Bond Funds

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Dense Chocolate
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Joined: Thu Jun 07, 2018 11:42 pm

Bond Funds

Post by Dense Chocolate » Thu Jun 07, 2018 11:45 pm

I am a totally new investor. I need advice on how to allocate funds for a $100k I have in an account I inherited

I dont want to lose the principal, I am hoping for a 3%ish growth
Anything greater than the Checking or Savings rate the bank can give me

Thanks in advance for any suggestions, and or ideas


Thank you

livesoft
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Re: Bond Funds

Post by livesoft » Fri Jun 08, 2018 5:18 am

Can you tell us why you don't want to temporarily lose the principal in order to make even more than 3%? What are you going to spend this money on and over what time frame? That is, what are the goals for this money?

If you don't want to have any possibility of losing the principal even temporarily, then you are going to have use CDs, savings accounts, or money market funds.
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Call_Me_Op
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Re: Bond Funds

Post by Call_Me_Op » Fri Jun 08, 2018 6:40 am

Have you looked into brokered CDs and US treasuries?
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Dandy
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Joined: Sun Apr 25, 2010 7:42 pm

Re: Bond Funds

Post by Dandy » Fri Jun 08, 2018 7:41 am

Vanguard is offering a 5yr CD at 3.3% and a 3 yr CD at 3%. These are brokerage CDs that will pay you back all your investment if you hold them to maturity. If you want to sell them early you take market risk. The Fed is likely to announce a rate increase next week which may raise these and other rates shortly after.

If you are interested in bank products like CDs, Money markets etc I suggest looking at depositaccounts.com. The site is very useful in identifying the banks/credit union products and rates that you might be interested in. Make sure to read the reviews of the firms before getting too excited. Some have attractive rates but not attractive terms or service.

As noted you can get better help if you tell us more about your situation.

z3r0c00l
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Re: Bond Funds

Post by z3r0c00l » Fri Jun 08, 2018 7:45 am

A quick and depressing reminder: you won't grow 3% after taxes and inflation. (2018 inflation likely to be around 2.6%.) If anything, expect to about break even after taxes and inflation. Low risk - low return is in effect here. A 5 year CD will give you 3% without volatility, an intermediate bond fund will offer you similar return with greater liquidity, but with noticeable volatility. Both will struggle to beat inflation unless inflation suddenly drops.
Last edited by z3r0c00l on Fri Jun 08, 2018 10:28 am, edited 1 time in total.

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ruralavalon
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Location: Illinois

Re: Bond Funds

Post by ruralavalon » Fri Jun 08, 2018 10:24 am

Welcome to the forum :) .

Dense Chocolate wrote:
Thu Jun 07, 2018 11:45 pm
I am a totally new investor. I need advice on how to allocate funds for a $100k I have in an account I inherited

I dont want to lose the principal, I am hoping for a 3%ish growth
Anything greater than the Checking or Savings rate the bank can give me

Thanks in advance for any suggestions, and or ideas


Thank you
What use do you have in mind for this money, and at what time? Do you have other accounts and investments? What is your age?

If you truly want no loss of principal you are really limited to:
1) FDIC insured savings accounts or CDs, please see www.bankrate.com for interest rates; or
3) a money market fund like Vanguard Prime Money Market Fund (VMMXX) current SEC Yield = 1.93%.

For a higher return it's necessary to take some risk.
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dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: Bond Funds

Post by dbr » Fri Jun 08, 2018 10:52 am

There is nowhere to place that money that is immune from losing value in real dollars. I bonds are the closest but there is an annual purchase limit. Otherwise short term TIPS would be close. It you also want 3% real interest rate then you are a million miles away from reality right now.

If your idea is to get back nominal dollars and a nominal 3% interest rate, then there are probably some CD's available right now that do that, as mentioned.

The question is why exactly 3% and what are your criteria regarding not losing money?

JimmyJammy
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Joined: Sat Oct 26, 2013 1:08 pm

Re: Bond Funds

Post by JimmyJammy » Fri Jun 08, 2018 11:10 am

And you don't actually *lose* any money unless you sell the investment.

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