Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
bond funds or cash reserves
Old 04-18-2020, 09:42 AM   #1
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Chicago
Posts: 1,151
bond funds or cash reserves

How much are people willing to go to cash reserves from bonds at this time? How much and why?
ripper1 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 04-18-2020, 11:45 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,247
I have been nervous about the interest rate risk associated with bonds, particularly bond funds, for years... still am. In 2019 many of us found some really good values in some credit union CD specials... 5-year CDs at 3.5% and 3.0%.

Only one of those remains to my knowledge... Navy Federal is still offering a 37-month 3.0% IRA CD according to its website. https://www.navyfederal.org/products...ates-rates.php

That said, I have a lot of cash right now but that came from stock sales and not bond sales. I'm temporarily parked some in VSGDX to eek out a little more yield (1.59% SEC yield) and accepting a smidgeon of interest rate risk (2.2 duration) as I don't see interest rates going up very soon.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 04-18-2020, 01:55 PM   #3
Full time employment: Posting here.
 
Join Date: Oct 2017
Posts: 695
I don't have any dedicated bond funds, but I do have a significant portion invested in VG Balanced Index Fund.


Going forward I am going to rebalance to 3 years cash, VG MM Fund, and the rest in a couple VG stock index funds.


Bonds have their purpose, but I've learned that they can go down in value, and they don't have the long term growth potential as equities. I also learned the hard way that if you buy an individual bond and rates go down that it can get called in. I've also seen them default. I'm not a bond guy.


Sometime in the future interest rates are going to go up. How are bonds going to perform ? I'm more comfortable with cash and diversified equites.
Stormy Kromer is offline   Reply With Quote
Old 04-18-2020, 02:12 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Jan 2013
Location: SoCal, SE Florida, Lausanne
Posts: 2,980
I have 41% cash (money market) and 59% in individual corporate bonds and CDs maturing between 2021 and 2031. My cash position will increment monthly as coupon payments come in. I had 20% cash going into the market sell-off and around mid March I was at about 1% cash and 99% corporate bonds. I have been selling off portions of my portfolio as prices have risen so far above par for many of my bonds/notes that they were not worth holding to maturity. I will wait for the next sell-off to buy back in. I have a shopping list ready of corporate bonds/notes that I will buy during the next sell-off. I keep to a discipline of buying bonds during periods of fund selling and sell them when their YTM is close to the best CD yields of the same duration.
Freedom56 is offline   Reply With Quote
Old 04-18-2020, 02:27 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Posts: 5,303
I am not a bond fund guy. I don’t like the risk to NAV.

I built and maintain about a 7 year bond ladder.

I can design my own paycheck with accuracy and relative safety.

I know individual bonds aren’t for everyone, but I understand them and enjoy hunting for them.
COcheesehead is offline   Reply With Quote
Old 04-18-2020, 06:46 PM   #6
Recycles dryer sheets
 
Join Date: Jul 2017
Location: Southern California Area
Posts: 85
I try to keep a standard constant asset allocation between bonds in general and equities. As for my bonds, I've tended towards mid-range maturities for the last several years, because the yield curve is so flat..and so little extra yield for going long.

So to answer your question directly, I'm not changing my asset allocation, no, so my cash vs. bonds vs. equities ratio has remained constant (other than equities becoming a smaller percentage due to losses, because I haven't rebalanced yet).
Toddtheformeraccountant is offline   Reply With Quote
Old 04-18-2020, 06:49 PM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 32,313
I have a big chunk in high quality bond funds, and I am fine with that. I also have a good amount of cash both in the retirement portfolio and in short-term funds.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 04-19-2020, 08:20 AM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 10,774
I liquidated enough cash to last two or three years in a crunch. But that is a small portion of our portfolio which remains at our target AA.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 04-19-2020, 12:22 PM   #9
Recycles dryer sheets
 
Join Date: Mar 2012
Posts: 386
Both for me. I have about 4 years of living expenses in cash or equivalents. As far as bonds go, I prefer bond index funds and have about another 15-20 years of spending in there. This is of course assuming inflation doesn't go over about 3%.....I know....could be a bad assumption out there in a few years. I'm strongly considering acquiring some TIPS now....have never owned them in the past.
__________________
FIRE'd---4/27/2018 @ 54. DW--RE date 03/01/19.
tdv2 is offline   Reply With Quote
Old 04-19-2020, 12:29 PM   #10
Recycles dryer sheets
 
Join Date: Mar 2010
Location: Just south of Rochester
Posts: 119
I have both. Two years of cash and a mix of short/intermediate/total bond funds
vince is offline   Reply With Quote
Old 04-19-2020, 12:43 PM   #11
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Location: Nashville
Posts: 2,250
No change for us. Bonds essentially 50/50 VFSUX and VBILX, at >15 years of moderate/low spending. True cash is one year of moderate/low spending, with the VFSUX still deemed quasi-cash despite the more-than-zero level of risk demonstrated again in March.

("moderate/low" spending is probably more than we'll be able to spend this year, FWIW)
__________________
OMY * 3 2ish Done 7.28.17
2017ish is offline   Reply With Quote
Steady as she goes
Old 04-19-2020, 01:01 PM   #12
gone traveling
 
Join Date: Dec 2015
Location: Berkeley, Denver, CO, USA
Posts: 1,406
Steady as she goes

We have cash for 6 months of withdrawals.
We have FTBFX (Fidelity Total Bond Fund) for 70 months of withdrawals. This is up a tiny bit from January 2020.
We have THOPX (Thompson Bond Fund) for 32 months of withdrawals. This is down 9% since January and I am not happy.
So, assuming the bond funds don't crater, we are good for 9 years before needing to sell stocks.
Probably too much in this "bucket", but, right now, I am making zero changes.

P.S. My Fido "advisor" told us last August that we should reduce stocks and expand bonds. I ignored his advice.
davebarnes is offline   Reply With Quote
Old 04-19-2020, 06:50 PM   #13
Recycles dryer sheets
retired1's Avatar
 
Join Date: Jun 2011
Posts: 285
All cash reserve in checking, saving, and CD accounts earling from 2% - 3%.... just enough to keep with inflation rates (hopefully)
retired1 is offline   Reply With Quote
Old 04-19-2020, 07:04 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,247
Quote:
Originally Posted by davebarnes View Post
...We have THOPX (Thompson Bond Fund) for 32 months of withdrawals. This is down 9% since January and I am not happy. ...
I don't blame you... that is down almost as much as stocks.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 04-20-2020, 05:51 AM   #15
Recycles dryer sheets
 
Join Date: Mar 2012
Posts: 386
Quote:
Originally Posted by pb4uski View Post
I don't blame you... that is down almost as much as stocks.

I was thinking the same thing.....and that performance doesn't come cheap...the expense ratio is 0.7% on that fund.
__________________
FIRE'd---4/27/2018 @ 54. DW--RE date 03/01/19.
tdv2 is offline   Reply With Quote
Old 04-20-2020, 07:21 AM   #16
Thinks s/he gets paid by the post
VanWinkle's Avatar
 
Join Date: Oct 2017
Location: Morton
Posts: 2,177
Risky bond funds lead to volatility beyond the Total Bond Market. I would not leave cash for a risky bond fund. Having said that, I just invested another 2 years of withdrawals into a short term bond index due to a yield around 2-3% vs the .59 of money market funds. I also have another year of cash in my high
yield rewards checking. If you reach for higher yield with bonds, it will eventually show why it is higher risk. My bond funds have reduced my
portfolio losses by more than 50%. That is why I have them.
__________________
Retired May 13th(Friday) 2016 at age 61.
VanWinkle is offline   Reply With Quote
Old 04-20-2020, 07:26 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 32,313
Quote:
Originally Posted by tdv2 View Post
I was thinking the same thing.....and that performance doesn't come cheap...the expense ratio is 0.7% on that fund.
Looking at what that fund owns - a lot of corporate and a large chunk in BBB rated issues plus more even lower rated, yeah its credit quality wasn’t that high, and those funds often get beat up during bear markets.

Has there been any recovery in the last two to three weeks?
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 04-20-2020, 07:32 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 32,247
No... it just leveled off. THOPX is orange line vs VTSAX... both YTD. THOPX is down ~8.9% YTD vs ~9.2% for VTSAX.
Attached Images
File Type: png Capture.PNG (156.2 KB, 77 views)
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56
pb4uski is offline   Reply With Quote
Old 04-20-2020, 08:07 AM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 32,313
Wow, that’s pretty bad!

Even DODIX which was hit very hard during the worst of it, has managed to recover to positive YTD. It turned around once the Fed was allowed to buy higher quality corporate bonds.

So it really makes me wonder about THOPX.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 04-20-2020, 08:07 AM   #20
Dryer sheet wannabe
 
Join Date: Jul 2012
Location: albany
Posts: 21
I'm 67. have 3 years of cash in MM to get me to SS. I have 600000 in the market will stay there for 10 years. What would you do with 500000 that is also siting in cash. I have about 1000 a week coming in from may Ira to live on but save 1/2 of that to savings. I live on about 2500 a month. what would you do with the 1/2m what bonds. Thanks
My Roth has 200000 in the market. I'm adding 25000 to that
hulurt1 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
ACA when one has no income and is living off of after tax cash reserves Tandemlovers Health and Early Retirement 65 09-03-2013 10:06 AM
Making over my cash reserves plan Alex in Virginia FIRE and Money 30 06-08-2013 03:19 PM
How do you layer your cash reserves? Berkshire_Bull Young Dreamers 0 02-11-2012 09:43 PM
How do you calculate cash reserves? ksr FIRE and Money 22 05-08-2010 11:01 AM
I CAN'T bring myself to use my cash reserves!! thefed FIRE and Money 18 02-28-2008 06:51 PM

» Quick Links

 
All times are GMT -6. The time now is 02:26 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.