Finding Good Bonds

[ToneGod]

Curious as to good places to research individual bonds that includes ratings etc. Looking at a ladder for part of fixed port. Is the 99.00 /yr M* fee worth investment? ...Rather than paying 0.5% one time fee at bank, it shouldn't be too tall a task to find 8 or 10 good bonds paying around 4% shorter term?
Thanks for any thoughts.

 

[COcheesehead]

If you are a Fidelity customer, they have a superior set of bond tools including research, bond ladder builder and a cash flow manager. I knew little about bonds, but was able to build a muni and taxable bond ladder that I am very happy with using Fido’s resources. They also only charge $1 per bond commission.

 

[Freedom56]

Curious as to good places to research individual bonds that includes ratings etc. Looking at a ladder for part of fixed port. Is the 99.00 /yr M* fee worth investment? ...Rather than paying 0.5% one time fee at bank, it shouldn't be too tall a task to find 8 or 10 good bonds paying around 4% shorter term?
Thanks for any thoughts.

What term are you looking for? There are many notes paying 4% for short / medium term notes (Ally, Ford, Ebay, Celgene, Biogen, Capitol One, Barclays etc..). The idea is to stick to companies that are financially stable, well capitalized, and have a future.

 

[DrRoy]

If you are a Fidelity customer, they have a superior set of bond tools including research, bond ladder builder and a cash flow manager. I knew little about bonds, but was able to build a muni and taxable bond ladder that I am very happy with using Fido’s resources. They also only charge $1 per bond commission.

+1. Their bond screener is great, and the traders at the bond desk are helpful.

 

[ToneGod]

Short and medium for sure. My IRA is at WF and they seem to have a decent inventory of 7-8 yr.@ 4% but the 4-5 are 3.5 or so. Although talking directly to their FI traders may bring better results. I do know their commission is built in to the bond price. I'll find out how much. It might pay to move funds to Fido.?
So freedom56, does one have to have funds in those different entities i.e. Ally, Cap One etc. to trade there? Sorry for all the beginners ?s

 

[Freedom56]

So freedom56, does one have to have funds in those different entities i.e. Ally, Cap One etc. to trade there? Sorry for all the beginners ?s

No those were examples of corporate notes that give you at least 4% that you were looking for. You should start here and get some basics before investing in individual bonds:

Bonds | FINRA.org

When you are buying a bond, you are loaning the entity your money in exchange for a coupon rate (usually fixed) for a predetermined amount of time and the amount of returned principal is known at the time of purchase (i.e you can buy a bond and a discount, premium, or par). Always put limit order and look at FINRA trace history to determine if you are paying a fair price. It's not that different from buying a CD, except you are taking some risk for a better yield. Always compare fixed income choices (CDs, treasuries, agency notes, corporate bonds/notes). For example, buying a 5 year CD yielding 3% is wiser than buying a AAA rated corporate note yielding 2.8% or treasury yielding 2.5%. Do some homework before investing bonds. If you just call a fixed income trading desk at a broker and ask for some bonds, 99% of the time they will sell you products they want to dump at prices higher than currently trading.

 

[brewer12345]

You don't get paid a lot for corporate credit risk these days. What is wrong with cds?

 

[OldShooter]

... If you just call a fixed income trading desk at a broker and ask for some bonds, 99% of the time they will sell you products they want to dump at prices higher than currently trading.

FWIW that is not my experience with Schwab. My regional bond guy there is happy to discuss options and does not push anything. In fact, one or two conversations ago he said what @brewer12345 just said, that the yield premium for investment-grade corporates is curently too small to justify the risk.

The risk of getting some inventory dumped on you, however, is very high if you are dealing with someone who is not legally a fiduciary. If you are dealing with a house where you are not absolutely 100% certain that you have a fiduciary relationship in all transactions you need to get out of there toot sweet.

(Note: Having a "CFP" designation does not make the holder a fiduciary, despite some bad data that's out there.)

 

[RobbieB]

But it will next year.

 

[OldShooter]

But it will next year.

Wow! Thanks for the link. That is a HUGE change and very positive. Too bad it is 16 months away.

IANAL but I think this means that they can no longer sell CFP certificates to Series 7 brokers who are only subject to the "suitability" standard. That has to have been a huge chunk of revenue for them in the past, but maybe they foresee the SEC's current proposals to presage the death of suitability anyway. It couldn't happen too soon.

This is also another nail in the coffin of load funds.

The one thing it still does not have, though, is legal teeth. The CFP Board is just a private company selling certificates and all they can do is to cancel the certificates of violators. That said, though, it appears that the new "Code" can be used as evidence in court (something the previous code explicitly prohibited). So, as a practical matter, they are as close to having legal teeth as a private company can get.

Very good news for the investing public once the CFPs have completed and implemented the extensive training that this change is going to require.

 

[foxfirev5]

I've practically worn out the Fido screener and can't find anything better than CD's on a risk adjusted basis. Go short enough and the treasury bills have a slight advantage.Those corporates yielding 4% for less than 3 years can go South in a hurry. CD's at 3% for 3 years appear to be a stress free way to go. For now. Personally I'm sticking to my 5 year ladders as I am concerned that interest rates may actually fall in the next couple years.

 

[COcheesehead]

I've practically worn out the Fido screener and can't find anything better than CD's on a risk adjusted basis. Go short enough and the treasury bills have a slight advantage.Those corporates yielding 4% for less than 3 years can go South in a hurry. CD's at 3% for 3 years appear to be a stress free way to go. For now. Personally I'm sticking to my 5 year ladders as I am concerned that interest rates may actually fall in the next couple years.

I just bought some 5 year investment grade bonds yielding in the 4's with coupons of 5. CD's of the same duration are at least 1.5% below that.

 

[haha]

Curious as to good places to research individual bonds that includes ratings etc. Looking at a ladder for part of fixed port. Is the 99.00 /yr M* fee worth investment? ...Rather than paying 0.5% one time fee at bank, it shouldn't be too tall a task to find 8 or 10 good bonds paying around 4% shorter term?
Thanks for any thoughts.

Really researching bonds requires a learning curve/risk profile that IMO is not worth it. My solution is to never buy anything that is not a direct US government obligation, or insured by US government. I think time is usually better spent researching equity investments. As Brewer says, pay close attention to CD details, this is good prospecting ground.

Ha

 

[foxfirev5]

I just bought some 5 year investment grade bonds yielding in the 4's with coupons of 5. CD's of the same duration are at least 1.5% below that.

Investment grade is a wide spectrum. 5 year CD's are 3.25. I believe you would need to drop down to single A or probably BBB to get an additional 1.5. At those ratings I'd need to be very diversified. My risk taking days in the fixed portion of my portfolio are behind me. Too conservative for some but it fits my needs.

 

[COcheesehead]

Investment grade is a wide spectrum. 5 year CD's are 3.25. I believe you would need to drop down to single A or probably BBB to get an additional 1.5. At those ratings I'd need to be very diversified. My risk taking days in the fixed portion of my portfolio are behind me. Too conservative for some but it fits my needs.

I guess there’s conservative and then there’s really, really conservative, but the default rates between the various degrees of investment grade bonds in almost all cases is less than .3% and in many cases a .1% difference. With a ladder of several hundred thousand dollars in bonds across multiple industries, I feel good about my diversification and about my 1.5% higher yield.

 

[ToneGod]

WF 1.11 so 10% higher per bond. fido will help build and manage my fi port free. Managed eq ports between .3 and 1.0. Heard a lot of positive on them. Considering making the jump.
Thanks for all your help.

 

[OldShooter]

WF 1.11 so 10% higher per bond. fido will help build and manage my fi port free. Managed eq ports between .3 and 1.0. Heard a lot of positive on them. Considering making the jump.
Thanks for all your help.

I'd interview multiple advisors at both Schwab and Fido; personal fit is important and with even low 6-figure assets both will assign someone to you for free. In addition, you can find out about the bond options. My guess is that they will be similar. It is a very competitive business.

 

[njhowie]

I've practically worn out the Fido screener and can't find anything better than CD's on a risk adjusted basis. Go short enough and the treasury bills have a slight advantage.Those corporates yielding 4% for less than 3 years can go South in a hurry. CD's at 3% for 3 years appear to be a stress free way to go. For now. Personally I'm sticking to my 5 year ladders as I am concerned that interest rates may actually fall in the next couple years.

Fidelity's screener is reasonably good. However you need to do more work to find the periodic diamond in the rough. I am able to do this consistently with municipal bonds in concert with info from msrb.org.

Yesterday I purchased 5.5 month muni for 3.27% tax free, which is very good relative to equivalent maturity CD.

These days, generally I can get 1% above CD rates for up to 2 years in pre-refunded/escrowed munis (all future interest and principal escrowed - so no risk). You just have to know how to uncover them within Fidelity's inventory - the screener does not always pick them up.

 

[foxfirev5]

Fidelity's screener is reasonably good. However you need to do more work to find the periodic diamond in the rough. I am able to do this consistently with municipal bonds in concert with info from msrb.org.

Yesterday I purchased 5.5 month muni for 3.27% tax free, which is very good relative to equivalent maturity CD.

These days, generally I can get 1% above CD rates for up to 2 years in pre-refunded/escrowed munis (all future interest and principal escrowed - so no risk). You just have to know how to uncover them within Fidelity's inventory - the screener does not always pick them up.

Good info. However in my case my brokered fixed income is in my TIRA so I really don't need the munis. The CD ladder is very easy to manage which may be helpful in the future.

 

[njhowie]

Good info. However in my case my brokered fixed income is in my TIRA so I really don't need the munis. The CD ladder is very easy to manage which may be helpful in the future.

My TIRA is loaded with 50% CD and 40% taxable munis - the taxable munis are most often the ones which are being pre-refunded and early redemption, as the issuers had to pay higher interest rates on them at issuance and have been able to refinance at lower rates since.

In Fidelity's screener, you can add a filter to return taxable munis.