Although Salaryguru may actually be on welfare, and not a guru at all, . . .
Oh no. My secret is out.
Although Salaryguru may actually be on welfare, and not a guru at all, . . .
Patience is way overrated IMHO.
I am not
interested in "eventually" any more. This is an area
where my wife and I are perfectly matched. We
live in the moment. Any planning ((financial or otherwise) is short term, although we might use
long term investments to produce current income.
In brief, we want what we want and we want it right now. It's a philosophy similar to not buying any green bananas. Patience is way overrated IMHO.
Over the past 20 years, the ST Corp fund beat the MM fund 15 times, often substantially.
Actually, the capital return for that fund was negative in seven years out of 20, even in the declining rate environment you describe. A fund with a duration of only 1.8 years has a limited downside, whether you're in a rising or a declining rate environment. It probably isn't a good idea to put a large portion of one's assets into such a fund if it will be needed in only a few months. But over time I think one comes out ahead by avoiding cash and using short term bond funds instead, for that portion of their assets that might otherwise be in cash.We've been in a declining interest rate environment for the past 20 years. If I were a betting man, I'd bet that the next 20 years will look a lot more like 1964-1984 than 1984-2004, and you won't see any cap gains from bond funds for a while.
Ted,
Back on the topic of parking cash. I am in a similar situation and specifically are you recommending the Vanguard VBISX - for this?
The data on the performance of Vanguard's short term bond fund presented by Bob Smith says it all. Note also that there was only one year when this fund had a negative return, which was very small. Thus, I feel very comfortable using it for "cash" beyond my immediate spending needs, which I take care of with a checking account.
Here are the numbers for the two funds for the last eight years. The Index fund was created in 1994. The average duration for the Index fund is 2.5 years at the moment, while the duration of the Corporate fund is only 1.8 years. The current yield on the corporate fund is 2.98%, while the yield on the index fund is 2.39. Shorter duration, higher yield, and minimal risk - my money is in the corporate fund now. It's probably splitting hairs, but it seems a decent bet to me.VBISX is Vanguard's Short Term Bond INDEX fund.
VFSTX is Vanguard's Short Term Corporate Bond fund.
While you should be OK with short-term bonds, I'm curious about how you (or anybody else) can think we won't see a spike in rates real soon now.Unless we see a sharp interest rate hike and/or inflation - - and I dont see that in 2004
Heh. Remember the immortal words of the elder George Bush regarding Greenspan: "I reappointed him and he disappointed me."Two words: Election Year.