|
|
Asset Allocation with CD’s
07-31-2019, 01:55 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,660
|
Asset Allocation with CD’s
I’ve never had a CD before and was thinking about getting some of the Navy Fed 18 month at 3%.
My new portfolio mix would be 70% stocks, 18% Bonds, 8% CD’s and 4% Money Market. So would you think of this as 70/18/12 or 70/26/4?
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
07-31-2019, 02:05 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
|
On my spreadsheet I'd see it as 70/30. Though I do have a place where I track cash so maybe 70/18/12. I see CDs more like MMs than Bonds but somebody will probably come up with a good justification for 70/26/4. Or how about 70/18/8/4?
|
|
|
07-31-2019, 02:07 PM
|
#3
|
Thinks s/he gets paid by the post
Join Date: Oct 2017
Location: Tellico Village
Posts: 2,622
|
70/26/4
__________________
Retired May 13th(Friday) 2016 at age 61.
|
|
|
07-31-2019, 02:25 PM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
|
Quote:
Originally Posted by VanWinkle
70/26/4
|
This ^^
|
|
|
07-31-2019, 02:31 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
|
Waiting for the justification on 70/26/4.
My justifications are:
70/30 Equities vs non-equities
70/18/12 CDs are cash, like MMs
70/18/8/4 CDs are cash, but not immediately accessible so different than MMs
I guess 70/26/4 is that CDs have a duration and set interest rate like bonds? Assuming they are FDIC I think that guarantee puts them in a different class.
|
|
|
07-31-2019, 02:42 PM
|
#6
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
|
The 4% is liquid cash. The bonds and CD's are fixed income, guarantee does not matter. I don't break out prefunded muni's which are 100% guaranteed. Why would I do it for FDIC?
70/26/4
|
|
|
07-31-2019, 03:25 PM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,376
|
Quote:
Originally Posted by RetireAge50
I’ve never had a CD before and was thinking about getting some of the Navy Fed 18 month at 3%.
My new portfolio mix would be 70% stocks, 18% Bonds, 8% CD’s and 4% Money Market. So would you think of this as 70/18/12 or 70/26/4?
|
70/26/4.... I view CDs as a akin to a US Treasury Bond... both are "risk-free" and fixed income.
It's not cash because of the EWP.... IOW it can't be converted to cash without the cost of the EWP.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
07-31-2019, 03:47 PM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2017
Location: City
Posts: 10,351
|
Quote:
Originally Posted by RetireAge50
I’ve never had a CD before and was thinking about getting some of the Navy Fed 18 month at 3%.
My new portfolio mix would be 70% stocks, 18% Bonds, 8% CD’s and 4% Money Market. So would you think of this as 70/18/12 or 70/26/4?
|
What problem are you trying to solve?
|
|
|
07-31-2019, 03:50 PM
|
#9
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,300
|
Quote:
Originally Posted by VanWinkle
70/26/4
|
+2
CD's can be a valid substitute for bonds, especially longer dated ones not counting as cash.
__________________
TGIM
|
|
|
07-31-2019, 03:54 PM
|
#10
|
Thinks s/he gets paid by the post
Join Date: Aug 2013
Posts: 1,660
|
Quote:
Originally Posted by OldShooter
What problem are you trying to solve?
|
None. Just a random thought for idle chit chat.
I like to have about 75% stocks, 20% Bonds and 5% cash. We got a windfall and are throwing the money into CD’s for now and thus the question.
|
|
|
07-31-2019, 04:14 PM
|
#11
|
Thinks s/he gets paid by the post
Join Date: May 2019
Posts: 2,821
|
I always express my AA as equities to everything else. Everything else is fairly stable, but volatility comes from equities.
|
|
|
07-31-2019, 04:47 PM
|
#12
|
Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,919
|
Quote:
Originally Posted by GenXguy
I always express my AA as equities to everything else. Everything else is fairly stable, but volatility comes from equities.
|
I am pretty much this way, now. I used to have the same issues, and came to the realization that it just does not matter whether you consider a CD to be a "bond" or "cash". Even our MM accounts are paying 2%, similar to some CD's and some bonds (though on the LOW end). So the only "cash" we have, that is money earning next to nothing at the B&M bank, is less than 1%. Not worth segregating.
__________________
If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
|
|
|
07-31-2019, 04:52 PM
|
#13
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 11,300
|
Some retirement calculators also effectively use this further differentiation between CD's and cash.
__________________
TGIM
|
|
|
07-31-2019, 05:21 PM
|
#14
|
Thinks s/he gets paid by the post
Join Date: Feb 2009
Location: Cville
Posts: 1,604
|
I have basic AA 65/35, but break down equities to large cap, mid and small, and international. Then I break down bonds to cash, us bonds and intl bonds. CDs fit into the cash allocation. With pen fed and navy you can break them out any time and forfeit I think 3 months of earnings so I think of them as cash.
__________________
FIRE 31 Aug, 2018 - Always leave every place better than you found it, always give more than expected or Due
|
|
|
07-31-2019, 05:56 PM
|
#15
|
Thinks s/he gets paid by the post
Join Date: Jun 2017
Location: Western NC
Posts: 4,633
|
Little difference in rates between bonds & CDs at this time...I'd count them the same.
|
|
|
07-31-2019, 06:01 PM
|
#16
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2007
Posts: 13,228
|
I guess my distinction is that I own bond funds, which are less like CDs.
|
|
|
07-31-2019, 06:06 PM
|
#17
|
Thinks s/he gets paid by the post
Join Date: Feb 2009
Location: Cville
Posts: 1,604
|
Quote:
Originally Posted by ncbill
Little difference in rates between bonds & CDs at this time...I'd count them the same.
|
One difference is that a Traditional CD won’t loose value like a bond can. Also no fees like a bond fund or cost to buy and sell. I consider more like cash or MM.
__________________
FIRE 31 Aug, 2018 - Always leave every place better than you found it, always give more than expected or Due
|
|
|
07-31-2019, 08:40 PM
|
#18
|
Thinks s/he gets paid by the post
Join Date: Jun 2002
Posts: 1,637
|
I solved that dilemma years ago by relabeling the "bond" category to "fixed income". Into that category go my bond MFs, CDs and I-Bonds. Problem solved. MMFs and savings accounts in a separate "cash" category (although, strictly speaking, they are also FI.)
__________________
friar1610
|
|
|
07-31-2019, 08:55 PM
|
#19
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,376
|
Quote:
Originally Posted by RetireBy90
One difference is that a Traditional CD won’t loose value like a bond can. Also no fees like a bond fund or cost to buy and sell. I consider more like cash or MM.
|
Brokered CDs have interest rate risk just like a bond.... bank CDs do not.
There is no penalty to cash out a MM... most long bank CDs have 180 day EWPs.... that makes then different.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
08-01-2019, 08:05 AM
|
#20
|
Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,884
|
I consider anything that isn't in equities as fixed income (that includes bonds, CDs and cash).
No reason to complicate things.
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|