New to CDs

[2Muchfun]

I am retired and like to hold 2 years of cash, as well as having 35% of my portfolio in bonds. I have no pension and do not plan to start SS for another 10 years, when I turn 70. Total Bond Fund in Vanguard has been negative and CD rates are rising. What are your thoughts on starting a CD ladder and move some of my cash and bonds to a bond ladder? Also, is your preference Vanguard or on-line banks for the bond ladder?

[ShokWaveRider]

For now we have ours in VMMXX, in December when our main investment CDs mature we will start the ladder for the next 5 - 7 years.

[audreyh1]

Bond funds usually have positive years after negative years. I simply rebalance annually.

[mrfeh]

I think making such a decision based on what total bond has done over the last 6 months is a bad idea.

[COcheesehead]

If you like predictability, ladders are a good idea. You will know exactly how much and when you’ll have it.

[Another Reader]

I don't care for Vanguard's tools, but I have a lot of cash in CD's at Fidelity. I also have treasury paper. Treasuries are state tax exempt if you are looking at laddering in a taxable account.

VMMX is not a bad place to keep short term cash. At 2 percent and liquid, it beats short term treasuries and CD's.

[OldShooter]

Quote:

Originally Posted by 2Muchfun ... Total Bond Fund in Vanguard has been negative and CD rates are rising.

This is what happens to bond funds when rates are rising. It may or may not recover before you need to withdraw funds.

Quote:

Originally Posted by 2Muchfun What are your thoughts on starting a CD ladder and move some of my cash and bonds to a bond ladder? Also, is your preference Vanguard or on-line banks for the bond ladder?

Good idea, though you have to watch rates between government securities, CDs, and investment grade corporates. Right now they are very, very close.

CDs are not fun if you need to get your money before maturity. Govvies, OTOH, are highly liquid and you probably wouldn't take much of a haircut if your plans change. You might want to consider putting the nearest tranche of the ladder into t-bills or t-notes even if you want to score a few additional basis points in CDs or corporates for the balance of your ladder.

Re Vanguard, AFIK Vanguard, Schwab, and Fidelity have similar capabilities though I have read here about a ladder-management option at Fidelity for which there is a fee. Regardless, I don't think there is any reason to screw around with buying CDs directly from banks when you can buy them the same place as you keep the rest of your investments. I have also read, again here, that sometime the rates the banks advertise to customers are lower than the rates they are offering on brokered CDs. That is certainly worth checking.

[Dtail]

Quote:

Originally Posted by OldShooter This is what happens to bond funds when rates are rising. It may or may not recover before you need to withdraw funds. Good idea, though you have to watch rates between government securities, CDs, and investment grade corporates. Right now they are very, very close. CDs are not fun if you need to get your money before maturity. Govvies, OTOH, are highly liquid and you probably wouldn't take much of a haircut if your plans change. You might want to consider putting the nearest tranche of the ladder into t-bills or t-notes even if you want to score a few additional basis points in CDs or corporates for the balance of your ladder. Re Vanguard, AFIK Vanguard, Schwab, and Fidelity have similar capabilities though I have read here about a ladder-management option at Fidelity for which there is a fee. Regardless, I don't think there is any reason to screw around with buying CDs directly from banks when you can buy them the same place as you keep the rest of your investments. I have also read, again here, that sometime the rates the banks advertise to customers are lower than the rates they are offering on brokered CDs. That is certainly worth checking.

Absolutely true with Fidelity.

[friar1610]

I've stayed away from brokered CDs and buy them directly from my credit unions. The reason is, as I understand it, that brokered CDs are subject to the same downside as bond funds if I unexpectedly need the money during a period of rising interest rates. That is, they will be put up for sale on the open market and, if interest rates have risen since I bought them, they will likely sell for less than I paid for them. Of course, I understand that direct CDs are subject to EWPs, but at least I know before I buy how big the hit will be if I need to redeem early. Of course, if you are absolutely certain you can let the brokered CDs go until maturity, what I mentioned is a non-problem.

I have a Total Bond Fund, direct CDs and I-Bonds in my fixed income segment. I sorta like the fact that each has a different twist on how you are impacted if/when you need access to your money. That way I can pick whichever is most profitable/least painful if I suddenly need the money.

[Helena]

.

I have money in an FDIC-insured local bank CD which pays over 3% each year for a 5 year term. I arranged for the interest to be automatically deposited into my checking account quarterly.

[2Muchfun]

Thanks everyone for your input!

[Helena]

.

I have a CD coming due at another bank this week, so I called my local bank who has offered a 3% 5 year CD for a few months now.

Beginning this week, the rate has been increased to 3.50% for new money... how's that for great synchronicity !!

[ShokWaveRider]

Quote:

Originally Posted by Helena . I have a CD coming due at another bank this week, so I called my local bank who has offered a 3% 5 year CD for a few months now. Beginning this week, the rate has been increased to 3.50% for new money... how's that for great synchronicity !!

Please Share.....

[Helena]

Quote:

Originally Posted by ShokWaveRider Please Share.....

Bank is First Guaranty Bank headquartered in Louisiana, but has a few branches in Texas [one where I live in NE Dallas County.] I was told by the branch manager over the phone today, but the website is not updated yet.

https://www.fgb.net/rates

https://www.bankrate.com/banks/first...y-bank/422433/


CityCU in the Dallas/North Texas area also offers a 3.50% 5 year CD.

https://www.citycu.org/en/rates

.

[ShokWaveRider]

Quote:

Originally Posted by Helena Bank is First Guaranty Bank headquartered in Louisiana, but has a few branches in Texas [one where I live in NE Dallas County.] I was told by the branch manager over the phone today, but the website is not updated yet. https://www.fgb.net/rates https://www.bankrate.com/banks/first...y-bank/422433/ CityCU in the Dallas/North Texas area also offers a 3.50% 5 year CD. https://www.citycu.org/en/rates .

Thanks