Fluctuation of govt securities

[tvz]

I know that stocks and their various indexes fluctuate quite a bit, day-to-day. So ideally, if you're going to put some $ into an equities mutual fund, you'd like to buy when prices are low. And I understand that people use dollar cost averaging to achieve that overall effect. What about government securities? If I have a sizable sum that I want to put into a govt securities mutual fund, should I try to do so when the price is low? Or break it up into smaller amounts and use dollar cost averaging to deposit it? Or is the day-to-day fluctuation small enough that I needn't worry about this?
THANKS
TVZ

[disneysteve]

If I have a sizable sum that I want to put into a govt securities mutual fund, should I try to do so when the price is low? Or break it up into smaller amounts and use dollar cost averaging to deposit it?

If you have a functioning crystal ball and know when the price will be low, then by all means buy then.

If you are like the rest of us mortals, go with dollar cost averaging.

[tvz]

Thanks Steve. Unfortunately, I'm definitely one of the mortals. What I meant to ask is, do government securities fluctuate enough to worry about, or should I just go ahead and invest all of what I have, and not worry about the dollar cost averaging?

Also, just curious--Is there a place where I can see the day-to-day prices of a government securities index, or something that reflects their day-to-day fluctuation in value?

Thnx
TVZ

[disneysteve]

What I meant to ask is, do government securities fluctuate enough to worry about, or should I just go ahead and invest all of what I have, and not worry about the dollar cost averaging?

Despite all of the DCA advice, it you are putting in a lump sum with a sufficiently long time horizon, in the end decades from now, it really won't make much if any difference. That said, I just took a look at VUSTX, the Vanguard Long-Term Treasury Fund. I pulled up a 3-month performance chart. It started that period at about $12.80/share, dropped as low as $12.20/share (a loss of about 4.6%) and reached a high of about $13.50 (a gain of 5.5% from the start and 10.65% from the low point). So even with a government securities fund, there can be substantial price fluctuations and thus the reason for dollar cost averaging.

[tvz]

Thanks Steve! I'll DCA it!

[kv968]

Also, just curious--Is there a place where I can see the day-to-day prices of a government securities index, or something that reflects their day-to-day fluctuation in value?

Thnx
TVZ

Here are some sites that might help you:

2-yr,10-yr and 30-yr monthly price charts
Just click on the bond on the left, set the chart in the middle of the page to "1D" and it'll chart the YTD prices.

Here's one that shows graphs of historical interest rates (not prices) of different treasury maturities:
St.Louis Fed

Treasuries are normally quoted in their yield instead of their price since the price itself is somewhat not important, for lack of a better term. Bond prices move inversely to their interest rates, so if the yield of the bond is lower than bond's coupon than that bond is trading at a premium and will be trading higher than what it was issued at and vice versa.

The above links are a little hard to navigate and may not make sense if you don't know what you're looking at so they may not be of much help. As Steve said, your best bet would probably be to just DCA into whatever fund you're interested in. However I do think you can somewhat "time" your way into the market by just looking at the interest rates. If they get really low (even lower than they are now), that might not be a good time to invest since that means the price is way up. Not that the price can't go up further and the yield lower but if you want to try and time it a bit just keep an eye on that. Day to day there might not be much fluctuation but there may be month to month or even week to week. Again, DCA'ing should help with that and the longer you're planning on holding the fund, the less the little bit of movement will matter.

One other thing to take notice of if you're looking at a bond fund...the duration of the fund. What that number shows (even though it's in years), is approximately how much a fund will rise or fall if there's a 1% change in interest rates.

For example, Vanguard's Long-Term Gov't Bond Fund (VLGIX) has a duration of 15.6 yrs and their Intermediate-Term Gov't Fund (VBIUX) has one of 6.4 yrs. So if interest rates were to go up 1% they would fall approximately 15.6% and 6.4% respectively, all other things held constant. Basically the longer the maturity, the more sensitive bonds are to interest rate changes.

Sorry if I confused you even more

[tvz]

Thanks kv. That's food for thought.