Given the prospects of inflation in the future, what should I do? I don’t currently need the income to live off of. What investment are most Boggleheads using for their bond allocation today, given interest rates are close to rock bottom?
The interest rate and bond discussion is well represented here:
Lots of threads/comments lately on bond funds versus CD ladders.
Here's a blog post on point from a Boglehead poster "tfb":
http://thefinancebuff.com/diversify-bon ... h-cds.html
For the best current deals on CDs, you might visit Ken Tumin's blog, www.depositaccounts.com. Click on the "blog" tab at the top, then scroll down for his weekly recap.
There seems to be a hint of folks tapping into the Vanguard short-term TIPS fund VTAPX, too.
The beauty of owning a little bit of everything is that one can pat themselves on the back because they bought the fund that lost the least amount of money while ignoring the fact that they also bought the fund that lost the most amount of money.
You will find that as the years go by eventually into retirement years you will want "less" to manage than "more". Experience has been my teacher
If you are going to use bond funds I would split between an intermediate duration and shorter duration and skip GNMA fund.
Dandy wrote:I think it is wise to move money out of mutual fund money markets. With interest rates so low I not a big fan in moving all your money market funds to bond funds. Why not put at least some $ in other "safe" assets such as I bonds, CDs or other FDIC type vehicles. If/when interest rates rise your bond funds will take a hit (maybe for the length of their duration) but this will be offset by reinvesting their dividends and having some fixed income assets in I Bonds or CDs. As CDs mature you can make the call whether to keep going the CD route or putting the money in your bond funds. F;or some the goal of fixed income is to provide portfolio stability - this approach should add to stability allowing you to take more of the risk on the equity side. If you go the CD route Ally Bank, Discover Bank and Pen Fed credit union have some of the best rates.
Assuming money is invested is in an IRA (or 401k, 403 etc) it is not so easy. Brokered CDs are different than bank CDs, they go up and down with interest rates just like bonds. I know banks and credit unions offer IRA accounts but they often have high fees just to maintain them. If one holds a high percentage of bond funds at Vanguard (we are 65% bonds), does it make sense to be switching custodians to a bank for FDIC CDs when we would lose our Vanguard Flagship client status? Switching IRA custodians, chasing the best CD interest rate sounds like too much hassle IMO. I can more see your point if the dollars are in taxable accounts. I do not know if you can even buy i-bonds in an IRA, maybe?
SpringMan wrote:Assuming money is invested is in an IRA (or 401k, 403 etc) it is not so easy. Brokered CDs are different than bank CDs, they go up and down with interest rates just like bonds. I know banks and credit unions offer IRA accounts but they often have high fees just to maintain them. Switching IRA custodians, chasing the best CD interest rate sounds like too much hassle IMO.
I have quite a few retail IRA CDs (laddered). Over the years, with many banks/CUs, I've never been charged a maintenance fee. There is usually a modest fee (generally $25 or thereabouts) to close and transfer the funds on maturity, but that's it. Maybe I've been lucky.
As to switching custodians (aka a custodian-to-custodian transfer) and searching for "best rates", I suspect it is a put-off for some. I admit to a certain trepidation back in 2006 when I constructed my first IRA CD ladder. It's easier after you've done a couple of transfers, and rolled a few rungs.
That said, I am not a fan of brokered CDs, either.
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