Golden sunsets
Thinks s/he gets paid by the post
- Joined
- Jun 3, 2013
- Messages
- 2,524
The majority of our fixed income portfolio has always been invested in a bond/CD ladder over a five year period. We have never felt comfortable spreading the funds over a period of more than five years. We chose the bond ladder approach because we aren't comfortable with bond funds, where principal can be lost.
Over the last few years as bonds/cd's matured and new 5 year rates fell off a cliff, we did not reinvest the maturing $$'s in new 5year investments, hoping that rates would revert to normal. We have been disappointed that the rate environment continues to be depressed by the economy and The Fed's Prolonged QE policy. We have invested a small portion of the matured $$ into bond funds in the hope of generating some return, but 2013 was a wash for us, with some losing $$, and a few with some small returns. Consequently, we now have an obscene wad of cash earning .085 percent.
I'm curious how others who traditionally ladder have handled this problem. One other point-we stick pretty rigidly to an AA of 55equity/ 45fixed income and rebalance annually, so investing more in equities would violate our investment principles.
Would you bite the bullet and invest in 5/4/3 year bonds to replenish the ladder at low rates? Would you invest in bond funds? Would you sit on cash? Am I missing anything here?
Over the last few years as bonds/cd's matured and new 5 year rates fell off a cliff, we did not reinvest the maturing $$'s in new 5year investments, hoping that rates would revert to normal. We have been disappointed that the rate environment continues to be depressed by the economy and The Fed's Prolonged QE policy. We have invested a small portion of the matured $$ into bond funds in the hope of generating some return, but 2013 was a wash for us, with some losing $$, and a few with some small returns. Consequently, we now have an obscene wad of cash earning .085 percent.
I'm curious how others who traditionally ladder have handled this problem. One other point-we stick pretty rigidly to an AA of 55equity/ 45fixed income and rebalance annually, so investing more in equities would violate our investment principles.
Would you bite the bullet and invest in 5/4/3 year bonds to replenish the ladder at low rates? Would you invest in bond funds? Would you sit on cash? Am I missing anything here?