Hey all, I have a novice's question, (and a bit of long one I'm afraid), but I never have quite understood bonds and what affects them.
We are building a sizeable, for us, after-tax bucket with Fidelity that we will need to tap to cover our pre-SS gap in about 5 years. (we are both 52 and will FIRE at 57). I always thought that bonds, though yielding less than stocks, were a much safer haven. In this bucket, we do have equities but we also put in a big chunk in a municipal bond fun, (about 45% of the total bucket), as gains are tax free. We did this only weeks ago thinking that though we weren't shoving the money under the mattress, this would be fairly safe if not lucrative.
Well, the fund has dropped significantly over the last couple of weeks and we haven't even gotten the first monthly dividend yet. Did we make a mistake?
I know with inflation and the likelihood of rising interest rates, bond prices will fall, (my fund will decrease in value, yes?), but should I expect the yield to rise enough for this investment to still make sense?
We also have some with Vanguard and for bonds, they allocate across three funds with varying durations. That also has decreased.
Should I move the money to Vanguard because the funds are at least a little more diversified? Or should I just move to Ally or a CD as discussed in another recent thread.
Thanks much; a stock I get, but I just can't seem to wrap my head around bonds.
We are building a sizeable, for us, after-tax bucket with Fidelity that we will need to tap to cover our pre-SS gap in about 5 years. (we are both 52 and will FIRE at 57). I always thought that bonds, though yielding less than stocks, were a much safer haven. In this bucket, we do have equities but we also put in a big chunk in a municipal bond fun, (about 45% of the total bucket), as gains are tax free. We did this only weeks ago thinking that though we weren't shoving the money under the mattress, this would be fairly safe if not lucrative.
Well, the fund has dropped significantly over the last couple of weeks and we haven't even gotten the first monthly dividend yet. Did we make a mistake?
I know with inflation and the likelihood of rising interest rates, bond prices will fall, (my fund will decrease in value, yes?), but should I expect the yield to rise enough for this investment to still make sense?
We also have some with Vanguard and for bonds, they allocate across three funds with varying durations. That also has decreased.
Should I move the money to Vanguard because the funds are at least a little more diversified? Or should I just move to Ally or a CD as discussed in another recent thread.
Thanks much; a stock I get, but I just can't seem to wrap my head around bonds.