You can take comfort in knowing you’re AOK with Vanguard GNMA. Pay no attention to the doomsayers calling for the bursting of the bond bubble. “Vanguard GNMA is one of my two largest holdings, and I would like to see it as one of your top two,” writes Dick Young in the September issue of Intelligence Report. Dick continues:
Buy Vanguard GNMA
Ginnie Mae’s balance sheet doesn’t use derivatives to hedge or carry long-term debt. What Ginnie Mae does is guarantee investors the timely payment of principal and interest on MBS backed by federally insured or guaranteed loans—mainly loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Ginnie Mae MBS are created when eligible insured or guaranteed mortgage loans are pooled by approved insurers and are securitized. Ginnie Mae MBS investors receive a pro rata share of the resulting cash flows. Ginnie Mae securities are the only MBS to carry the full faith and credit guarantee of the United States government, which means that even in difficult times, an investment in Ginnie Mae MBS is one of the safest an investor can make. In the crash year of 2008, with the NASDAQ down a staggering 40%, Vanguard GNMA was up 7.2%.
Vanguard GNMA is the lead position in my newly introduced Maximizers portfolio and is one of our largest client holdings at Richard C. Young & Co., Ltd. No investor should be without a core position in Vanguard GNMA.