Investment advice

[lawman]

I have $100,000.00 cash in a savings account I want to invest. I am looking for 2% - 3% return and want a conservative investment..I'm thinking intermediate term corporate bond fund but I don't know how to research them..Are there other options? What funds are good and what are their symbols?

 

[Dash man]

I have $100,000.00 cash in a savings account I want to invest. I am looking for 2% - 3% return and want a conservative investment..I'm thinking intermediate term corporate bond fund but I don't know how to research them..Are there other options? What funds are good and what are their symbols?

Interest rates are rising rapidly, so a bond fund may not be the best place at this time. Maybe a few short term individual bonds that you hold to maturity would be a better option, so you’d get your principal back. I’ll be doing that in April when a number of CDs are maturing.

 

[lawman]

Interest rates are rising rapidly, so a bond fund may not be the best place at this time. Maybe a few short term individual bonds that you hold to maturity would be a better option, so you’d get your principal back. I’ll be doing that in April when a number of CDs are maturing.

Would that be better than a short term ETF?

 

[Dash man]

Would that be better than a short term ETF?

That’s up to you. A short term bond fund may not have drastic moves, but may lose a bit as you can see in this graph. Holding investment grade individual bonds will likely return all your principal when they mature. If you create a ladder, you can replace the maturing bonds with higher interest bonds if rates continue to climb.

 

[FreeBear]

What a fund with only about 30% equities, like Vanguard Target Retirement Income fund (VTINX). The return has been 8% over the last decade. If this is too high, just heavily salt with cash (online savings account, money market fund). The basic idea is to use 15-30% equities to give your yield, then bonds and cash so you sleep at night. Obviously, can be implemented in other ways, like 15% total market, then the rest in bonds and cash.


I think it's great you can live with 2-3% yield. You don't have to swing for the fences!

 

[corn18]

Is there a specific purpose for this money or is it part of your overall portfolio?

 

[lawman]

That’s up to you. A short term bond fund may not have drastic moves, but may lose a bit as you can see in this graph. Holding investment grade individual bonds will likely return all your principal when they mature. If you create a ladder, you can replace the maturing bonds with higher interest bonds if rates continue to climb.

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Individual bonds scare me..I worry about default. I owned Enron stock.

 

[Freedom56]

I have $100,000.00 cash in a savings account I want to invest. I am looking for 2% - 3% return and want a conservative investment..I'm thinking intermediate term corporate bond fund but I don't know how to research them..Are there other options? What funds are good and what are their symbols?

Put limit orders on corporate notes below par. I posted a short list of some of the notes that I bought last March in the Preferred Stock thread today. I always buy when there is panic selling by bond funds. I'm looking at 1 to 3 year notes (maturities from 3/21 through 4/24). The coupons range from 4.25% to 7.5%. I always buy well below par with limit orders so my yields are much higher. Avoid bond funds but use them to time your purchase. Bond fund yields are far too low. Most of bond funds are down YTD, but my individual corporate notes are up YTD. Bond funds have been loading up with low yield corporate notes over the past 6 months and those notes are the first ones to sink when rates move up.

 

[Dash man]

Individual bonds scare me..I worry about default. I owned Enron stock.

Muni bonds are another option, and government/municipal entities that are investment grade rarely default.

 

[38Chevy454]

Is there a specific purpose for this money or is it part of your overall portfolio?

This is a good question, as it helps understanding of what this $100K is intended for.

 

[Finance Dave]

You might be able to get a private placement annuity with an insurance company for about 2%. I think the minimum term I've seen is 3 years. The only risk is default risk, so pick a good insurer.

 

[lawman]

Is there a specific purpose for this money or is it part of your overall portfolio?

No..I don't plan to spend it however since I have capital gains in all my older investments this would be the one I would use should I need funds..

 

[corn18]

No..I don't plan to spend it however since I have capital gains in all my older investments this would be the one I would use should I need funds..

So it's just part of your fixed income allocation. I'm a three fund boglehead so my canned answer would be BND.

But last year I moved from TBM and put all my fixed income into my 401k Stable Value Fund (SVF) that is currently paying 2.2%.

If you don't have access to an SVF, and you don't need the money right away, just put it in BND and don't worry about it. Everyone hates low rates AND they don't want bond yields to increase because their bond funds/ETFs would go down. That's silly. Bond funds may go down, but they will recover. If you definitely need the money in less than 3-5 years, just put it in a savings account or CD.

 

[lawman]

So it's just part of your fixed income allocation. I'm a three fund boglehead so my canned answer would be BND.

But last year I moved from TBM and put all my fixed income into my 401k Stable Value Fund (SVF) that is currently paying 2.2%.

If you don't have access to an SVF, and you don't need the money right away, just put it in BND and don't worry about it. Everyone hates low rates AND they don't want bond yields to increase because their bond funds/ETFs would go down. That's silly. Bond funds may go down, but they will recover. If you definitely need the money in less than 3-5 years, just put it in a savings account or CD.

What about IGSB?

 

[lawman]

I'm heavy invested in bond funds..I"ve been wishing for higher rates for many years..I love it when my bond fund share price goes down as that gives me hope that interest rates will soon go up...

 

[corn18]

What about IGSB?

Sounds like you are chasing yield. That's ok but it comes with risk. IGSB is yielding 3% and BND is yielding 2.57%. IGSB dropped 11% in Mar 2020 and BND dropped 5%. Not sure what you gain with IGSB other than volatility and 0.43% yield.

 

[Sunset]

I'm heavy invested in bond funds..I"ve been wishing for higher rates for many years..I love it when my bond fund share price goes down as that gives me hope that interest rates will soon go up...

Then you will love BND, as it's dropping like crazy. Seems like 1/2% per day

Eight months of this and it'll be at zero

 

[DrRoy]

Individual bonds scare me..I worry about default. I owned Enron stock.

You can't get the 2-3% with stable principle with a fund. Pick a company you are not worried about with a good credit rating.

 

[lawman]

You can't get the 2-3% with stable principle with a fund. Pick a company you are not worried about with a good credit rating.

I researched bonds on my Schwab account... All I found was bonds yielding much less than 1% on three year bonds..

 

[OldShooter]

I researched bonds on my Schwab account... All I found was bonds yielding much less than 1% on three year bonds..

Call the bond desk with your question.There are good guys there and they aren't paid on commission.

 

[DrRoy]

I researched bonds on my Schwab account... All I found was bonds yielding much less than 1% on three year bonds..

You would need to go out to 10+ years.

 

[coveredbridge]

Put limit orders on corporate notes below par. I posted a short list of some of the notes that I bought last March in the Preferred Stock thread today. I always buy when there is panic selling by bond funds. I'm looking at 1 to 3 year notes (maturities from 3/21 through 4/24). The coupons range from 4.25% to 7.5%. I always buy well below par with limit orders so my yields are much higher. Avoid bond funds but use them to time your purchase. Bond fund yields are far too low. Most of bond funds are down YTD, but my individual corporate notes are up YTD. Bond funds have been loading up with low yield corporate notes over the past 6 months and those notes are the first ones to sink when rates move up.

OP is looking for a conservative investment. Based on the bonds you bought last March, it looks like you are investing in sub-investment grade corporates, not really what I would call conservative. Please let us know when you settle at a discount on those 1 to 3 year corporates with 4.25% to 7.5% coupons in this rate environment. The bid on the 3 year 7.5% coupon right now is 111.4, and that's a BB- credit rating, well into sub-investment grade. It's got a long way to drop to get under par.

 

[MrSmee]

Can I hijack this thread with a question about bond funds? I only have options inside my Megacorp plan for Short Term and Intermediate Term bond index funds. The latter says it tries to replicate the Bloomberg Barclays U.S. Aggregate Bond Index. How do I think about owning an index fund like this vs owning the underlying bonds? If I own a bond I can always hold it to maturity and get my principal back and have a guaranteed coupon rate right? But if I own an index fund are the managers going to be buying and selling bonds to match the index? So I will be "gambling" on the index itself? If my objective is to lock in my gains and have a conservative hedge on inflation is this the place to go? Sorry if these are newbie questions - I've been a 100% equity investor to date.

 

[lawman]

Can I hijack this thread with a question about bond funds? I only have options inside my Megacorp plan for Short Term and Intermediate Term bond index funds. The latter says it tries to replicate the Bloomberg Barclays U.S. Aggregate Bond Index. How do I think about owning an index fund like this vs owning the underlying bonds? If I own a bond I can always hold it to maturity and get my principal back and have a guaranteed coupon rate right? But if I own an index fund are the managers going to be buying and selling bonds to match the index? So I will be "gambling" on the index itself? If my objective is to lock in my gains and have a conservative hedge on inflation is this the place to go? Sorry if these are newbie questions - I've been a 100% equity investor to date.

In my opinion I feel using funds and ETF's are a good choice if you plan on long term investing.. ( 10 years on intermediate bond funds )..I have very little in funds that I ever plan to take out except dividends. I think those managers are better and managing stocks and bonds than I am and I like spreading the risk. As far as index funds go I basically think in the same terms..

 

[jazz4cash]

You might be able to get a private placement annuity with an insurance company for about 2%. I think the minimum term I've seen is 3 years. The only risk is default risk, so pick a good insurer.

I think I agree if you are referring to a multi year guaranteed annuity (MYGA) product. I see 2.45-2.60 for 3-4 yr terms from well known insurance companies with B+/A ratings. Is private placement really an accurate term for these products?