Are bond funds a good parking place for liquidity?

[FD1000]

CD and MYGA require zero watching, maintenance, anything. They are guaranteed, in writing. The interest is always paid, on-time.

The above are good for many investors.
I would consider them if they paid 8-9% annually.

 

[Al18]

My asset allocation is currently 52% stock / 48% fixed income. I expect volatility in my stock allocation, which are mostly funds and ETF. I don’t expect any with my fixed income. As long as I’m keeping up with inflation, I’m good.

 

[KingMota]

How do you think I made over 13% on average annually with a portfolio that owns 95+% in bond OEFs since 2018 and never lost more than 1% from any last top?
* I don't use indexes
* I don't use high-rates bond funds
* I use nice uptrend funds without high volatility for that period.
* Any time my fund is losing 0.5%, I watch carefully; at -0.7% to -0.8% I sell and switch to another.
* I use only 2-3 funds
* Every year I find funds like that.
* If I don't find funds like that, I stay with a generic, very good risk-reward fund until I find one.
* I sell immediately when risk is very high
* There is no way to predict the future; markets and charts in real time are the ultimate indicators.
* There is no way to do anything close to the above without flexibility, thinking outside the box, timing, and finding funds like that.
* You will not find funds that you can buy and hold that have done it.

Examples:
From early 2023 to 03/2025 I used HOSIX. I never used CLO before. In the last several months, the managers increased liquidity and ratings to 84% IG.
From early 2024 to 03/2025 I used CLOZ.
From April 2025 I started with EIGMX + EGRIX. Several months later, only EGRIX. I never used EM/international before.

Hosix latest INFO
View attachment 62174

How do you think I made over 13% on average annually with a portfolio that owns 95+% in bond OEFs since 2018 and never lost more than 1% from any last top?
* I don't use indexes
* I don't use high-rates bond funds
* I use nice uptrend funds without high volatility for that period.
* Any time my fund is losing 0.5%, I watch carefully; at -0.7% to -0.8% I sell and switch to another.
* I use only 2-3 funds
* Every year I find funds like that.
* If I don't find funds like that, I stay with a generic, very good risk-reward fund until I find one.
* I sell immediately when risk is very high
* There is no way to predict the future; markets and charts in real time are the ultimate indicators.
* There is no way to do anything close to the above without flexibility, thinking outside the box, timing, and finding funds like that.
* You will not find funds that you can buy and hold that have done it.

Examples:
From early 2023 to 03/2025 I used HOSIX. I never used CLO before. In the last several months, the managers increased liquidity and ratings to 84% IG.
From early 2024 to 03/2025 I used CLOZ.
From April 2025 I started with EIGMX + EGRIX. Several months later, only EGRIX. I never used EM/international before.

Hosix latest INFO
View attachment 62174

View attachment 62171


View attachment 62172

That is quite impressive. Seems just as complicated as picking equities, but potentially less risky with your knowledge. Less upside, but less downside. Unfortunately, most of us don't have that skill. Maybe you have posted about this previously and I didn't follow.

 

[Markola]

I have been in bond funds since 1990. I don't invest in them to turn a profit. I invest in them for the income, especially the big bond fund I invested in bigtime back in late 2008 when I ERed. The monthly income from that bond fund provides me with most or all of the income I need to pay the bills.

Another bond fund, an intermediate-term muni bond fund I have been in since 1994, I use as a second-tier emergency fund. It has been paying 2-2,5% annually, mostly tax-free. It has checkwriting privileges, making the money more quickly and easily accessible. I have written 19 checks in the 31 years I have been in the fund. Sometimes, I made a profit. Sometimes, I took a loss. Overall, I am slightly ahead. I use FIFO for cost basis, so a paper profit or loss usually depended on which shares I bought 10 or 15 years earlier. An intermediate-term fund does fluctuate in price, but not too much for me.

I also have a intermediate-term corporate bond fund in my rollover IRA. It is the bond component in that account. It has been growing nicely since its inception in 2008 when I ERed. And rebalancing moves I have made in that account in the last 17 years have had no tax consequences.

I like bond funds.

Not to be a buzzkill, but what’s your inflation strategy? CPI has averaged 2.4% annually since 2008, and CPI likely lowballs actual inflation in the real world.

 

[Diogenes]

* I don't use indexes
* I sell immediately when risk is very high
* There is no way to predict the future; markets and charts in real time are the ultimate indicators.
* There is no way to do anything close to the above without flexibility, thinking outside the box, timing, and finding funds like that.
* You will not find funds that you can buy and hold that have done it.

Your success has been impeccable, but with all due respect, my mind is boggled (pun intended) to see how you and I could conceivably be any more different!

1. I use almost exclusively indices.
2. I've hardly sold anything since the 1990s, instead only adding (including as a semi-retiree).
3. I absolutely abjure charts, technical indicators and even fundamentals.
4. Thinking outside of the box? The box is hermetically sealed.
5. I'd have bought-and-held even if I were a stock market investor in Russia in 1917. Or in the US, in 1929.

 

[FD1000]

Your success has been impeccable, but with all due respect, my mind is boggled (pun intended) to see how you and I could conceivably be any more different!

1. I use almost exclusively indices.
2. I've hardly sold anything since the 1990s, instead only adding (including as a semi-retiree).
3. I absolutely abjure charts, technical indicators and even fundamentals.
4. Thinking outside of the box? The box is hermetically sealed.
5. I'd have bought-and-held even if I were a stock market investor in Russia in 1917. Or in the US, in 1929.

+1
And what I have been recommended for most investors.

 

[scrabbler1]

Not to be a buzzkill, but what’s your inflation strategy? CPI has averaged 2.4% annually since 2008, and CPI likely lowballs actual inflation in the real world.

I have several strategies. One is that I do not use much of my portfolio to pay the bills. I have not yet begun to tap into my rollover IRA and do not need SS yet even though I am technically old enough (62) to claim it. I am not old enough yet to claim my frozen company pension. These 3 "reinforcements" are just sitting out there, not needed yet because my taxable portfolio generates enough income to cover the bills with some left over.

Not all of my taxable portfolio is that big bond fund. It's about 60-65% bond funds now. The rest is a stock index fund which acts as an inflation guard, growing in value while spinning off some dividends every year. Some years, I use them to supplement my bond fund income, other years I just reinvest them.

 

[Koolau]

How do you think I made over 13% on average annually with a portfolio that owns 95+% in bond OEFs since 2018 and never lost more than 1% from any last top?
* I don't use indexes
* I don't use high-rates bond funds
* I use nice uptrend funds without high volatility for that period.
* Any time my fund is losing 0.5%, I watch carefully; at -0.7% to -0.8% I sell and switch to another.
* I use only 2-3 funds
* Every year I find funds like that.
* If I don't find funds like that, I stay with a generic, very good risk-reward fund until I find one.
* I sell immediately when risk is very high
* There is no way to predict the future; markets and charts in real time are the ultimate indicators.
* There is no way to do anything close to the above without flexibility, thinking outside the box, timing, and finding funds like that.
* You will not find funds that you can buy and hold that have done it.

Examples:
From early 2023 to 03/2025 I used HOSIX. I never used CLO before. In the last several months, the managers increased liquidity and ratings to 84% IG.
From early 2024 to 03/2025 I used CLOZ.
From April 2025 I started with EIGMX + EGRIX. Several months later, only EGRIX. I never used EM/international before.

Hosix latest INFO
View attachment 62174

View attachment 62171


View attachment 62172

It sounds like you do very well. My concern is that I have no skill, experience or (frankly) interest in "managing" at this level. I'm glad it w*rks for you, though.

 

[FD1000]

It sounds like you do very well. My concern is that I have no skill, experience or (frankly) interest in "managing" at this level. I'm glad it w*rks for you, though.

Investing has been my passion for decades. Over the years, I read countless research papers and articles repeating the same conclusions: there’s no free lunch, market timing doesn’t work, and it’s impossible to achieve strong performance with very low volatility.
In 2000, I decided to challenge those assumptions, and I did. I approached investing as a lifelong mission, one that could easily span 60+ years. It took about 13 years of learning, testing, and refining before I truly mastered my approach. The results were transformative: I was able to retire after just 23 years from when I began investing, far earlier than I had expected, and remain comfortably retired without worrying about our portfolio running out.
For me, investing was never just about returns (which I had anyway). It was about building the confidence, discipline, and resilience needed to sustain financial independence over the long term.
So how did I get there?
It started in high school and continued through university and later in my professional career. The goal was never to memorize formulas or theories. Instead, it was about developing the skills needed to solve complex problems with simple, elegant solutions.
No idea was considered stupid. Brainstorming was essential, and every idea had to be defended and proven with reasoning and evidence.
Hierarchy didn’t matter either. A great idea could come from someone who was 22 years old or 50. You could be a manager or just starting your career. Good ideas don’t care about titles.
And “no” was never the final answer, it was simply a temporary obstacle until a better solution could be found.
That mindset ultimately shaped my investing approach. The model I developed is deliberately simple and does not require spending hours watching markets or constantly trading.

======================

The challenge with bond investing is that most investors want to hold bonds for many years while expecting three things at the same time: safety, liquidity, and high distributions. In reality, you usually can’t have all three simultaneously.
However, markets occasionally create windows of opportunity when those conditions briefly align. At times lasting months or even a few years, it becomes possible to capture attractive yields while still maintaining reasonable safety and liquidity. The key is recognizing and taking advantage of those temporary opportunities when they appear.

 

[Original Wally]

A bond fund could lose value, which means you might end up with less cash that you expected. You could do a ladder using bonds or target maturity bond funds. Finally, nothing wrong with giving up a little yield for the safety, liquidity, and certainty of a MMF.

True. I was the Sr. Financial Officer for a Municipal Utility District. Our Mantra was
1) Safety
2) Liquidity
3) Yield.

 

[audreyh1]

My funds for ~immediate use, even if a couple of years out, are invested in high yield savings, brokerage money market funds, T-bills and/or short-term CDs based on which is yielding better overall at the time. I have a large fixed income position in my long-term portfolio and that includes bond index funds, but I don’t use them to invest funds I might need in a year or two.

 

[Quattro73]

Here are a few ideas to consider parking cash outside of MM or ST treasury fund or traditional bond fund. All have some risks.

BOXX which was previously mentioned. Currently tax efficient. Could change if IRS interprets differently

BALT - Innovator ETF tied to SP500 with 20% buffer that resets quarterly. Could experience loss that would be hard make up if it blows through the buffer.

CSHI - Tbills with an option overlay.

100% buffer ETF - several out there - Calamos, Innovator, PGIM etc. Pricing will be based intra-outcome period on the option pricing.

CPAG - invests in total bond fund but tries to avoid the distributions by switching between funds and is therefore tax efficient.

No recommendations, just ideas I have come across to replace bonds in taxable or park cash myself.

 

[Contrarian]

My asset allocation is currently 52% stock / 48% fixed income. I expect volatility in my stock allocation, which are mostly funds and ETF. I don’t expect any with my fixed income. As long as I’m keeping up with inflation, I’m good.

Exactly. If my fixed income has as much (or near as much) volatility as my equities, (e.g. on downside leveraged cefs) rather be in equities with its long term performance as my guide. Fixed should be safe and lend stability to the portfolio. It should not be a gamble onto itself even if offers projected high yield. Current high yield is not an indication of future good performance nor a buffer for poor performance. It is just high yield. Many don't get that on some forums, and so, for any non entertainment utility even just browsing must sift through the chaff.

 

[Koolau]

Investing has been my passion for decades. Over the years, I read countless research papers and articles repeating the same conclusions: there’s no free lunch, market timing doesn’t work, and it’s impossible to achieve strong performance with very low volatility.
In 2000, I decided to challenge those assumptions, and I did. I approached investing as a lifelong mission, one that could easily span 60+ years. It took about 13 years of learning, testing, and refining before I truly mastered my approach. The results were transformative: I was able to retire after just 23 years from when I began investing, far earlier than I had expected, and remain comfortably retired without worrying about our portfolio running out.
For me, investing was never just about returns (which I had anyway). It was about building the confidence, discipline, and resilience needed to sustain financial independence over the long term.
So how did I get there?
It started in high school and continued through university and later in my professional career. The goal was never to memorize formulas or theories. Instead, it was about developing the skills needed to solve complex problems with simple, elegant solutions.
No idea was considered stupid. Brainstorming was essential, and every idea had to be defended and proven with reasoning and evidence.
Hierarchy didn’t matter either. A great idea could come from someone who was 22 years old or 50. You could be a manager or just starting your career. Good ideas don’t care about titles.
And “no” was never the final answer, it was simply a temporary obstacle until a better solution could be found.
That mindset ultimately shaped my investing approach. The model I developed is deliberately simple and does not require spending hours watching markets or constantly trading.

======================

The challenge with bond investing is that most investors want to hold bonds for many years while expecting three things at the same time: safety, liquidity, and high distributions. In reality, you usually can’t have all three simultaneously.
However, markets occasionally create windows of opportunity when those conditions briefly align. At times lasting months or even a few years, it becomes possible to capture attractive yields while still maintaining reasonable safety and liquidity. The key is recognizing and taking advantage of those temporary opportunities when they appear.

Thanks for your explanation of how you arrived at your level of expertise. Honestly, I've never wanted to w*rk that hard toward such a goal. I've been more of the "couch-potato" investor and being satisfied with "average" results. And all that was after allowing FAs to "direct" my investments (with generally disastrous results).

I'm impressed with the efforts you've invested into your knowledge base. I'm glad it has paid off (and is paying off for you). All the best to you.

 

[FD1000]

Exactly. If my fixed income has as much volatility as my equities, rather be in equities with its long term performance as my guide. Fixed should be safe and lend stability to the portfolio. It should not be a gamble onto itself even if offers projected high yield. Current high yield is not an indication of future good performance nor a buffer for poor performance. It is just high yield. Many don't get that on some forums, and so, for any non entertainment utility even just browsing must sift through the chaff.

How can bond funds have the same volatility as typical stock funds?
BND-index is not a good bond fund, with higher volatility and lower performance.
Look at managed bond funds, such as PIMIX,RSIIX, and EGRIX.
Their SD = volatility is less than 25% of SPY. SPY=17.85 VS highest PIMIX=4.16.
Sure, 2022 was an abnormal year. Many should be out of bonds and stocks after the Fed announced that they are going to raise rates rapidly.
BTW, higher SD doesn't guarantee better results

 

[pb4uski]

CD and MYGA require zero watching, maintenance, anything. They are guaranteed, in writing. The interest is always paid, on-time.

Same with target maturity bond ETFs when held to maturity.

 

[Quattro73]

Same with target maturity bond ETFs when held to maturity.

Those are working for you as expected? I have them on my “consider” list as I try to figure all this out.

 

[Contrarian]

Investing has been my passion for decades. Over the years, I read countless research papers and articles repeating the same conclusions: there’s no free lunch, market timing doesn’t work, and it’s impossible to achieve strong performance with very low volatility.
In 2000, I decided to challenge those assumptions, and I did. I approached investing as a lifelong mission, one that could easily span 60+ years. It took about 13 years of learning, testing, and refining before I truly mastered my approach. The results were transformative: I was able to retire after just 23 years from when I began investing, far earlier than I had expected, and remain comfortably retired without worrying about our portfolio running out.
For me, investing was never just about returns (which I had anyway). It was about building the confidence, discipline, and resilience needed to sustain financial independence over the long term.
So how did I get there?
It started in high school and continued through university and later in my professional career. The goal was never to memorize formulas or theories. Instead, it was about developing the skills needed to solve complex problems with simple, elegant solutions.
No idea was considered stupid. Brainstorming was essential, and every idea had to be defended and proven with reasoning and evidence.
Hierarchy didn’t matter either. A great idea could come from someone who was 22 years old or 50. You could be a manager or just starting your career. Good ideas don’t care about titles.
And “no” was never the final answer, it was simply a temporary obstacle until a better solution could be found.
That mindset ultimately shaped my investing approach. The model I developed is deliberately simple and does not require spending hours watching markets or constantly trading.

======================

The challenge with bond investing is that most investors want to hold bonds for many years while expecting three things at the same time: safety, liquidity, and high distributions. In reality, you usually can’t have all three simultaneously.
However, markets occasionally create windows of opportunity when those conditions briefly align. At times lasting months or even a few years, it becomes possible to capture attractive yields while still maintaining reasonable safety and liquidity. The key is recognizing and taking advantage of those temporary opportunities when they appear.

Wow very impressive.
So what specifically do you recommend buying now?

 

[FD1000]

I'm in 99+% MM until my model signals a buy.
Unfortunately, I don't recommend funds because I may be in a fund for a month or one year, or I can be invested or out at 99+%.

 

[pb4uski]

Those are working for you as expected? I have them on my “consider” list as I try to figure all this out.

So far, yes.

 

[Echard]

This is a very fascinating thread. Bonds and bond funds always produce aggressive conversations about their merits, their faults, preferences for one fund over another etc. Several years ago when I first joined this forum I really didn't fully understand the whole fixed income category and went down rabbit hole after rabbit hole to really understand them much better.

My conclusion is that it's all about the risks you want to take, or not, combined with the overall attractiveness of the asset category in relation to other categories. For many years, bond funds were bad investments because they returned low yields to maturity (2% anyone?). When the interest rate hikes happened, longer duration funds were exposed for the bad investments they were.

Today is very different. 4-6%+ is achievable. In relation to an over-valued stock market, that's pretty attractive. However, you still have risks. Credit risk for funds like HOSAX. Duration risks for funds like BND. Leverage risk for funds that employ leverage. As Mr Feh indicated, there is no free lunch. So it comes down to what risk each person is willing to take for the return they want.

For me, I settled on a mix of short and medium term bond funds, with a bit of inflation protected target date funds, a bit of emerging market bond funds, a bit of longer maturity funds (not much), and a heavier weighting towards government bonds vs corporate or securitized. My thought process was that short term 3.5% government bond rates wasn't high enough to satisfy my income requirements, so I stretched in places: credit, duration, leverage, inflations protected, target date vs rolling maturity. That way, no one issue sinks the whole portfolio.

My weighted average portfolio duration is around 4 years and my average yield to maturity is somewhere around 4-4.5%. That is a relatively high credit level, because I believe we are entering the danger zone of credit quality. I'm about 60-70% government, the rest corporate and securitized. I'm pretty high credit quality. I have significant inflation linked government bonds as well.

 

[Fermion]

20 year treasury today was near 5% yield. Very Very tempting. Money market is only paying 3.x%

 

[COcheesehead]

20 year treasury today was near 5% yield. Very Very tempting. Money market is only paying 3.x%

General rule in a rising rate environment is to stay short, but I get the attraction.

 

[NW-Bound]

20 year treasury today was near 5% yield. Very Very tempting. Money market is only paying 3.x%

Not tempting to me. I can make up the 1.5%/year easily by writing way-out-of-the-money puts secured by the cash. And I will also buy into value stocks, not growth stocks, when it feels right.

 

[Fermion]

Not tempting to me. I can make up the 1.5%/year easily by writing way-out-of-the-money puts secured by the cash. And I will also buy into value stocks, not growth stocks, when it feels right.

Kind of tempting to me, even though I also write calls and such. You do it for fun though, so I can see how putting $3 million into 20 year treasuries and just getting $150,000 every year even if Canada invades Greenland would be boring. I keep thinking that $150,000 would buy a lot of small boats and solar panels.