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Short-term bond fund or CD in retirment account?
Old 04-29-2007, 01:23 PM   #1
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Short-term bond fund or CD in retirment account?

In about a week, I'll want to choose either a short-term bond fund or a CD for my retirement portfolio. The 6 month CD pays 5.06 APY. The bond fund is an ETF (CSJ)and is currently yielding 4.84%. Any ideas of the best way to go on this?
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 01:34 PM   #2
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Re: Short-term bond fund or CD in retirment account?

depends if you think rates are more likely to drop then rise?


if you tyhink drop go for the bond fund
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 01:35 PM   #3
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Re: Short-term bond fund or CD in retirment account?

As long as you don't need the funds for 6 months, take the higher yield and guaranteed principal of the CD.

If only all investment decisions were so easy.
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 01:36 PM   #4
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Re: Short-term bond fund or CD in retirment account?

Why not a money market fund paying 5.1% or more?
My spouse purchased a 3 month CD paying 5.2%. The extra 0.1% interest might make her another $20. Hardly worth thinking about. It probably does not matter what you do unless the amount is tens of thousands of dollars.
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 02:19 PM   #5
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Re: Short-term bond fund or CD in retirment account?

If you are subject to state income taxes, I would also consider a 6 month t bill, which would be exempt from stsale and local income tax.
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 02:21 PM   #6
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Re: Short-term bond fund or CD in retirment account?

Quote:
Originally Posted by LOL!
Hardly worth thinking about. It probably does not matter what you do unless the amount is tens of thousands of dollars.
Well, there still is the $283, 000+ that was handed over to me.
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 02:30 PM   #7
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Re: Short-term bond fund or CD in retirment account?

If you are messing with $283K, then you had better be getting better than 5.1% interest rate on it. Why are the two choices you presented so dismal?
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 03:02 PM   #8
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Re: Short-term bond fund or CD in retirment account?

Quote:
Originally Posted by LOL!
If you are messing with $283K, then you had better be getting better than 5.1% interest rate on it. Why are the two choices you presented so dismal?
Whoops, LOL. That money doesn't really belong to me--apparently some REALLY, REALLY jealous people (actually some helpful, well-grounded people) on the board have suggested how to handle the situation and moving to Estonia is no longer a viable option. Sorry about the confusion, LOL. But, you know, trying to return it has become a chore.

Actually, for the short-term bond fund vs. the CD I'm talking about $40K.
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 03:10 PM   #9
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Re: Short-term bond fund or CD in retirment account?

Vanguard quotes 5.25% for a 3 month CD and 5.2% for a 6 month CD. Their mm fund pays 5.1%. I must admit that we have some cash sitting in lower paying mm funds, but it needs to be available for deployment.

OTOH, 0.25% extra interest on $40K for 6 months is just $50.

But if this pushes you over the edge and makes you transfer your retirement account to VG, it could be a good thing.
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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 03:19 PM   #10
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Re: Short-term bond fund or CD in retirment account?

Quote:
Originally Posted by LOL!
Vanguard quotes 5.25% for a 3 month CD and 5.2% for a 6 month CD. Their mm fund pays 5.1%. I must admit that we have some cash sitting in lower paying mm funds, but it needs to be available for deployment.

OTOH, 0.25% extra interest on $40K for 6 months is just $50.

But if this pushes you over the edge and makes you transfer your retirement account to VG, it could be a good thing.
Thanks, LOL...
I appreciate the helpful information.
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Re: Short-term bond fund or CD in retirement account?
Old 04-29-2007, 04:20 PM   #11
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Re: Short-term bond fund or CD in retirement account?

I have opted for the Vanguard ST Bond index fund for half of my Cushon Fund (most call it the emergency fund). This gives me the flexability that I require (if I need to pull it out today I can sell it and direct the funds to my PMMF and write a check). It also gives me an opportuinity to possibly receive a bit better return (with some risk) than the PMMF. I do not believe that a CD gives these things.

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Re: Short-term bond fund or CD in retirment account?
Old 04-29-2007, 08:10 PM   #12
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Re: Short-term bond fund or CD in retirment account?

the equivalent APY on VMMP is about 5.23%; on V ST Corp, about 5.18%. 6 mo CDs are available at >5.4% (see http://bankdeals.blogspot.com/ ) if the time horizon is truly 6 months, i'd shy away from ST bonds funds, but would favour it for longer time frames.
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