Bucket 1 Fund

[ferco]

Any opinion on the Fidelity Municipal Income Fund (FHIGX) as a Bucket 1 allocation. Looks pretty stable. 5 star Morningstar rating. Expense ratio 0.47% Beta 0.99 Tax equivalent yield 5.48%.

The TR Price Spectrum Income Fund (RPSIX) also looks attractive.

Any opinions.

PS: The local Edward Jones rep trying to sell me on the Lord Abbott funds (Tax free Income and Bond Funds) with front load of 4-5%.

 

[ziggy29]

Sounds like a fund investing in muni bonds. Given the problems with state and local budgets, I'd want to look very closely at where they are investing. For one thing, I'd rather see investments in "general obligation" debt than "revenue" debt. The former are usually guaranteed by the full taxing authority of the governmental entity whereas the latter are only "guaranteed" by revenue streams coming from the projects they funded.

But as for a "bucket 1" fund, at least as that term is used in the Ray Lucia sense? With a tax equivalent yield of 5.48% it MUST be taking more risk than I think is prudent for a "bucket 1" investment. Bucket 1 is almost exclusively about preservation of capital, and nothing yielding a taxable equivalent of 5.48% in THIS investing environment is going to very dependable for preservation of capital. And many cities are teetering on the brink of bankruptcy due to unsustainable entitlement obligations and pension fund shortfalls, so be careful there.

 

[Rich_by_the_Bay]

I agree with Ziggy.

Bucket one needs to look like cash, act like cash, and be accessible like cash. Most authors suggest things like MMF, fixed-term immediate annuities, bank accounts and, perhaps, very short-term bonds (controversial). Municipals don't pass the test for Bucket 1 in most of the stuff I have read.

Bucket 2 is where they traditionally would go.

 

[samclem]

Agreed. In addition to the default risk noted by Ziggy, a bond fund (particularly one holding longer term bonds) will be very sensitive to changes in interest rates. When rates go up, these investments go down. Bucket one is supposed to contain things that are stable in price. Regardless of the yield of the underlying bonds, you won't be happy if interest rates climb 2% and the value of your shares in bucket 1 goes down 20% (or whatever).

Why did you allow an Edward Jones rep to have your contact info? Did you give it to Amway, too?

 

[ferco]

E Jones rep is next door neighbor...............sort of what you call "curb side" consultation.......beware of friends bearing gifts

 

[hankster]

E Jones rep is next door neighbor...............sort of what you call "curb side" consultation.......beware of friends bearing gifts

That front load looks like a good deal (for him )