Cash to bonds. But where?

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retire57
Posts: 549
Joined: Fri Oct 28, 2016 3:03 pm

Cash to bonds. But where?

Post by retire57 » Thu May 21, 2020 12:31 pm

Retired couple here wondering where to place our monthly cash surplus. We plan to keep 10K in our Prime MM fund but are searching for a better yield. In addition, our annual rebalancing dictates adding to our bond holdings.

The goal of this money is undetermined. Perhaps a future car replacement, moving, a decadent vacation? Not sure when or if we will need to tap into it, which makes the decision difficult.

I don't believe our 12% tax bracket warrants a tax-exempt option.

Either VSBSX (short-term treasury index) or VSIGX (intermediate-term treasury index) look promising.

What would you do?

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ruralavalon
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Location: Illinois

Re: Cash to bonds. But where?

Post by ruralavalon » Thu May 21, 2020 12:37 pm

retire57 wrote:
Thu May 21, 2020 12:31 pm
Retired couple here wondering where to place our monthly cash surplus. We plan to keep 10K in our Prime MM fund but are searching for a better yield. In addition, our annual rebalancing dictates adding to our bond holdings.

The goal of this money is undetermined. Perhaps a future car replacement, moving, a decadent vacation? Not sure when or if we will need to tap into it, which makes the decision difficult.

I don't believe our 12% tax bracket warrants a tax-exempt option.

Either VSBSX (short-term treasury index) or VSIGX (intermediate-term treasury index) look promising.

What would you do?
Either of those funds would be a good very safe choice, or you could consider Vanguard Ultra Short-term Bond Index Fund (VUBFX), current SEC Yield = 1.75%

What bond funds you currently use?
Last edited by ruralavalon on Thu May 21, 2020 12:38 pm, edited 1 time in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

bloom2708
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Re: Cash to bonds. But where?

Post by bloom2708 » Thu May 21, 2020 12:38 pm

No free lunch out there with bond funds. More yield = more risk.

How about 1.3% at Marcus:

https://www.marcus.com/us/en/savings/hi ... &gclsrc=ds

Goldman Sach's high yield savings account.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead

Topic Author
retire57
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Re: Cash to bonds. But where?

Post by retire57 » Thu May 21, 2020 12:46 pm

What bond funds you currently use?
Total Bond Market Index.

OHWantToRetire
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Re: Cash to bonds. But where?

Post by OHWantToRetire » Thu May 21, 2020 12:52 pm

I have around $600K that has been in TBills I was looking to get a bit more yield from. I agree Marcus is good rates right now, but concerned I'll mess up the 'split' of an amount like that to make sure I have all of it FDIC Insured. I think $200K for me, wife, and joint would do it.

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anon_investor
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Re: Cash to bonds. But where?

Post by anon_investor » Thu May 21, 2020 1:09 pm

OHWantToRetire wrote:
Thu May 21, 2020 12:52 pm
I have around $600K that has been in TBills I was looking to get a bit more yield from. I agree Marcus is good rates right now, but concerned I'll mess up the 'split' of an amount like that to make sure I have all of it FDIC Insured. I think $200K for me, wife, and joint would do it.
You can also do 11 mo no penalty CDs at Ally Bank at 1.3% if you need more FDIC insured space too.

Slowtraveler
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Re: Cash to bonds. But where?

Post by Slowtraveler » Thu May 21, 2020 1:12 pm

Not quite bonds but Capital One High Performance has a 1.3% yield and a $100 bonus after 90 days per $10,000 deposited up to $500. Seems the best yield I've found at the moment so far when including the bonus.

NYCPete
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Re: Cash to bonds. But where?

Post by NYCPete » Thu May 21, 2020 1:19 pm

retire57 wrote:
Thu May 21, 2020 12:31 pm
Retired couple here wondering where to place our monthly cash surplus. We plan to keep 10K in our Prime MM fund but are searching for a better yield. In addition, our annual rebalancing dictates adding to our bond holdings.

The goal of this money is undetermined. Perhaps a future car replacement, moving, a decadent vacation? Not sure when or if we will need to tap into it, which makes the decision difficult.

I don't believe our 12% tax bracket warrants a tax-exempt option.

Either VSBSX (short-term treasury index) or VSIGX (intermediate-term treasury index) look promising.

What would you do?
What state are you located in? Is it one with a state income tax? It may not be relevant, but Vanguard's Federal Money Market Fund normally produces about 70% of its interest income annually from US government debt, which means ~70% of the income is exempt from state and local income taxes. You'll want to do the math for whether Federal Money Market Fund would do better than Prime Money Market Fund, but it could be better to move the 10K to Federal MM.

In 2019, Prime Money Market had 30% of income from government debt, versus 73% from Federal Money Market. Here are 2019's numbers: https://personal.vanguard.com/pdf/USGO_012020.pdf

Best,
Peter
To the extent that a fool knows his foolishness, | He may be deemed wise | A fool who considers himself wise | Is indeed a fool. | | Buddha

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ruralavalon
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Re: Cash to bonds. But where?

Post by ruralavalon » Thu May 21, 2020 1:32 pm

retire57 wrote:
Thu May 21, 2020 12:46 pm
What bond funds you currently use?
Total Bond Market Index.
That would also be a good choice for increasing your desired bond allocation, and would keep the portfolio simpler.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

Topic Author
retire57
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Re: Cash to bonds. But where?

Post by retire57 » Thu May 21, 2020 2:49 pm

ruralavalon wrote:
Thu May 21, 2020 1:32 pm
retire57 wrote:
Thu May 21, 2020 12:46 pm
What bond funds you currently use?
Total Bond Market Index.
That would also be a good choice for increasing your desired bond allocation, and would keep the portfolio simpler.
Thanks for the response.

All our VBTLX is in tax-deferred. We really want bonds that are more liquid for future big-ticket items.

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ruralavalon
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Location: Illinois

Re: Cash to bonds. But where?

Post by ruralavalon » Thu May 21, 2020 3:08 pm

retire57 wrote:
Thu May 21, 2020 2:49 pm
ruralavalon wrote:
Thu May 21, 2020 1:32 pm
retire57 wrote:
Thu May 21, 2020 12:46 pm
What bond funds you currently use?
Total Bond Market Index.
That would also be a good choice for increasing your desired bond allocation, and would keep the portfolio simpler.
Thanks for the response.

All our VBTLX is in tax-deferred. We really want bonds that are more liquid for future big-ticket items.
You want bonds in a taxable brokerage account?

Do you currently have both bonds and stocks in a larger tax-advantaged account?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

hudson
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Re: Cash to bonds. But where?

Post by hudson » Thu May 21, 2020 5:01 pm

retire57 wrote:
Thu May 21, 2020 12:31 pm
What would you do?
I agree with Bloomxxxx. I'd consider using a high yield savings account.
For funds that I might need in the short term, I use AMEX...or American Express Bank at 1.3%.
I like AMEX because if I request a transfer before 11:30 am on a business day, it's in my local credit union before 5 pm. I think that they wire it?
Otherwise, it's nothing special. There's plenty to choose from:

https://www.depositaccounts.com/savings/
Last edited by hudson on Thu May 21, 2020 5:10 pm, edited 1 time in total.

palanzo
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Re: Cash to bonds. But where?

Post by palanzo » Thu May 21, 2020 5:05 pm

ruralavalon wrote:
Thu May 21, 2020 12:37 pm
retire57 wrote:
Thu May 21, 2020 12:31 pm
Retired couple here wondering where to place our monthly cash surplus. We plan to keep 10K in our Prime MM fund but are searching for a better yield. In addition, our annual rebalancing dictates adding to our bond holdings.

The goal of this money is undetermined. Perhaps a future car replacement, moving, a decadent vacation? Not sure when or if we will need to tap into it, which makes the decision difficult.

I don't believe our 12% tax bracket warrants a tax-exempt option.

Either VSBSX (short-term treasury index) or VSIGX (intermediate-term treasury index) look promising.

What would you do?
Either of those funds would be a good very safe choice, or you could consider Vanguard Ultra Short-term Bond Index Fund (VUBFX), current SEC Yield = 1.75%

What bond funds you currently use?
I agree about the Treasury Index funds but I would be careful about Ultra Short-term Bond Index Fund (VUBFX). It is mostly an asset backed bond fund. ZERO Treasuries.

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Dandy
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Re: Cash to bonds. But where?

Post by Dandy » Fri May 22, 2020 7:50 am

Think fixed income vs "bonds". Some FDIC products like high yield savings or CDs can be helpful.

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