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Suggestions for fixed income investments?
Old 11-12-2004, 04:33 PM   #1
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Suggestions for fixed income investments?

Without boring you with the gory details, just about the same time the Fed announced a trend of higher interest rates I found myself with a somewhat sizable (to me) portion of my investments in money market and longer term muni bond funds. I would eventually like much of this as the fixed portion of my portfolio and in something like a total or intermediate bond fund with maybe some long term TIPs or treasuries (if this makes some sense).

I’ve dabbled some of this into a short and an intermediate bond fund and some I bonds, but find myself reluctant to go much longer than a couple of years durations. And though advisors recommended avoiding long term bond funds, my munis have held up well with the interest rises so far.

I know interest rates are not perfectly predictable, but it sounds like those bold enough to predict are saying 6 or maybe 8 more quarter point raises in the next year. I guess three general thoughts are to stay short and wait, bite the bullet go longer with everything now, or cost average over time.

There are probably some fancier things to do, like so CD ladders, but I’m also hoping to keep things a bit on the simpler side. Anything I'm missing?
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Re: Suggestions for fixed income investments?
Old 11-12-2004, 06:22 PM   #2
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Re: Suggestions for fixed income investments?

A little help please.
With the higher interest coming is this better for Muni Funds?
Is it better to go into Muni Funds when rates are higher or lower.
I have a learning disability with bonds and bond funds.
Thanks
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Re: Suggestions for fixed income investments?
Old 11-13-2004, 11:53 AM   #3
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Re: Suggestions for fixed income investments?

Generally speaking, muni funds are better for
higher tax bracket folks. Divide the interest rate
of a muni fund by 1-(your tax bracket) to find
the break-even point with a taxable fund.

To your point, there are many factors that influence
the interest rate ratio of taxable to non taxable
bond funds but I have never heard that the general
level of interest rates as being one of them .

But then, I may be wrong.

Cheers,

Charlie
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Re: Suggestions for fixed income investments?
Old 11-14-2004, 06:14 AM   #4
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Re: Suggestions for fixed income investments?

Personally, I don't think that a retail investor can do better than putting FI money into high yield CDs. Many banks are competing for deposits, so you can get 5 year CDs that pay more than a 10 year treasury and still have the backing of Uncle Sam. Unless you are in a really high tax bracket, I probably wouldn't bother with munis. Long maturity munis get killed in a rate spike just like taxable bonds.
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Re: Suggestions for fixed income investments?
Old 11-14-2004, 12:24 PM   #5
 
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Re: Suggestions for fixed income investments?

Brewer,

Any tricks for finding the best CD rates? I check bankrate.com regularly, and they also list credit union best rates, but i noticed some banks (like ING) aren't listed and wondered if there were any other good deals out there. We don't currently belong to a CU but may be eligible (husband is fed employee).

Thanks
shanna
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Re: Suggestions for fixed income investments?
Old 11-14-2004, 01:21 PM   #6
 
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Re: Suggestions for fixed income investments?

Quote:
Brewer,

Any tricks for finding the best CD rates? I check bankrate.com regularly, and they also list credit union best rates, but i noticed some banks (like ING) aren't listed and wondered if there were any other good deals out there. ...
I check Bankrate.com, too, but they don't tell the whole story.

I found higher interest CDs at local FDIC-insured banks by calling around and by reading advertisements in local newspapers. Many of these were not listed at Bankrate.com. Two local banks were offering 15-month CDs last month for 3.1 to 3.14% APY before the FED's latest interest rate increase.

BTW, it's good to use a web browser which blocks popup advertisements. The Bankrate.com site is lousy with popups.
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Re: Suggestions for fixed income investments?
Old 11-14-2004, 04:01 PM   #7
 
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Re: Suggestions for fixed income investments?

My experience is identical to parnass, i.e.
I check bankrate.com, but can almost always beat their "best" rates by calling and checking around
close to home.

John Galt
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Re: Suggestions for fixed income investments?
Old 11-15-2004, 07:34 AM   #8
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Re: Suggestions for fixed income investments?

In addition to the tactics already mentioned, if you are talking about a jumbo amount ($95 to $100k), you might get a better deal if you approach a small local bank that is trying to grow its deposit base. My parents have successfully done this a number of times.
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