Everything got temporarily whacked during a brief panic in March. Even US treasuries! Margin investors were scrambling to cover investments gone bad and liquidity had temporarily seized up. Thus the extreme Fed actions.
That’s not so favorable considering that for most high quality bond funds NAV has increased quite a bit.
I’m not so crazy about ultra-short bond funds, as they often seem to get into trouble during credit crises, and I have avoided them since 2008. Most are probably loaded up on corporate bonds. Fidelity FCONX is an example. Fidelity created that fund after their original ultra-short bond fund crashed and burned 2008-2009 and was subsequently closed. FCONX was their “more conservative” answer. Like everything else it blipped down in March. I don’t know how well it recovered, but with a current SEC yield of only 0.05% it’s not worth touching a mostly corporates bond fund.
Gosh that depends on so many things. When she might need the money, what do her other investments look like, does she need funds from her investments to supplement her income, how risk averse is she. Generally to maintain the same risk profile, another FDIC account would be appropriate - another CD or a high yield savings account paying a decent rate.
Online high yield savings are around 0.5% with a few a bit higher. No point in buying a much lower yielding CD. Ally Bank is currently offering a 15 month CD at 0.65%.
https://www.depositaccounts.com/ gives a good overview of the offerings both for savings accounts and CDs.
One comment - think "fixed income", not bonds.
Our fixed income breakdown:
75% total bond index
15% TIPS
5% short-term bond index
5% CDs
One comment - think "fixed income", not bonds.
Our fixed income breakdown:
75% total bond index
15% TIPS
5% short-term bond index
5% CDs
I dunno... at first blush it looks pretty good... 0.6 duration, 1.5 average maturity, decent SEC and distribution yields.
However, why there could be a ~$2 difference between the 52-week high of $50.14 and low of $48.10 at NAV is a bit of a mystery... that's a 4% swing... I wouldn't expect such a swing in an ultra-short bond fund.
Thanks all for the responses - for those who've listed what their bond portfolios consist of - curious how you arrived at that allocation - was it intentional or just sort of happened based upon assets acquired over the years. .....
Many folks (Swedroe, Armstrong among others) recommend using the highest quality bond funds to diversify against stocks. This includes a large dose of government and government backed bonds. Lower yielding, overall, but high credit quality and generally behave much better when equities get hit hard. Corporate bonds, high yield bonds are much more economically sensitive and tend to suffer during bear markets - yield spreads widen compared to treasuries. Global bonds - well that's a whole other ball of wax and I haven't seen anything showing that global bonds improve a portfolio's risk profile.Thanks all for the responses - for those who've listed what their bond portfolios consist of - curious how you arrived at that allocation - was it intentional or just sort of happened based upon assets acquired over the years. I've got a mix of government bonds (27.5% of bond portfolio, corporate bonds (40%), a small slice of muni's (2.5%), global bonds (10%) and other securitized assets (e.g. MBS) (20%). Just sort of evolve over time. What I'm wondering is there any guidance as to what one SHOULD have? How about in taxable vs. IRA accounts? or does it just not matter so much if the bond portfolio is just diversified across types of bonds and maturities?
... is there any guidance as to what one SHOULD have? ....
Good question! Vanguard has Life Strategy funds and Target Date funds. You can see what the "professionals" do by looking at those. They typically put about 2/3rds of their bonds in Total Bond Market Index and the other 1/3rd in Total International Bond Index.
Is that what you should do? I don't know...
I looked into diversifying my 40% total bond allocation by moving 25% to 50% of that into a Total International (non-US) Bond Index but since I'm still w*rking for the next 4 years or so and about 80% of our net worth is in 401(k) plans. Unfortunately neither of my plans offer any international bond index funds.
But I plan on adding some international funds after retirement.
There are many threads over on bogleheads.org regarding ex-US bonds if you want to get a variety of opinions.
Personally, while 1/3 of our equities are ex-US, our bond holdings are purely US.
I'd be happy to buy bonds if I could conveniently buy and hold govt bonds myself in my IRA. But everything seems to be funds instead of individual bonds and therefore has interest rate risk, or complicated.
So I've been using CD's for the last 10 years and quite happy with them.
Until now...
+2 With Schwab it's easy too. You can do it on their web site or (my preference) you can call the bond desk and talk to an expert who is not paid commissions. He can advise on trends, bonds, brokered CDs and other aspects of fixed income. I brokerchecked the guy I like to talk to and he has been in the business for 17 years. Fee for meat-based buying is $25 but IIRC they have usually waived it for me. Web orders don't have fees at all.+1 I could have easily bought individual bonds in either my Vanguard or Fidelity tIRAs... I chose not to because they yields sucked, but that is a different reason.