Bond vs Bond Fund

[gayl]

I've decided that maybe I should put about 50k into bonds. But I don't know how to do this. I know the mechanics of buying but how do I decide if it's a good one?? It would be in my IRA if that matters. What do I need to read up on to figure this out? About a decade ago Schwab advised me to buy PWZ as it is taxfree. But I don't need taxfree in a tax deferred account.

As to risk tolerance: I've traded stocks for decades, used to trade up to 300× year, level 2 options trader, a little embarrassed that I know very little about bonds so I've just been accumulating cash. We all know how little that earns. I've really REALLY slimmed down investments to just SCHB (86%), SCHD & individual stocks (4%), PWZ (6%), straight cash (4%). Plus EF in a different account ... comfortable with that being just cash. Tired of trading -- started to feel like work

[jazz4cash]

This will be interesting. I presume you’re following the “golden period” thread?

[Dash man]

You can always call Schwab and talk to the bond desk. They’re happy to walk you through it.

I’d avoid any bond fund though.

[aja8888]

Bonds are simply I.O.U.'s with a defined set of payback criteria.

[gayl]

Quote:

Originally Posted by jazz4cash This will be interesting. I presume you’re following the “golden period” thread?

Actually, no. But I will now. Where is that thread

[jebmke]

for this amount I'd be inclined to just stick it in a short term treasury index fund and find something more fun to do than worry about individual bonds.

[foxfirev5]

What's to worry about? I'm pretty simple minded but find no challenge setting up a ladder of CD's, T Bills or whatever. If you don't want to deal with it select auto roll. It all probably takes less time than I spent reading and responding to this post. However, in all honesty, it really doesn't matter. Short term mutual funds may wash out in the end. ��

[gayl]

Quote:

Originally Posted by foxfirev5 What's to worry about?

if you're asking me, I keep thinking about opportunity cost. If bonds ^ 3%, inflation ^ 9%, historically stocks ^ 8% then I'd lose 6% YOY in the long run. But I keep telling myself it's only 4% of portfolio and better than interest on cash

[foxfirev5]

Quote:

Originally Posted by gayl if you're asking me, I keep thinking about opportunity cost. If bonds ^ 3%, inflation ^ 9%, historically stocks ^ 8% then I'd lose 6% YOY in the long run. But I keep telling myself it's only 4% of portfolio and better than interest on cash

Now you're asking about the future which neither I nor anyone else can predict. At 4% of the portfolio the point is moot. IMHO

[jazz4cash]

Quote:

Originally Posted by gayl Actually, no. But I will now. Where is that thread

We are entering a "Golden Period" for fixed income investing
https://www.early-retirement.org/for...d.php?t=114400

[OldShooter]

There's bonds and there's bonds. Govvies, TIPS, Corporate Investment Grade, Corporate US, International, Junk.

Our personal portfolio is 95% in TIPS. DW and I are on the investment committee of a nonprofit with about $3M in corporate investment grade bonds. No funds except MM and ultrashort for occasional parking. Most of our corporates are limited to $10K positions, so we have several hundred different issues carefully diversified across business sectors; consumer durables, aerospace, etc. Our FA has a guy who is expert at this and he spends a lot of time on the diversification as well as studying the issues. Almost all are BBB and this has caused us no trouble.

DW and I have quite a bit more than $50K on our fixed income side, but we would not consider corporates because we don't have enough $$ to afford a well diversified portfolio and we don't want to expend the necessary effort. We also don't like bond funds for reasons hashed and rehashed here many times. YMMV however.

[jazz4cash]

Here’s another good one that is very informative

Muni Bond (and Muni Bond Fund) Discussion
https://www.early-retirement.org/for...d.php?t=104000

[RetMD21]

Quote:

Originally Posted by gayl I've decided that maybe I should put about 50k into bonds. But I don't know how to do this. I know the mechanics of buying but how do I decide if it's a good one?? It would be in my IRA if that matters. What do I need to read up on to figure this out? About a decade ago Schwab advised me to buy PWZ as it is taxfree. But I don't need taxfree in a tax deferred account.

Its awfully easy to buy treasuries. No research needed. Pick a maturity and click a button. I favor TIPS but anything is better than cash at Schwab. If you go with nominals I would keep the maturity to 5 years of less.

[aja8888]

Quote:

Originally Posted by RetMD21 Its awfully easy to buy treasuries. No research needed. Pick a maturity and click a button. I favor TIPS but anything is better than cash at Schwab. If you go with nominals I would keep the maturity to 5 years of less.

Even Schwab's MM fund, SWVXX is paying 1.4% right now.

[mrfeh]

Quote:

Originally Posted by gayl I've decided that maybe I should put about 50k into bonds. But I don't know how to do this. I know the mechanics of buying but how do I decide if it's a good one?? It would be in my IRA if that matters. What do I need to read up on to figure this out? About a decade ago Schwab advised me to buy PWZ as it is taxfree. But I don't need taxfree in a tax deferred account. As to risk tolerance: I've traded stocks for decades, used to trade up to 300× year, level 2 options trader, a little embarrassed that I know very little about bonds so I've just been accumulating cash. We all know how little that earns. I've really REALLY slimmed down investments to just SCHB (86%), SCHD & individual stocks (4%), PWZ (6%), straight cash (4%). Plus EF in a different account ... comfortable with that being just cash. Tired of trading -- started to feel like work

If this is a long term investment (>5 years), just put it in a total bond fund (ie. VBTLX, FXNAX, etc).

https://www.bogleheads.org/wiki/Bogl...g_start-up_kit

[pb4uski]

^^^ Sounds like a sure-fire way to lose money in the near term.

[mrfeh]

Quote:

Originally Posted by pb4uski ^^^ Sounds like a sure-fire way to lose money in the near term.

A) you don't know that
B) I said if it's a long term investment

[pb4uski]

Yup... and I said near term. Let's check back in 6 months and see what happened.

[mrfeh]

Quote:

Originally Posted by pb4uski Yup... and I said near term. Let's check back in 6 months and see what happened.

If the investment is being held for years, who cares about 6 months? It's irrelevant.

[pb4uski]

I guess my point is that given the high likelihood that the Fed will be increasing rates over the next few months this is a bad time to invest in a bond index fund with a 6-7 year duration... a 1% increase in interest rates will create a hole that will take 6-7 years to recover from... so en if held 5 years it will not have recovered.

IMO it is bad advice.