Bond, Jones Bond.

[Mike93]

Hi,

I have an account ~200K that was sitting in T.Rowe Price's
Spectrum Income, but it has faired poorly even though rates have
not officially risen yet. So I dumped it and am considering TRP's
municipal or corporate bonds, but they only deal with that over
the phone, and the TRP phone person really wasn't that helpful.
I didn't feel comfortable with it because I guess I don't know
that much about buying municipal bonds over the phone.

I also talked to a man at an Edward Jones office and he said
they have a 'ladder of bonds'
dealing largely with municipals, and he seemed more helpful
by suggesting shuffling bonds to offset risks of interest rates.

Any warnings about EJ's corporate and municipal bonds?
I know they charge more than other companies, but if they
have something that actually works, it might be worth it.

I got the impression that the TRP muni bonds would suffer more
from a rate hike, than from the munis at EJ. The TRP guy just
said 'yes it will go down if rates go up. The EJ website specifically
addresses that problem and hints at a technique to deal with that
problem. Or is that just one of their good selling techniques?

One other thing I've considered is just waiting until rates rise, and
then buying CDs.

Thanks for any advice or pointers, or you can point and laugh as well.


Mike

 

[bingybear]

Having a "bond ladder" is nothing magical, but a pure mutual fund company may not offer individual bonds. Most brokerages do. Owning individual bonds will behave differently than bond funds if you hold to maturity.
If that is what you want to do, you could also check out Schwab, Fidelity, maybe Etrade or tdameritrade.
Note that you have to look at the stability of the bond issuers.
Many options to pick from.

If you are concerned about increasing interest rates, keep the duration of you bonds on the shorter side.

 

[ESRwannabe]

Hi,

I have an account ~200K that was sitting in T.Rowe Price's
Spectrum Income, but it has faired poorly even though rates have
not officially risen yet. So I dumped it and am considering TRP's
municipal or corporate bonds, but they only deal with that over
the phone, and the TRP phone person really wasn't that helpful.
I didn't feel comfortable with it because I guess I don't know
that much about buying municipal bonds over the phone.

I also talked to a man at an Edward Jones office and he said
they have a 'ladder of bonds'
dealing largely with municipals, and he seemed more helpful
by suggesting shuffling bonds to offset risks of interest rates.

Any warnings about EJ's corporate and municipal bonds?
I know they charge more than other companies, but if they
have something that actually works, it might be worth it.

I got the impression that the TRP muni bonds would suffer more
from a rate hike, than from the munis at EJ. The TRP guy just
said 'yes it will go down if rates go up. The EJ website specifically
addresses that problem and hints at a technique to deal with that
problem. Or is that just one of their good selling techniques?

One other thing I've considered is just waiting until rates rise, and
then buying CDs.

Thanks for any advice or pointers, or you can point and laugh as well.


Mike

If I wanted to make some money off of bonds, I'd use a CEF as they will use leverage. I don't believe interest rates will be going anywhere for years. There might be a token raise or two, but I don't see inflation as an issue right now. I think global deflation is the problem. So I personally would be willing to take the extra risk that leverage adds.

Anyway, I'd probably put the money into "PowerShares CEF Income Composite ETF" which tracks the fixed income CEFs. The yield is 9.17% and its invested in 150 CEFs weighted by market cap.

PCEF PowerShares CEF Income Composite ETF ETF PCEF Quote Price News

 

[Mike93]

Having a "bond ladder" is nothing magical, but a pure mutual fund company may not offer individual bonds. Most brokerages do. Owning individual bonds will behave differently than bond funds if you hold to maturity.
[...]

If you are concerned about increasing interest rates, keep the duration of you bonds on the shorter side.

-----------------
I think TRP did offer individual bonds, because he was mentioning maturity
and losing out if you sold too early. He just wasn't that clear. I might
start with a small one and just see how it behaves. As the rating went down,
the interest went up, to where it probably was a junk bond.
Its hard to believe in the 80's you could park your stuff
in CD's and get 17%. Thanks for the advice.

 

[bingybear]

-----------------
I think TRP did offer individual bonds, because he was mentioning maturity
and losing out if you sold too early. He just wasn't that clear. I might
start with a small one and just see how it behaves. As the rating went down,
the interest went up, to where it probably was a junk bond.
Its hard to believe in the 80's you could park your stuff
in CD's and get 17%. Thanks for the advice.

The value of a bond does chance over time. If interest rates go up after you buy a bond, its value goes down. Doesn't matter where you buy it or if it is in a ladder. OK, floating rate bonds may not be as sensitive.
Really should read up on the basics of bonds.

 

[marko]

I've owned TRP's Spectrum Income (RPSIX) for over ten years.

IMHO it hasn't 'fared poorly' and has consistently paid a decent dividend. It has also performed better than the Barclay's US multisector and the price has held fairly stable during that time.

Remember that it is not a true bond fund but also holds a series of equities and so on.

Having said all that, I suspect that the mere mention of Mr Jones on this forum may spark a few negative comments; mostly due to fees.

 

[nun]

If you are interested in a simple way to invest in municipal bonds look at Vanguard

https://investor.vanguard.com/mutual-funds/vanguard-mutual-funds-list?assetclass=bond&taxeff=xmpt

for an easy way to construct a bond ladder look at defined maturity bond funds. But you should expect to get low returns from bonds for quite a few years to come.

 

[MRG]

Hi,

I have an account ~200K that was sitting in T.Rowe Price's
Spectrum Income, but it has faired poorly even though rates have
not officially risen yet. So I dumped it and am considering TRP's
municipal or corporate bonds, but they only deal with that over
the phone, and the TRP phone person really wasn't that helpful.
I didn't feel comfortable with it because I guess I don't know
that much about buying municipal bonds over the phone.

I also talked to a man at an Edward Jones office and he said
they have a 'ladder of bonds'
dealing largely with municipals, and he seemed more helpful
by suggesting shuffling bonds to offset risks of interest rates.

Any warnings about EJ's corporate and municipal bonds?
I know they charge more than other companies, but if they
have something that actually works, it might be worth it.

I got the impression that the TRP muni bonds would suffer more
from a rate hike, than from the munis at EJ. The TRP guy just
said 'yes it will go down if rates go up. The EJ website specifically
addresses that problem and hints at a technique to deal with that
problem. Or is that just one of their good selling techniques?

One other thing I've considered is just waiting until rates rise, and
then buying CDs.

Thanks for any advice or pointers, or you can point and laugh as well.


Mike

E.D.Jones,

Don't give them your money. They will find a way to make it theirs. Seriously Jones doesn't sell anything you can't buy elsewhere. Their fees are very high.

 

[LOL!]

EdwardJones? They will charge you a nice mark-up on those bonds both coming and going. They are not known for doing anybody any favors and are well-known for high fees, both hidden and not-so-hidden.

To put some numbers on this, a simple google search turns up:
http://www.investmentnews.com/artic...-jones-to-pay-20-million-for-bond-overcharges

http://www.bondbuyer.com/news/washi...osure-after-edwards-jones-case-1081969-1.html