obgyn65
Thinks s/he gets paid by the post
I would agree with this. However, I am one of the most conservative investors here. Hard to change habits.
no cd's what to do
- Thread starter frank
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OAG
Thinks s/he gets paid by the post
+1 for staying with CD's. We are 100% CD's and have been for about 35 years now (always long term ladders). Even low interest long term (7 year) CD's will preserve principal (yes, there may even be a period when the official inflation rate will exceed interest rates (has happened before (1979-1981 or so)). What many seem to not consider in advising someone to go to the Stock Market are three factors: Age, Pensions and SS Benefits. If one is older, has a pension and adequate SS benefits to pay routine living expenses there is no (IMO) benefit to head to the Stock Market.
obgyn65
Thinks s/he gets paid by the post
I am so pleased to see I am not the only very conservative investor here 
We are in the minority, but FIRE is still possible while being very conservative as long as we live below our means. Some here are very vocal against this opinion. Be prepared
We are in the minority, but FIRE is still possible while being very conservative as long as we live below our means. Some here are very vocal against this opinion. Be prepared
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a CD alternative from a recent thread on this ER site:
ETFs | Guggenheim Investments
YTM/YTworst are somewhat higher than CDs in the 3-7 yr period.
ETFs | Guggenheim Investments
YTM/YTworst are somewhat higher than CDs in the 3-7 yr period.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have transitioned some of my fixed income allocation to these. I wanted to do CDs in my IRA but didn't like the hassles of having IRAs with different banks to stay under the FDIC limits. Besides, now my IRA is all with Vanguard so it is convenient. I considered brokerage CDs from Vanguard but their yields were very low (~1.2%).
For me, the Bulletshares were a good substitute for a CD but you need to be aware that they are different from CDs in may respect. Unlike CDs that are FDIC insured, they have credit risk and some of the bonds in the underlying portfolio could default. Also, their NAV and fair value will vary with interest rates, however it would be expected that the value would converge to the aggregate par value in the maturity year. Finally, distributions are regular, but are more volatile than a CD.
For me, I think they will work well, but depending on your objectives they may not. YMMV.
galeno
Recycles dryer sheets
Anything decent in fixed income will get you a NEGATIVE real return. SEC yields: 5yrTbill = 1.13%. 5yrCD = 1.60%. BND = 1.68%. PTTAX = 2.09%.
You'd better buy and hold some equities. I suggest a MINIMUM of 40%.
You'd better buy and hold some equities. I suggest a MINIMUM of 40%.
photoguy
Thinks s/he gets paid by the post
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I wouldn't consider VYM (Vanguard High Yield Dividend ETF) stable. If you plot it's performance over the past couple years it's basically the same as the S&P 500 index.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+1 Some people seem to view this as a bond substitute which is a big mistake IMO. Good stock - good yield and track record - but still a stock with significant volatility and not anywhere near being cd like.
eytonxav
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I am skeptical that these will react like an individual bond when it comes to interest rate risk; do you believe there is only credit/default risk with these bulletshares.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Why wouldn't it? It is nothing more than a pass-through of a bond portfolio at the end of the day. From any given point in time the aggregate distributions to the ETF holder would be the same as the aggregate cash flows from the bond portfolio (net of the 24 bps expenses) as I understand it. As I understand it it is essentially a pass through except for fund expenses and a bit of retention or extra distribution of cash flow to keep the NAV stable.
I don't see any interest rate risk if held to maturity just like a portfolio of individual bonds. If you want out before the maturity year and interest rates have changed then the NAV will reflect the fair value of the bonds as of that date, but the fair value would converge to par when the bond matures.
I don't see any interest rate risk if held to maturity just like a portfolio of individual bonds. If you want out before the maturity year and interest rates have changed then the NAV will reflect the fair value of the bonds as of that date, but the fair value would converge to par when the bond matures.
eytonxav
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The yields are pretty low on their corp bond etfs and you end up purchasing them at a premium, so it seems possible to me you could end up losing money due to raising rates without any credit problems occuring. If there was no chance of losing money should rates rise and the shares are held to maturity, wouldn't their website say that in a clear manner provided there were no negative credit impacts (I am not sure I noticed any statement to that effect, but most of these disclosures are confusing to me). They may be OK, but I am holding back as the yields are quite low and the product is untested in terms of performance to maturity date.
). They may be OK, but I am holding back as the yields are quite low and the product is untested in terms of performance to maturity date.could be wrong but my general impression was that depending on bond coupon and current rates, bonds could be bought at either discount or premium and therefore you would get back at maturity either more or less than your original investment, but you are buying on yield to maturity/worst so in principle, knew your return going in.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
The yields are pretty low on their corp bond etfs and you end up purchasing them at a premium, so it seems possible to me you could end up losing money due to raising rates without any credit problems occuring. If there was no chance of losing money should rates rise and the shares are held to maturity, wouldn't their website say that in a clear manner provided there were no negative credit impacts (I am not sure I noticed any statement to that effect, but most of these disclosures are confusing to me
I have been buying the 2019/2020 Corporate issues at a slight premium to NAV, so I would expect my annual return to maturity to be roughly the YTW of the underlying bond portfolio less 24 bps less a slight adjustment for the premium (before any credit defaults).
ETFs | Guggenheim Investments provides a calculator that will do an estimated net acquisition yield calculation for you based on a purchase price you provide. On June 7, the NAV was $20.79 and they were trading at ~$20.90 so the estimated acquisition YTW was 2.21% (before any defaults).
I guess that I don't view the yield as being low. IIRC the 2.21% yield is about the same as the VFICX after considering the .04% ER difference and the duration is similar as well (5.14 for BSCJ vs 5.30 for VFICX).
The 2011 and 2012 series had maturity distributions that were a bit north of $20. See ETFs | Guggenheim Investments
I really don't see how I could end up losing money on these if I hold them to 2019/2020 absent any credit events (which would affect bonds funds as well). I can see where my yield might be lower than the 2.21% in the example depending on how the distributions play out but the a slightly lower yield in exchange for lower interest rate risk is attractive to me.
The thing I do not like about them is the way they unwind in the terminal year is that they hoard the maturity proceeds until the end of the year which depresses the return, but if they continue to do so I will just sell 6 months to a year before the end of the maturity year.
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obgyn65
Thinks s/he gets paid by the post
I just found a 10 year CD, 2.5%. At least I will preserve my capital.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Interesting. Where?
obgyn65
Thinks s/he gets paid by the post
I bought the CD via Edward Jones. Please feel free to PM me if you want more details.
obgyn65
Thinks s/he gets paid by the post
By the way I just checked my Wellesley, which I bought a few weeks ago after many people here advised me to be less conservative. My 401k is now below the value when I bought Wellesley. It is the only account where I have been losing money this year. I am thinking of sending the bill to MichaelB or Midpack
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REWahoo
Give me a museum and I'll fill it. (Picasso) Give
And the point of your post is...?
obgyn65
Thinks s/he gets paid by the post
That some of us may feel better about our CDs at 2.5% than seeing our Wellesley go down in value. I hope the OP makes the right choice for him/her.
Before taxes.
obgyn65
Thinks s/he gets paid by the post
This is correct.
Please note I plan to keep my Wellesley over the next few years anyway and will compare results overtime. Hopefully we will be able to compare whose approach was best over the long term. I will not cheat with any result I may get. I hope to come back to these posts one day and reflect upon the rationale behind some of our investment decisions.
Please note I plan to keep my Wellesley over the next few years anyway and will compare results overtime. Hopefully we will be able to compare whose approach was best over the long term. I will not cheat with any result I may get. I hope to come back to these posts one day and reflect upon the rationale behind some of our investment decisions.
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Dawg52
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
There are a couple on Fidelity's inventory list as of this moment.
https://fixedincome.fidelity.com/ftgw/fi/FICorpNotesDisplay?name=CD
By the way I just checked my Wellesley, which I bought a few weeks ago after many people here advised me to be less conservative. My 401k is now below the value when I bought Wellesley. It is the only account where I have been losing money this year. I am thinking of sending the bill to MichaelB or Midpack
You might want to give it more than a couple of weeks. . .
Live And Learn
Thinks s/he gets paid by the post
I hear that. I'm frowning as I watch my bonds decline in value, even tho they were all fairly short duration. But my stocks are up. Sometimes it's hard to watch the daily gyrations in my portfolio, where I could be up, or down, a months salary at a time. Everyone has their "risk tolerance", and if I wanted to work another 5 or 10 years I'd probably be in something less volatile also. But I have to suck it up and hope that the future is at least somewhat representative of the past. I can tell you, its not easy and I often feel OMY (or TMY, and sometimes FMY) syndrome as a real affliction that I am struggling against.
* FMY= five more years
