I'm trying to get my head around bond fund investing.
As I understand it, it's best to hold a bond fund investment for at least as long as the fund's effective duration. So for example, according to Morningstar, FXNAX has an effective duration of 5.92 years (let's round up to 6 years). Therefor it's best to buy shares and hold them for at least 6 years.
But what about buying additional shares prior to the end of 6 years? Would the clock start over again for the new shares that you bought?
So say on June 5 2021 I bought 100 shares of FXNAX. Today is June 5 2024 so ideally I should hold those 100 shares for at least another 3 years.
But say today I buy another 100 shares of FXNAX. Does that mean that I should avoid selling all 200 shares in 3 years? If I'm considering selling any of my 200 shares, should I limit it to not more than 100?
As I understand it, it's best to hold a bond fund investment for at least as long as the fund's effective duration. So for example, according to Morningstar, FXNAX has an effective duration of 5.92 years (let's round up to 6 years). Therefor it's best to buy shares and hold them for at least 6 years.
But what about buying additional shares prior to the end of 6 years? Would the clock start over again for the new shares that you bought?
So say on June 5 2021 I bought 100 shares of FXNAX. Today is June 5 2024 so ideally I should hold those 100 shares for at least another 3 years.
But say today I buy another 100 shares of FXNAX. Does that mean that I should avoid selling all 200 shares in 3 years? If I'm considering selling any of my 200 shares, should I limit it to not more than 100?
Statistics: Posted by BBurki — Wed Jun 05, 2024 2:43 pm — Replies 2 — Views 223