Proper use of iShares SHYG or something like it?

[stephenson]

Hi All,

Background - I've been trying to get my act together following FIRE ...started out OK, but kind of drifted off course ... ended up with quite a bit of IRA and Roth IRA rollover from megacorp lump sum pension (~480K) and megacorp 401K (~1.4M) ...have monthly pension component and non-qual components as well as military retirement. Have substantial taxable equity funds that we could live off even if didn't have pension.

Been about six months, and financial situation is very stable - could easily triple living expenses and not spend all the income ... we ARE living pretty frugally simply because we haven't decided where to go and what to do (bought small house in Florida to establish residency - will probably convert it to rental when we decide where to live).

Back to the question - I'm looking for a place to stash the money while I figure out how and when to start buying back into equities. I just want to get it out of cash and doing SOMETHING - I feel silly saying this as I have saved consistently since high school - always knew what I needed to do because there was so little to do it with ... seems backwards this time ...

Was looking for flexible tool to use - one of my advisors recommended SHYG as a short term corporate bond ETF play ... what do you all think?

If you have options or advice ... please and thanks!

 

[braumeister]

I don't see anything wrong with SHYG for that purpose.

I use FAGIX for the same reason, but there are a lot of similar choices.

 

[pb4uski]

I don't see anything wrong with SHYG for that purpose. ....

I do... as I'm reading the chart $10,000 invested on Jun 16, 2014 dropped to $9,122 by Feb 12, 2016 with dividends reinvested.

How about CDs? Online savings accounts pay 1.1% or so.

 

[stephenson]

That period of time east he worst possible within a five year timeframe ...I'll take a look at online rates, but I am willing to deal with some risk for better short term returns.

 

[OldShooter]

... some risk for better short term returns.

IMO bond funds, except for short term funds, are a bad idea unless someone has only tiny money. Given the interest rate uncertainty in the near future, even SHYG's duration of 2+ years is mostly downside.

We've had a bunch of money parked in SAMBX for the past three years and have been fairly pleased with its performance. It is an unleveraged "floating rate" fund that has some credit risk but less than junk bonds and has little rate risk. There are also leveraged floating rate funds out there, but I didn't want to increase risk that way. In hindsight, though, it would have been fine.

... stash the money while I figure out how and when to start buying back into equities. ...

Plenty of discussions here and elsewhere about the futility of market timing. I won't repeat them.

 

[foxfirev5]

Rather than a junk bond fund, why not put half in equities now and the rest in a CD or Treasury ladder? Roughly the same overall risk while getting your foot back in the equity game.

 

[stephenson]

FFv5,

Good thought - thanks!