seeking advice: bond funds vs CDs/Treasuries

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
LearningAlot
Posts: 45
Joined: Thu Aug 02, 2018 8:43 am

seeking advice: bond funds vs CDs/Treasuries

Post by LearningAlot »

I'm recently retired and new to investing. Thanks to the very helpful feedback from this forum, I am feeling good about the equity side(I'm keeping it simple).

I continue to struggle with the fixed income/bond side of things. I keep going back and forth from 1. take the long view, don't try to time interest rates, keep it simple and invest in intermediate and short duration bond funds vs. 2. why not, at least for now, invest in 1 and 2 year CDs/treasuries,
when (if) rates normalize, then move into bond funds.

It is just not clear to me, which is the better path, any input would be greatly appreciated. Thanks in advance!
betablocker
Posts: 505
Joined: Mon Jan 11, 2016 1:26 pm

Re: seeking advice: bond funds vs CDs/Treasuries

Post by betablocker »

I think CDs are better because they usually have a better yield than equivalent duration treasuries particularly in tax advantaged account. You can build a ladder by putting 4/5ths in a 1 year cd and buying a 5 year with the other 1/5. Do that for 5 years. That minimizes interest risk. They don’t get the flight to quality premium that treasuries do but that only comes every 10 year and the yield spread is always there.
aristotelian
Posts: 8283
Joined: Wed Jan 11, 2017 8:05 pm

Re: seeking advice: bond funds vs CDs/Treasuries

Post by aristotelian »

betablocker wrote: Fri Oct 05, 2018 2:46 pm I think CDs are better because they usually have a better yield than equivalent duration treasuries particularly in tax advantaged account. You can build a ladder by putting 4/5ths in a 1 year cd and buying a 5 year with the other 1/5. Do that for 5 years. That minimizes interest risk. They don’t get the flight to quality premium that treasuries do but that only comes every 10 year and the yield spread is always there.
I agree, if you are going to go through the trouble of laddering, might as well go with CD's and get a little better return.
venkman
Posts: 1198
Joined: Tue Mar 14, 2017 10:33 pm

Re: seeking advice: bond funds vs CDs/Treasuries

Post by venkman »

For maturities of 2 years or less, spreads between CD's and Treasuries are pretty low right now. If this is in a taxable account and you're subject to state taxes, Treasuries might be the better option.
Post Reply