Thinking of Moving Fixed Income AA to CDs. Advice Please

[Cheesehead]

Hello,

I am not that financially astute and was thinking of moving the 49% of our nest egg that is not equities into laddered CDs. Does anyone have a good reason not to? Of this 49% we have 28% in four bond funds we can place in CDs. Here's the AA of them presently, based on seeing an hourly CFP, a Fidelity advisor and following Bob Brinker's newsletter, however, I'm worried that if interest rates rise we will lose value. Also, High Yield can be volatile and acts more like stocks. Some advisors say that it should be listed in equities in one's AA. Thoughts? Thanks.

7.15% VFISX VANGUARD SHORT TERM TREASURY Average Duration = 2.3 Yrs

7.16% VFSTX VANGUARD SHORT TERM INVESTMENT GRADE BOND FUND Average Duration = 2.5 Years

7.08 VWEHX VANGUARD HIGH YIELD CORPORATE BOND FUND Average Duration = 3.9 Years

6.98 VIPSX VANGUARD INFLATION PROTECTED SECURITIES

 

[eytonxav]

Where is the other 21% of your FI? Your durations look pretty short and this doesn't look like a bad mix of bond funds to me. Even if rates rise, its the velocity of change that will matter, and I suspect any increases will be small and gradual over time and could very well rise and then fall again depending on economic conditions.

 

[soupcxan]

As long as you don't panic sell and your duration is not very long, rising interest rates are actually better for the bond fund investor over the long run. And forecasting interest rates is not that easy.

 

[Cheesehead]

Hi DFW_M5,

The rest is in CDs and 2% is in I Bonds. The other 50% is in index equity funds

 

[eytonxav]

Hi DFW_M5,

The rest is in CDs and 2% is in I Bonds. The other 50% is in index equity funds

Given that, I think your FI allocation looks like a good conservative mix, and I see no reason to make it more conservative.

 

[Cheesehead]

Thanks!