Does gnma make money

Posted: Dany22 On: 25.06.2017

CD rates and money market accounts currently offer dismal returns. What is an investor to do to get higher returns, yet not drastically increase risk? Who is Ginnie, and does she have anything to do with Fannie and Freddie?

Ginnie Mae , otherwise known as the Government National Mortgage Association, is a U. Ginnie Mae provides guarantees on mortgage-backed securities MBS backed by federally insured or guaranteed loans, mainly loans issued by the Federal Housing Administration, Department of Veterans Affairs, Rural Housing Service, and Office of Public and Indian Housing.

Ginnie Mae securities are the only MBS that are guaranteed by the United States government. Ginnie Mae, which extracts fees for guaranteeing mortgage investors are repaid, is a smaller and more conservative player in the mortgage market than Fannie Mae and Freddie Mac were. Ginnie Mae returns are outstanding when compared to other government bonds. According to Morningstar, the Vanguard GMNA Fund has gotten an average 6. The 1, 5, and 15 year returns also show similar returns, so its beta is very low.

This is a perfect investment to add into your security bucket fixed income of assets. At the moment, I have a portion of my security bucket into a Ginnie Mae mutual fund. Ginnie Mae are generating a much better return than other government bonds, CDs and money market accounts. So you are getting a premium return compared to treasuries, yet getting the same default risk as a treasury. As with all bonds, they can suffer interest rate risk and should always be part of your investment equation.

If the FED increases interest rates, the returns on Ginne Maes could decrease. They also can have albeit very low default risk from the government.

The primary issue is when investing through mutual funds, because not all bond funds are alike. According to the Washington Post , some Ginne Mae funds invested in other bonds, and got burned during the stock market crash. I always recommend using Morningstar to do your research. Find out what other securities the mutual fund invests in and at what percentage.

Most people are best suited to invest via a Ginnie Mae mutual fund. In my opinion, the two best funds are from Vanguard and Fidelity:. Both have a low expense ratio, consistent performance, and a low minimum deposit requirement. There are many other GMNA mutual funds available. Do your research on Morningstar for others. With active ETFs becoming more common, I suspect a Ginnie Mae ETF might be on the horizon.

Make Money in a Bear Market

Larry, how high do interest rates need to go to cause any significant impact in performance of GMNAE bonds? Do you consider this a wise investment for millenials? I am 68 and want to retire next year. I have all my retirement in mutual funds and worry about another drop in the stock market.

With the Fed interest rates as low as they are now is it wise to invest in the Ginie Mae Bonds? What do you think is going to be with FGMNX in future. How further deep it can go? What is your recommendation from now to next 2 years? I am seeing the current performance dropping off substantially and am wondering if it is time to look to some other fund to replace the Ginnie Mae, do you have any recomendation? FGMNX has been steadily dropping in the past month or so.

Am retired and really cant afford to get hurt big time right now. Wondering if now is the time to bail out of FGMNX?? Ron, if you have that much money into FGMNX ie not diversified then you know the answer to your own question. If you sell your ginnie mae mutual fund before the end of the month, are you entitled to the interest earned to the sell date.? That is a question to ask the specific mutual fund.

does gnma make money

Generally with mutual funds you are only entitled to the interest of the ex-dividend date of the mutual fund, not the ex-dividend date of the stocks and bonds owned within the fund itself. Confirms my interest in selecting GNMA for my Rollover IRA. If we have a spike in interest rates muni funds have recently taken a hit this would cause a dip in GNMA NAV prices which would results in a decrease in your net return.

Thanks for the article. Do GNMAs have varying maturities similar to treasuries? I noticed that the duration for the vanguard GNMA is low, like 1. Thank you for any help you can give. They are callable bonds since the owner of the mortgage can prepay or refi. They tend to act much like long term bond funds. Right now I think we are on the cusp of some rate hikes which will decay the principal values of GMNA funds.

Hey Paul, thanks for visiting. I don't think your assessment is way off. The question is when will rate hikes occur?

I think we have a least one year, because the FED will base a rate increase upon the unemployment number. I have never heard of Ginnie Mae before. I appreciate this post.

Ginnie Mae Investing

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does gnma make money

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Ginnie Mae Investing CD rates and money market accounts currently offer dismal returns. Now that you know what is Ginnie Mae, lets talk about these factors: What kind of returns should you expect? What risks do you have when investing?

The Risks (and Rewards) of GNMA funds - AssetBuilder Knowledge Center

How can you invest in them? Risks As with all bonds, they can suffer interest rate risk and should always be part of your investment equation. In my opinion, the two best funds are from Vanguard and Fidelity: Learn What the Wealthy Know Sign Up for Our FREE Weekly Newsletter.

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Morningstar Review - The Perfect Service for Value Investors Top Resources to Help You Find the Best CD Rates How to Get a Guaranteed Rate of Return on Your Money. Notify of new replies to this comment. Hi CB, To be expected based upon the treasury rates are increasing. Hi Paul, That is a question to ask the specific mutual fund. Hi Bill, Thanks for visiting. Be aware of the difference between bonds and bond funds. Recent Alternative Investments Articles The Highs and Lows of Peer-to-Peer Investing Why Putting Gold Into an IRA Is a Dumb Idea How to Get a Guaranteed Rate of Return on Your Money Health Savings Account: A Tax Efficient Investment Alternative?

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