Where are you putting your fixed income/ bond investments?

[Mulligan]

I always try to buy my preferreds below par through Fidelity. Originally I purchased an etf, which I still own, but have purchased many to build my own etf, in order to keep fees low. I believe if you google "preferred stocks below par", you will get a link to a list of preferreds way under par to those over par, as well as some past income portfolios. You can do your own due diligence, I buy about 200 of each issue to limit my exposure. Just like when I buy a bond, I do not pay a premium. I have only been burned twice, in GM and Freddie Mac; however I bought those way under par more for speculation than for income. You will be pleasantly surprised; just remember me in your prayers......

I am pretty new to the game, and historically speaking, preferred prices are not "cheap" now. Most of the types of preferreds I am interested in now are generally slightly above par as many were issued when rates where generally higher. The ones that I am looking at (mostly utilities) only have below par issues that also offer low paying yields. I am not trying to snag any capital gains though I risk them being called. The four recent ones I purchased all have spit out their next dividend that covers the call price difference already. I hope they do not get called but that is the risk I am taking to get the higher yield.
Though not intending to ever sell, I do take some comfort in knowing "the spread" between 10 year treasury and utility preferreds is wide now compared to 2006 when the 10 year was above 4%. In fact the price of the preferreds I own are about the same now as they were then prior to the "new low rate interest era".


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[sengsational]

I've got TIPS (2.63% coupon) and stable value (at around 2% now) in the 401k. I don't mind individual bonds, but am not convinced bond funds are a very good deal for the long term investor. I hadn't thought too much about preferred stock, but then again, I'm not the an individual stock picker type.

 

[RE2Boys]

I've been a recent buyer of some CHSCM mostly as a dividend play. Currently selling very close to par. Moved some short term bond fund money to CHSCM.
It is issued by a huge agricultural coop that does not have a common stock.

 

[Mulligan]

I've been a recent buyer of some CHSCM mostly as a dividend play. Currently selling very close to par. Moved some short term bond fund money to CHSCM.
It is issued by a huge agricultural coop that does not have a common stock.

That is where my 2015 HSA contribution is going once the calendar turns.... Until a few weeks ago I had never heard of this company despite it being a Fortune 100 company. Last years earnings covered preferred payouts by 30 times, I read. One to sock away into the vault and forget I hope.


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[aja8888]

That is where my 2015 HSA contribution is going once the calendar turns.... Until a few weeks ago I had never heard of this company despite it being a Fortune 100 company. Last years earnings covered preferred payouts by 30 times, I read. One to sock away into the vault and forget I hope.


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I looked at this company a while ago but never pulled the trigger. This may be a good place to put some fixed income dollars. Looks like the price has a floor of $25 which was the issue price. Yields about 6.6% plus they are in the refining business and supply fuel from their Cenex stations.

CHS Inc. prices public offering of preferred stock at $25 per... -- ST. PAUL, Minn., Sept. 9, 2014 /PRNewswire/ --

 

[Mulligan]

I looked at this company a while ago but never pulled the trigger. This may be a good place to put some fixed income dollars. Looks like the price has a floor of $25 which was the issue price. Yields about 6.6% plus they are in the refining business and supply fuel from their Cenex stations.

CHS Inc. prices public offering of preferred stock at $25 per... -- ST. PAUL, Minn., Sept. 9, 2014 /PRNewswire/ --

It is definitely not your grandfathers farming coop. They got their fingers into everything. They are planning on building a $3 billion fertilizer plant in N. Dakota to take advantage of that cheap natural gas. I read they intended to call one of their earlier prefereds but the farmers who own the private shares and also own the preferreds too raised hell and wanted to keep clipping those 8% coupons so they decided to extend the life of that issue.


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[aja8888]

It is definitely not your grandfathers farming coop. They got their fingers into everything. They are planning on building a $3 billion fertilizer plant in N. Dakota to take advantage of that cheap natural gas. I read they intended to call one of their earlier prefereds but the farmers who own the private shares and also own the preferreds too raised hell and wanted to keep clipping those 8% coupons so they decided to extend the life of that issue.


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I don't think too much wrong can happen with this co op as people will continue to eat and drive cars and trucks. They have two small refineries that are equipped to refine low quality crude oil (which is cheap) and own the pipelines and terminals. As long as they are not drilling for crude, the price risk is out.

Seems like a good place to park "bond money" until rates go up, especially for us older guys who can't be heavy in risk assets.

 

[clifp]

Roughly 40% is in Penfed CD between 3% and 5%, 50% is in short term Sallie Mae (ISM/OSM) inflation adjusted bonds which pay 2%+ inflation. The other 10% is in misc.

Almost all of my fixed income assets mature in 2017 and 2018, I just hope we get back to normal interest rate environment by then,.

 

[mathjak107]

Higher rates usually go hand in hand with higher inflation. After inflation and taxes it is usually near break even anyway.

 

[audreyh1]

What was "normal" a decade ago, may not be "normal" again for many decades in the future.

 

[clifp]

What was "normal" a decade ago, may not be "normal" again for many decades in the future.

Perhaps, but in the last 5 year central banks of the developed countries have injected what most experts have called an "unprecedented" amount of liquidity into the world's financial systems. You could go back hundreds of years and not find a decade where sovereign debt rates are this low

I'll be the first to admit that I've been dead wrong about interest rates since 2010 or so. Although in my defense I have plenty of company.

 

[audreyh1]

Perhaps, but in the last 5 year central banks of the developed countries have injected what most experts have called an "unprecedented" amount of liquidity into the world's financial systems. You could go back hundreds of years and not find a decade where sovereign debt rates are this low

I'll be the first to admit that I've been dead wrong about interest rates since 2010 or so. Although in my defense I have plenty of company.

There was a period in the 40s and 50s with pretty low interest rates.

With global economic growth so low, threat of deflation here and there especially from overseas, etc., I just don't see how something different with interest rates can be expected anytime soon......

Maybe when US reaches full employment and we really start to see wage inflation. Labor shortage is a real possibility in the not too distant future.

 

[ReadySkiDaddy]

I was/am worried about rising interest rates undermining bond values.

Don't abandon bonds.
Don’t let rate fears scare you out of bonds
Why Bond-Bubble Fears Are Overblown | Financial Planning

 

[mathjak107]

What was "normal" a decade ago, may not be "normal" again for many decades in the future.

it took us 40 years just to get to this point.

 

[papadad111]

Cash. No yield in bonds and down side risk.

 

[audreyh1]

it took us 40 years just to get to this point.

Right, so it might take us 40 years to get back.

 

[audreyh1]

Cash. No yield in bonds and down side risk.

No yield? Seriously?

 

[mathjak107]

in the mean time with everyone shunning bonds especially the longer term bonds TLT THE LONG TRESEAURY BOND FUND WAS UP ANOTHER 25% THIS YEAR.

the 5 year bond in germany went negative return yesterday so all we need is a flight to safety and long term treasuries the red headed step child can soar again.


if i was a speculator i would bet the ranch on the long bond getting another good run up as soon as stocks falter.

 

[Closet_Gamer]

My experience has only been buying stocks/etfs/mutual funds in a brokerage account.
Do you buy preferreds directly like other stocks in a brokerage account ?
Or do you buy an etf of preferreds ?

I use PFF as a preferred vehicle. Exp ratio is 0.49% thru schwab.

Intuitively, I agree with others that if you have a sufficiently large fund with a long horizon, buying individual positions and bonds or preferreds is a better choice that funds or ETFs...but I lack the time to do that properly right now...especially as I'm still accumulating and would need to contestantly find the next position.

 

[Winemaker]

I own some PFF which is an etf with an emphasis on financial (big banks) and it pays dividends quarterly I believe. I prefer PGX that is more diversified and pays monthly, and I have done extremely well with it as well as individual preferreds. In 2008, I moved $150k of my 401k into fixed income instruments outside of the plan which was lacking that AA. In October, after retiring, I moved another $100K and purchased exclusively more preferreds. Those preferreds are up $3.7k since October. My original fixed income account from 2008 is up $40K. Future performance is not guaranteed as the past performance, but current happiness is definitely still on the rise.

 

[mathjak107]

our corporate bond funds still had a good year last year returning around 8% total return. out total bond fund returned 5.50%.

luckily we dumped high yield stuff early on ,that stuff was dismal not even returning 2%

so the plan stays as is until the picture changes.

 

[pb4uski]

Yeah, I suspect that my emphasis on mitigating interest rate risk cost me about 150-200 bps of return on my total portfolio last year compared to just being in Total Bond as bonds had a pretty good year.

 

[mathjak107]

usually when we all see the same thing on the horizon the markets love to disappoint the majority.

our newsletter held firm on holding high quality intermediate bond funds and returns were great. the fidelity corporate bond fund returned over 8.00%

fidelity total bond came in at 5.50% we held that too..

 

[mickeyd]

My tax favored accounts contain Intermediate-term Index fund @ VG. Also I am using the STB fund in my taxable side as a back-up to cash that is stashed @ Ally in an online acct.

It's some kind of a plan...

 

[audreyh1]

in the mean time with everyone shunning bonds especially the longer term bonds TLT THE LONG TRESEAURY BOND FUND WAS UP ANOTHER 25% THIS YEAR.

the 5 year bond in germany went negative return yesterday so all we need is a flight to safety and long term treasuries the red headed step child can soar again.


if i was a speculator i would bet the ranch on the long bond getting another good run up as soon as stocks falter.

Bond guru Gundlach is betting that way.

FTABX was up 10.75% in 2014 and took another jump on Friday.

I'm not letting go to of my longer term stuff or my intermedate term. My short-term position may be hit a little, but I'll ride that out.