Returns. Ginnie Mae returns are outstanding when compared to other government bonds. According to Morningstar, the Vanguard GMNA Fund (VFIIX) has gotten an average 6.36% for the past ten years. ... Ginnie Mae are generating a much better return than other government bonds, CDs and money market accounts.
The Government National Mortgage Association, or GNMA, insures principal and interest payments on some bond funds. GNMA funds are regarded as low-risk securities compared with other types of bonds and debt instruments. Nevertheless, these funds expose investors to dangers that include inflation and refinance risk.
Rising Rates, Falling Prices
In a rising rate environment, the prices of Ginnie Mae bonds and the share prices of Ginnie Mae funds decline.
Vanguard Mortgage-Backed Securities ETF (VMBS)
Invests primarily in U.S. agency mortgage-backed pass-through securities issued by Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC). Moderate interest rate risk, with a dollar-weighted average maturity of 3 to 10 years.
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This bond fund specializes in government mortgage-backed securities. The fund primarily invests in GNMA securities, which are backed by the full faith and credit of the U.S. government and typically offer a higher yield than U.S. Treasuries.
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Fund facts.
| Asset class | Intermediate-Term Bond |
|---|---|
| Category | Intermediate Government |
GNMA securities, like U.S. Treasuries, are guaranteed and backed by the full faith and credit of the U.S. government and generally are considered to be of the highest credit quality.
Overall, Vanguard GNMA Investor ( VFIIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, Vanguard GNMA Investor ( VFIIX ) looks like a good potential choice for investors right now.
Pass through securities have interest rate risk - if market interest rates rise, their value falls. ... What is NOT a risk of investing in a GNMA? Fluctuating principal value due to interest rate movements. The principal value of a security is fixed - it does not fluctuate.
Congress established Ginnie Mae in 1968. It is also known by the acronym GNMA. When a GNMA-approved bank makes several mortgages, it may sell the pool of mortgages to a bond dealer. The dealer in turn sells securities backed by the underlying mortgages (hence the name "mortgage-backed securities").
The interest you earn from a GNMA bond is fully taxable. ... Interest earned from a Treasury bond is taxable at the federal level, but exempt from state income taxes.
To invest directly in GNMA securities, you need at least $25,000, the minimum investment amount. After that, you can buy more securities for as little as $1. Ask your brokerage firm if it sells GNMA security issues. If so, you can buy them through your broker.
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