Bogleheads.org

Its a 3 month ladder, so your risk of a mistake is low...if you make a mistake it'll last no longer than 3 months.

I think the Fed is irrelevant in this decision, but what isn't irrelevant is the bank failures. It did cause a bit of panic buying on the short end as people withdrew money from their bank and dumped it in something they think is safer (1-6 month bills). Most of that got out of the system yesterday, and short end is already popping a bit.

I don't view it as market timing by not buying on a black swan event day. Thats just being smart.

Unfortunately, FDLXX has already gone the same way. They had less than 97% USGO the past two years. See this post: Here is some bad news by way of Fidelity. FDLXX - Fidelity® Treasury Only Money Market Fund Just Reported their USGO% for 2022 as only 93.63%. Their name says Treasury ONLY and it is clear they held a lot of Repos last year. I think the Treasury Money Markets are no longer as pure as we'd like. Here is their 5 year history of USGO%: FDLXX - 2022 - 93.63% FDLXX - 2021 - 96.42% FDLXX - 2020 - 100% FDLXX - 2019 - 100% FDLXX - 2018 - 100% I never see any repos in their composition, at least not in recent memory. Repors are always at 0% and it ttill shows 0% now. A lot of funds did some things when rates were near 0 to try to stay ...

beyou wrote: ↑Sat Jan 21, 2023 11:02 am Treasury only FDLXX is comparable to VUSXX, except for the expense ratio.

That and FDLXX is a pure play treasury fund - no repos. VUSXX does repos, granted I think only with the federal reserve. Makes up almost 1/4 of the fund's holdings. The fund now has this note on it on the front page:

"Important Note: Income generated from investments in repurchase agreements with the federal reserve are generally subject to state and local income taxes."

scorcher31 wrote: ↑Sun Feb 19, 2023 10:52 pm I currently keep about 200k in my ally account as an emergency fund.

That would be quite an emergency.

As to the Treasury, it is a coupon treasury? it may pay interest, if for example you're buying a 10 year note that happens to mature in 6 months.

You're question is really asking about the direction of interest rates. No one knows for sure, but many (myself included) feel rates have peaked. If you share that opinion, then stretching duration a bit, by going back to intermediate, could make sense.

Its a roll of the dice though, so my suggestion is to go back to whatever your long term plan was to begin with when you decided to go short.

Lyrrad wrote: ↑Thu Jan 05, 2023 7:14 pm
FZEXX:
12/28/2022 3.43%
12/29/2022 3.34%
12/30/2022 3.26%
12/31/2022 3.26%
01/01/2023 3.26%
01/02/2023 3.26%
01/03/2023 3.22%
01/04/2023 3.13%
01/05/2023 2.81%

FTEXX:
12/28/2022 3.41%
12/29/2022 3.31%
12/30/2022 3.26%
12/31/2022 3.26%
01/01/2023 3.26%
01/02/2023 3.26%
01/03/2023 3.24%
01/04/2023 3.13%
01/05/2023 2.82%

Where are you finding the 1 day yields?

Outer Marker wrote: ↑Fri Jan 06, 2023 11:00 am I wouldn't call collecting on a life insurance policy a "windfall." $1M is not that much money and may not be enough to offset the lost earnings of the primary breadwinner. I'd put 5 years or so of expenses in cash-like assets (CDs, T-bills, Short Term treasuries), and invest the remainder conservatively in something like the Vanguard Balanced Fund or Tax Managed Balanced fund, depending on your tax bracket.

+1. Outstanding suggestion and I don't have anything better to suggest.

If these are Treasurys, you dont have to sell the entire position. If you, for example, have a $20K tbill, you can decide to just sell $5K of it.

Most bonds work that way, but its a lot easier to sell smaller lots with a Treasury.

Unfortunately for the OP, I think this is a good lesson about brokered CDs vs Treasurys. I've been part of a lot of posts where i've recommended Treasurys over Brokered CDs for liquidity reasons and the oft response to my suggestion is that someone is 100% going to keep them to maturity. Well life happens sometimes. Brokered CDs can be tempting when they are paying a little bit more than Treasurys, but factoring in liquidity issues with the CDs, as well as the tax disadvantages, I think one should often just stay away from the CDs. The brokered CD market just isn't liquid enough. Sorry OP, I don't mean to derail your post and please don't take this as an insult. I ran into a very similar thing myself about 7-8 years ago where I had to sell ...

Kookaburra wrote: ↑Wed Aug 24, 2022 10:33 pm FSKAX isn’t all that tax efficient, as it produces capital gains. You might want to use VFIAX as a TLH partner instead.

According to Fidelity's research tab on the fund it hasn't thrown off capital gains since April of 2019, and when it did it was 12.7 cents a share on a fund with a NAV > $100.

VBTLX is already 2/3 Treasurys and US Govt agency debt. Youd really only be tinkering with the other 1/3.

I'm unclear as to exactly what your asking but you may just be thinking of shortening the duration to short term? If that's the case maybe look at VBIRX Vanguard Short-Term Bond Index Fund Admiral Shares. Similar composition to total bond but short term.

I'll warn you that many people (myself included) think most of the losses on bonds due to interest rate rises are past us, so switching duration now effectively just locks in those losses.

southernlucky wrote: ↑Fri Dec 30, 2022 12:48 pm I think you made a good choice and long term will be very happy. You will *never* have to see the underlying components performance or rebalance yourself again. It is truly a hands off, set it and forget it solution to help staying the course easier. And if you wish later to reduce your AA as you get older and/or your portfolio gets larger then simply use a lower stock allocation in your tax deferred accounts. You may decide to eventually use a single, all in one balanced fund in your those accounts too. Good luck!

+1, every bit as fine of a choice as life strategy.

Samosa22 wrote: ↑Fri Dec 30, 2022 6:49 am 1. Should I just pay the taxes I owe ($2600) now on December 31st and wait for IRS to tell me how much I owe in penalties plus interest, Or should I pay penalties plus interest now to avoid further accumulation of penalties & interest

I would pay what you think you owe, the taxes plus what you estimate for penalties and interest. With the IRS sooner you pay the better.

salilsurendran wrote: ↑Sun Dec 25, 2022 8:05 pm With interest rates being so high I was thinking about investing in treasuries. I was wondering if I get a decent YTM of 4% or so do I need to worry about buying direct from the US government versus the secondary market? I have an account with Fidelity that I believe let's me buy direct from treasury?

Yes, you can buy at auction or secondary market via Fidelity. With the auction you have to wait until one is coming up for the bond you want. With secondary, you can just search and see whats out there.

I do auctions myself, although I occasionally buy on the secondary market as well.

anon_investor wrote: ↑Thu Dec 29, 2022 8:58 am I don't have the $25k min for FZEXX quote yet. But I did move from SPRXX (4.15%) to FTEXX (3.41%), since the after tax for me is quite a bit higher.

I often see muni MM's yields spike near the end of the quarter. Im going to wait until mid January and see how it looks then. Thats what I meant about being suspicious.

5%+ TEY on a muni money market just seems too good to last.

anon_investor wrote: ↑Wed Dec 28, 2022 1:22 pm Be careful, I believe FFTXX has a floating NAV, so you can lose principal (which is much less likely with a money market mutual fund with a NAV fixed at $1).

+1. Buyer beware, this ultra short bond fund as a replacement for money markets at higher yield has blown up in people's faces before. Nothing wrong with ultra short bond funds, but they are not money markets and shouldnt be confused as such.

https://www.investmentnews.com/fidelity ... fund-15833

AnnetteLouisan wrote: ↑Wed Dec 28, 2022 6:50 pm I sure hope they are as safe as one says they are.

Backed by the full faith and credit of the US. Same as the dollars in your pocket, so TBills are as safe as those. Take that how you wish

You could just buy a TIP or TIPs with the same approximate duration as to the fund.

I have TLH'd from Vanguard Treasury Index to individual bonds several times...

1. Find the Vanguard ETF companion to my current Vanguard mutual funds 2. Call Vanguard and convert from mutual fund to the ETF companion (not taxable event) 3. Transfer in kind to Fidelity, keeping the Vanguard ETFs (also not taxable event) 4. Fidelity does not charge commissions / transaction fees on Vanguard ETFs, so future purchases will not bear added transaction costs to buy more of the Vanguard ETFs through Fidelity 5. Added bonus, I can stay in Vanguard products I like, and if needed in the future, I could likely transfer back to Vanguard (or other brokerage) in kind without triggering taxes This is the best path, as you will probably find some if not all of your admiral funds are not transferrable. YMMV on it, some had been able t...

ZinCO wrote: ↑Tue Dec 27, 2022 11:37 am Fidelity Tax-Exempt Money Market Fund, FZEXX. Current tax-equivalent yield is above 5% I believe (5.59% for 38.8% tax rate as of 12/23).

Im suspicious of its yields right now since we're near end of the quarter. Seems too good to be true, but I have been eyeing it as well.

grabiner wrote: ↑Wed Dec 28, 2022 1:49 pm Because past performance is not an indication of future results. Vanguard Treasury Money Market currently yields 3.96%. Vanguard Short-Term Treasury ETF yields 4.42%, which is good compensation for the risk that the actual return will be higher or lower if yields fall or rise. (The Fed is still expected to increase rates, but that will not affect the Treasury fund directly; the yield on two-year Treasuries already incorporates investors' expectations of rates over the next two years.)

Good choice except its twice the duration the OP asked for. Something like BILS is right in the sweet spot of his desired duration range.

3 Month Tbill is paying, at this moment 4.46% and its safe from your high CA state taxes.

If you're sure you don't need it for 1-2 years, the 1 year TBill is at 4.74%.

Kevin M wrote: ↑Mon Dec 26, 2022 12:49 pm This has been discussed at length in the Treasury taxation thread I linked to in my previous reply, and the consensus seems to be that the acquisition or market discount is exempt from income tax by the state.

Thanks, Kevin.

This whole quote is patently false. It's actually easier to see and find a good rate on Secondary, because everything is shown to you up-front. There is no need to get nasty. I'm entitled to my opinion that auctions are easier, especially for small lot sizes and my personal experience has shown that to be true for me. All that being shown things up front does is provide you certantity of price, it does not help you find a good rate. It allows you to move onto another bond to keep looking if the price isn't great, which is additional work. This is versus an auction, where you don't have to worry about a depth of book. You get the same price everyone else gets. If you think that makes it harder for you, fine, but don't call my statement pate...

I buy T-bills at auction but have been wondering about the secondary market. I know Kevin M. seems to recommend this. I had the impression that this was somehow more complicated tax-wise but don't remember why. It takes some effort to make sure you're getting a price as good or better than an auction in the Secondary market, and you usually have to have a decent lot size. Its unlikely you're going to get good pricing, without a bunch of luck, on for example a $5000 purchase of Treasurys. At auction, you get the same price for a $1,000 bond as someone who is purchasing $10,000,000. For the causal Treasury investor, like myself, I always suggest buying at auction if there is an auction coming up in the near future for the Treasury you want. ...

smooth_rough wrote: ↑Sun Dec 25, 2022 9:02 am What does vanguard offer for tax exempt money market with check writing?

You'll take a hit on yield, but Fidelity's cash management account is great. You can hold a muni money market it and write checks, use a debit card, and hit an ATM. It blows away Vanguard's offering.

ApeAttack wrote: ↑Sat Dec 24, 2022 12:34 am Holding them until needed as they are part of my emergency fund.

Agreed, they make a perfect emergency fund. Thats exactly how I view them as well.

vineviz wrote: ↑Sat Dec 24, 2022 2:31 pm Yes, the main risk is that the junk bonds could default or that investors become more confident than they might default.

For certain, there have been periods where the total return of BND has exceeded the return of junk bond funds for exactly the same reasons.

+1, they dont call them junk bonds for nothing. Take your risk on equities.

However, if you want some junk/high yield maybe consider a "plus" bond fund, which is mostly investment grade bonds with a little high yield kicker. For example VCPIX Vanguard Core-Plus Bond Fund Investor Shares. It has 15% high yield, but the other 85% is investment grade / US Treasury.

chrisdds98 wrote: ↑Thu Dec 22, 2022 8:26 pm I don't know of another version of IEF. I would use SCHQ instead of TLT

Yes, TLT is pretty expensive for a Treasury ETF IMHO.

However, TLT is a little further out on duration. Not a ton, but its worth a note.

I agree. However, government MMFs are not gated and I have a hard time imagining a scenario where a treasury MMF would be at risk. If the government can't pay back treasury debt, I guess the FDIC would also be screwed. :wink: While I am not aware of any government MM's that are have liquidity gates or fees, its important to note that there is nothing in the MM reform that prevents them from instituting those features. They are just not required to have them, unlike retail MMs which are required to have them. Also, while one threat to a MM is credit risk (your reference to not paying back Treasury debt) but another is interest rate and liquidity risks. If short term interest rates were to increase suddenly (say the Fed increases rates 75 ba...

Eno Deb wrote: ↑Thu Dec 22, 2022 5:07 pm Depends on the circumstances. The Reserve Primary Fund that dropped below $1 in 2008 (because it held debt from Lehman Brothers) was eventually liquidated and paid back slightly less than $1 to the investors (something like $0.99 if I remember correctly). But note that this was an institutional fund, not a retail fund.

You're correct the amount, but not the institutional only impact. They sold to retail investors as well.

First I applaud you for asking the right questions and looking into this.

My opinion is if using LifeStrategy is what will get you to invest on autopilot and stay the course then use it. While tax issues should not be minimized, they pale in comparison to you either not investing, or not feeling comfortable with your investments.

Lifestrategy is fine.

am wrote: ↑Thu Dec 22, 2022 8:40 am

welderwannabe wrote: ↑Thu Dec 22, 2022 7:25 am If you open a cash management account at Fidelity, you can hold their money markets in there. It comes with a debit card and checkbook and is like a fully functional checking account. You can write checks, do ATM withdrawals, use the debit card and it will pull right from the muni mm.

Can you open the same fund twice in cash management to segregate money for different purposes? I do this in amex savings?

No, but you can open more than one cash management account. I have 3.

Seems like fidelity has multiple muni money markets. Not sure which one is best or what the current 7 day yields are as their site show 11/30 yields. Aside from state specific ones, they really have 2 primary ones. The Municipal money market, and the tax exempt. The municipal money market will have some income that subject to AMT, which with the Trump tax plan is less of an issue for many, but could become more of an issue if that were left to expire. They only have 1 fund class of this. The tax exempt fully tax exempt and doesnt produce much if any income subject to AMT. Since that type of fund tends to attract super high net work individuals, they have several fund classes, so you will find at the higher fund class (Premium and up) it ca...

If you open a cash management account at Fidelity, you can hold their money markets in there. It comes with a debit card and checkbook and is like a fully functional checking account. You can write checks, do ATM withdrawals, use the debit card and it will pull right from the muni mm.

Is anyone just investing 100 % in corporate bonds instead of a mix of government bonds and stocks? I like that they return more than government bonds but are less risky than stocks. I only invest in corporates in my 401k, which is money that has a further time horizon for me. I do a barbell of ST corporates and LT Treasurys there. I don't like the idea of holding long term corporates due to credit risk. Yes, in theory its priced in, but with yields artifically low (well until recently), you just didn't get enough of a risk premium on the LT side for corporates. Think of the companies that were around 20 years ago that aren't around now? A lot changes in 20 years. No thanks, I'll go with credit risk free long term debt only. In taxable, onl...

platypushuzza wrote: ↑Mon Dec 19, 2022 7:41 am So, by the same token, purchasing VBTLX (in a retirement account) within 30 days of the said sale of VFISX at a loss, in a taxable account, will not result in a wash sale, I assume? (as VBTLX is not substantially identical to VFISX?)

VBTLX and VFISX are very different mutual funds. VBTLX is intermediate term and a mix of corporate and treasury, while VFISX is short term treasury only. No wash sale concerns in my opinion.

In the same email, they mentioned that headed into March 2020, Vanguard Prime Money Market was holding 33% in government securities when the industry average was 3%. If you look at communications from the SEC there are also thoughts that the gates were counterproductive in March 2020 and may be eliminated. Fidelity moneymarket is over 30% treasury repos. I think vanguard dumping their prime money market was a mistake, and likely more to poor yields at the time that anything. Money was leaving money markets in drives in 2020 with rates at 0, so some things had to go so save money since almost all of them cost more to run than they made. It certainly wasn't the risk back then since they're was almost 0 credit spreads. With a 0 credit spread ...

zero_coupon wrote: ↑Sun Dec 18, 2022 2:37 pm That's good. Wouldn't want a repeat of the Schwab Yield Plus (or whatever it was called) debacle. Presumably that product was designed entirely different than Fidelity's prime funds.

That and the Reserve Primary Fund money market...

There have been significant money market regulatory reforms since, these gates being one. I think the likelihood of a repeat event is low.

Thanks for pointing out the issue for residents of those three states. Do you know if the same concern exists for Fidelity's FZEXX? If the fund is only 73% exempt (as the example above), does that mean that only 73% of the earnings are tax-exempt? Correct on the 73%. FZEXX is a totally different animal. That invests in state, county, and local debt and is FEDERAL tax exempt. 100% of it would be exempt from Federal taxes. It would invest in some debt from your state, so its possible (depending on the state your in) that a SMALL portion of it would be state tax exempt, in addition to Federally exempt. There also some money markets that invest only in a single state's debt, but these are usually reserved for large states like California. FABX...

zero_coupon wrote: ↑Sat Dec 17, 2022 12:28 pm Are there any practical ramifications to investing in the latter, besides the aforementioned "gates?"

Provided we don't have any 'black swan events' that impact money markets, no. Very unlikely scenario.

km91 wrote: ↑Fri Dec 16, 2022 5:24 pm Assuming that gold has a place in a portfolio and offers protection as a last resort against catastrophes, how much gold should you own? 6 months living expenses, a year, five years? A small allocation to gold offers little protection in a worst case scenario. Does the average family need a coupe pounds of gold buried in the backyard?

20% in my taxable in my case.

September wrote: ↑Sat Dec 17, 2022 8:40 am How about VMFXX (Vanguard Federal Money Market Fund)? The 7-day yield as of 12/16 was 3.99%. Is this fund be treated the same as VUSXX, i.e., exempt from state tax?

A large percentage of it is state tax exempt, but far from all of it. Not everything it invests in is considered 'direct obligations' of the Federal government. Last year it was about 73% exempt. We won't know this year until Vanguard releases the information, usually in January.

That 7 day thing is only temporary too. With Fidelity, I've been a customer for a while, and now the first $25K of an EFT/ACH is available for trading immediately. The rest is only a couple days longer.

3 fund portfolio still works in taxable, albeit with taxes. On the bond side instead of the normally recommended Vanguard Total Bond, take a look at:

VSIGX Vanguard Intermediate-Term Treasury Index Fund Admiral Shares.

That fund is state income tax free since it only invests in direct US Govt obligations.

miket29 wrote: ↑Thu Dec 15, 2022 10:08 pm You always have your cash available since Treasury bills are one of the most liquid investments on earth. Depending on what interest rates have done since purchase there may be a gain or loss by selling before maturity, but given the short duration of a Treasury bill gains or losses will likely be small.

Not so true. I have personally experienced periods where the market was not very liquid for the smaller lot sizes many of us hold. Im talking market orders going unfilled to sell a bill. I've posted about it several times. Having a slug of cash mature every month avoids that, along with a potential bid/ask spread on a secondary market sale.

zero_coupon wrote: ↑Wed Dec 14, 2022 11:24 pm Great, thanks. It seems there's no difference in safety, then, as long as one is able to leave one's funds alone during a crisis.

Money markets are low risk. However, within those low risk assets, there is a significant difference in risk between a fund that invests only in us treasurys and agency debt, and one that invests in uninsured bank CDs, and commerical paper.

I like a ladder for my cash. I like doing 3 month bills with one maturing every month, so I always have 1/3 of my cash available every month.

I think SPDR's ETF offering may be a little closer to Fidelity.

SPDR® Portfolio Short Term Treasury ETF SPTS. Its got a duration of about 1.9 years. Expense ratio is only .06%.