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Old 05-15-2017, 09:08 AM   #41
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Are the CDs in Vanguard safe? That's where I have my IRA account and I don't want to transfer in/out to get higher CDs rate.
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Old 05-15-2017, 11:10 AM   #42
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Are the CDs in Vanguard safe? That's where I have my IRA account and I don't want to transfer in/out to get higher CDs rate.


Not sure what you consider safe but if you are talking about FDIC CDs issued by banks that are brokered by Vanguard, most folks would consider anything with FDIC coverage to be safe. That's what Fido offers for my IRA. Some folks avoid brokered CDs due to liquidity I guess. I think I'm one of em but I appreciate your desire to stay with Vanguard when the benefit of opening another IRA is marginal.
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Old 05-15-2017, 11:24 AM   #43
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Current IBond rate 1.96, and adjusts for CPI inflation. Go to Gov't site for details.
Our older 2001-2003 bonds are returning more than 5% .
Depends on where you think inflation will go. In our case we consider that it was a good move, and we always felt safe.

Won't work for large amount, but then, each person could invest up to $60K/year, which we were able to do. Anyway, every little bit counts.
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Old 05-15-2017, 11:30 AM   #44
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Not sure what you consider safe but if you are talking about FDIC CDs issued by banks that are brokered by Vanguard, most folks would consider anything with FDIC coverage to be safe. That's what Fido offers for my IRA. Some folks avoid brokered CDs due to liquidity I guess. I think I'm one of em but I appreciate your desire to stay with Vanguard when the benefit of opening another IRA is marginal.
Are they considered brokered CDs and what's wrong with brokered CDs. Sorry I'm really clueless when it comes to CDs that are not FDIC insured.
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Old 05-15-2017, 11:33 AM   #45
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In your shoes I would look for a bullet fund. I have become uncomfortable with the interest rate and negative convexity risk that has crept into bond funds so I started switching to IBDL. This is an investment grade corporate bond fund that is highly diversified and all of the bonds mature in 2020 (when the fund distributes its cash and dissolves). In a potentially rising rate environment, I can roll down the curve over time and know when my money matures rather than trust to the vagaries of a portfolio manager. You may be able to find something similar in the muni world.
In looking at IBDL I have a question. Its selling at 25.5. Would I be correct that it terminates at 25 and therefore we're paying a 2% premium? If so then if it's yielding 2.25 % then the real yield is about 1.25%?/pa? That's assuming that in 2019 we sell it.

Thanks
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Old 05-15-2017, 11:59 AM   #46
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Are they considered brokered CDs and what's wrong with brokered CDs. Sorry I'm really clueless when it comes to CDs that are not FDIC insured.
Vanguard brokered CDs are FDIC insured, just like "bank" CDs (CDs that you purchase directly from a bank rather than through a broker like VBS). No problem if you hold them to maturity.

The main difference is that brokered CDs are not redeemable early... so if you want out you have to sell them like you would a bond... so they have interest rate risk.
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Old 05-15-2017, 01:45 PM   #47
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In looking at IBDL I have a question. Its selling at 25.5. Would I be correct that it terminates at 25 and therefore we're paying a 2% premium? If so then if it's yielding 2.25 % then the real yield is about 1.25%?/pa? That's assuming that in 2019 we sell it.

Thanks
https://www.ishares.com/us/products/...-corporate-etf

Take a look at the "characteristics" section. "Average yield" of 2.22% is effectively the YTM of the underlying portfolio (YTW in the case of callable bonds). The average coupon is 3.32% on the bonds in the portfolio, so the average bond in the portfolio is trading at around 103. You are effectively buying short term bonds at a premium and getting YTM of about 2% with minimal credit risk and steadily declining interest risk as the portfolio grinds toward maturity.

In contrast, it looks like the Lehman Agg I shares fund sports a portfolio YTM of about 2.5%. In return you get average maturity of 8 years and almost a third of the bonds being MBS pass throughs with a lot of negative convexity/extension risk. No thanks.
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Old 05-21-2017, 07:21 PM   #48
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This past January, I had a truck load of CDs coming to maturity and at that time CIT bank was having a promotion paying $95 when you opened their 1.05% HYS with a minimum of $25K keeping it for 3 statement cycles. Due to their omission of limiting the promotion to only one account, I opened 14 accounts of $25,000 each giving me $95 for each new account. They currently have a promotion paying $100 when you open only one new spring 1.15% account with a minimum of $15K again keeping it in the account for 3 "full" cycles.
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Old 05-22-2017, 08:21 AM   #49
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A few pluses for Vanguard brokered CD's:

- FDIC insured on face value
(though you may pay more or less than face value. You could actually make money if
the bank goes under! )

- Rates tend to be higher, especially for longer term
( I see a 8 year 2.94% CD at the moment)

- You can sell them at anytime
(though they may go up or down in value. inverse of interest rates)

- For building a ladder, you can buy them in small increments out to 10 years

- no maturity instructions are needed, bank won't auto roll over onto new cd.
( I hate the 10 day window that some banks give you)

- you can have multiple CD's from multiple bank in one vanguard account, so
easier to watch and manage.


Negatives:

- The spread between buying and selling is high compared to stocks
(not a problem if holding to maturity)

- interest rate risk in that value will go way down if interest rates go up.

- somewhat confusing interface to learn for buying
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Old 05-22-2017, 09:20 AM   #50
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With a similar objective recently, I chose Metropolitan West Unconstrained (MWCRX). My previous favorite was Riverpark ST High Yield (RPHYX) which is closed.

If you can accept a bit more risk then intermediate bond funds such as DODIX DLTNX can be interesting. Also PONDX.
LOL, I utilize everyone of the funds you mentioned.
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Old 05-22-2017, 09:50 AM   #51
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I recently left the W2 world with a significant severance. That and a habit of having significant cash reserves has now upped our cash holdings to around $600K. They are currently spread over 4 accounts but none of them earn more than 1%.

Our other holdings (pre-tax and post tax) amount to around $4M and are all in well diversified stocks and stock funds, so I was thinking this might be a good time to build up some bond holdings (say around $400K, leaving $200K for our emergency fund) but I have no experience in doing that. We have significant invested assets in both Vanguard and Fidelity so funds by either of these companies would work.

I am primarily looking for relatively safe funds that return better than 1%. Eventually, if there is a market crash, we would use these funds to buy more equities - this was a good strategy for us post 2008 and I wish we had $600K then - only had $100K which I put right in! Any advice from the more experienced investors on how to go about it would help. Tax efficiency is a bonus - we live in California and are top tax bracket so our marginal rates are over 50%

Thanks in advance!

You should definitely look into municipal bond funds. I'd suggest using a combination of funds. First I'd put some money into Vanguard and I'd spread it out into a short-term muni fund, an intermediate muni fund, and a CA specific muni fund (state and federal tax free). Then if you want to increase your returns you could look at putting some into a municipal bond closed end fund (CEF).
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Old 05-22-2017, 04:31 PM   #52
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LOL, I utilize everyone of the funds you mentioned.
Well, that is a bit stunning, 5 funds. Please feel free to share other insights, I can only guess i would like them.

Montecfo
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Old 05-23-2017, 01:09 PM   #53
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Well, that is a bit stunning, 5 funds. Please feel free to share other insights, I can only guess i would like them.

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Nothing special, other bond holdings include: FFRHX, FGMNX, FNMIX, WEFIX, and SHY. Other investment grade bond holdings reside in Wellington twins.
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Old 05-23-2017, 02:03 PM   #54
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I usually check depositaccounts.com reward-checking-accounts and I see you can make 1.5% on $250K with a Lexington KY based "MemoryBank" (apparently this is to boost their entry into web banking). The site says the institution is healthy and you only have to use your debit card 5 times a month.

My credit union is 2.25% but only up to $10K and you need to use your card 30 times! I'd never get there.

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Earn 1.5% Annual Percentage Yield† (30X the national average*!) for the first year on balances up to $250,000, if you meet these simple requirements each monthly statement cycle1:

Receive at least 1 electronic deposit such as payroll, transfers from other financial institutions, or even Popmoney2.
Use your debit card for at least 5 in-person or online purchases3.
Get your statements online.
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Old 05-30-2017, 05:13 PM   #55
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Thanks for all the replies and insights. I started with moving $150K into a Short Term tax exempt fund (VWSUX) that yields 1.09%. I reckon I have another $250K to place and will look at some other funds to diversify but at least I am now getting around 1.8% tax equivalent return on some of the cash!

I recently read an article in Money magazine about floating rate funds and found they yield around 4% with relatively stable price levels - seems too good to be true so I decided to do some more research. Any thoughts on those?
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Old 05-30-2017, 06:11 PM   #56
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Originally Posted by PaloAlto View Post
Thanks for all the replies and insights. I started with moving $150K into a Short Term tax exempt fund (VWSUX) that yields 1.09%. I reckon I have another $250K to place and will look at some other funds to diversify but at least I am now getting around 1.8% tax equivalent return on some of the cash!

I recently read an article in Money magazine about floating rate funds and found they yield around 4% with relatively stable price levels - seems too good to be true so I decided to do some more research. Any thoughts on those?
As I mentioned in post #2, we are using SAMBX. Bought 7/23/14 to park some money. It has been yielding about 4% with no excitement at all. At the same time I bought a couple of brokered 3-year CDs yielding 1.2%.

I have a friend who runs money for a family office and he has been buying leveraged floating rate funds -- pushed by his principals even though he is nervous about it. I think they have been doing OK too.

Recently I was doing an investment advisor survey for a nonprofit I'm involved with and one of the advisors told us that they are also using SAMBX and quite happy with it. So that was a nice confirmation. At the time we bought, it was on Schwab's recommended list and it still looks like that's the case.
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Old 05-30-2017, 06:29 PM   #57
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As I mentioned in post #2, we are using SAMBX. Bought 7/23/14 to park some money. It has been yielding about 4% with no excitement at all. At the same time I bought a couple of brokered 3-year CDs yielding 1.2%.


Thanks Oldshooter. I will have to look into SAMBX for the other money I need to park. I don't know much about brokered CD's but 1.2% seems very low to lock up funds for 3 years when you can get 1%+ in money market funds. Am I missing something?
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Old 05-30-2017, 06:38 PM   #58
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Thanks Oldshooter. I will have to look into SAMBX for the other money I need to park. I don't know much about brokered CD's but 1.2% seems very low to lock up funds for 3 years when you can get 1%+ in money market funds. Am I missing something?
According to Morningstar, SAMBX went down 20% plus in 2008.
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Old 05-30-2017, 06:42 PM   #59
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I recently left the W2 world with a significant severance. That and a habit of having significant cash reserves has now upped our cash holdings to around $600K. They are currently spread over 4 accounts but none of them earn more than 1%.

Our other holdings (pre-tax and post tax) amount to around $4M and are all in well diversified stocks and stock funds, so I was thinking this might be a good time to build up some bond holdings (say around $400K, leaving $200K for our emergency fund) but I have no experience in doing that. We have significant invested assets in both Vanguard and Fidelity so funds by either of these companies would work.

I am primarily looking for relatively safe funds that return better than 1%. Eventually, if there is a market crash, we would use these funds to buy more equities - this was a good strategy for us post 2008 and I wish we had $600K then - only had $100K which I put right in! Any advice from the more experienced investors on how to go about it would help. Tax efficiency is a bonus - we live in California and are top tax bracket so our marginal rates are over 50%

Thanks in advance!
let us know when you time the market and go from bonds to stock after the crash, im interested to see how your market timing is.
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Old 05-30-2017, 06:46 PM   #60
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I recently read an article in Money magazine about floating rate funds and found they yield around 4% with relatively stable price levels - seems too good to be true so I decided to do some more research. Any thoughts on those?
They are great until the stock market has a hiccup or we go through a credit squeeze/credit crisis. Then they can be hit hard. It's similar to owning a high yield bond fund - on the higher end of the credit risk spectrum.
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