears via Morningstar that PTTDX has a higher yield as well as better 10 year performance.

    Why would one purchase PTTAX when they can Purchase PTTDX?

  2. Mr. Gorby Gorb. on May 28th, 2009 8:49 pm

    Appears that when one comments the comment cannot be deleted….I mean I thought comments were going to PIMCO so as to have questions answered….Guess they instead go the the world. Tried to delete the comment after realized it probably did not go to PIMCO???? Tough to delete.

  3. Art Berman on August 7th, 2010 7:05 am

    Is there a ETF which mirrors PTTDX ?

  4. Ron Rowland on August 8th, 2010 3:32 pm

    Not directly. PIMCO has not offered an ETF version of this fund. I view PTTDX as an aggregate or core bond fund. Two aggregate bond ETFs to consider are iShares Barclays Aggregate Bond (AGG) and Vanguard Total Bond Market ETF (BND). However, they are indexed and not actively managed.

  5. Art Berman on August 8th, 2010 6:22 pm

    Ron, Thanks for the reply. PIMCO’s management is the reason I bought PTTDX Art