Non-equity AA - where?: Bond ETF, or MM, or ???

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Domadosolo
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Non-equity AA - where?: Bond ETF, or MM, or ???

Post by Domadosolo »

To meet my non-equity AA, I am rebalancing from Equity ETFs to Bond ETFs
The question I ask is, given the current market, interest rates, low yields, C19, upcoming elections, does it make sense to continue to buy into Bonds?
My current Bond ETFs : BND and SCHZ
or should I keep it in Money Market funds :shock:
or .....
Can the gurus on this board recommend alternatives?
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David Jay
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Re: Non-equity AA - where?: Bond ETF, or MM, or ???

Post by David Jay »

Is this money in retirement accounts? Are you more than 10 years away from retirement?

If both answers are “yes”, put all the money in those 2 Bond funds.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
sycamore
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Re: Non-equity AA - where?: Bond ETF, or MM, or ???

Post by sycamore »

One general idea to think about is using a fixed income investment that's appropriate to your investing goal, which might be something like "retire in 15 years".

If your investment goal is short term, a money market fund or savings account or even a short-term bond fund is fine.

If your investment goal is intermediate to long term, I would either (1) stick with your bond funds (this is simplest) or (2) seek out the higher-yielding CDs (this requires some effort to open new accounts and transfer funds around).
dbr
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Re: Non-equity AA - where?: Bond ETF, or MM, or ???

Post by dbr »

I think CDs have always been a credible choice for fixed income in a long term portfolio, but I would not shift long term fixed income from bond funds you have already selected to CDs just because you think something is different now, even if there are always things that are different.

Cash in a money market probably does not make any sense.
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Domadosolo
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Re: Non-equity AA - where?: Bond ETF, or MM, or ???

Post by Domadosolo »

David Jay wrote: Tue Jul 14, 2020 4:16 pm Is this money in retirement accounts? Are you more than 10 years away from retirement?

If both answers are “yes”, put all the money in those 2 Bond funds.
Thanks David,
#1. Yes the money is in IRAs
#2. I am a 59yo, retired early. I don't expect to touch the IRA until 72 (RMDs). ... Let me explain. I utilized the IRAs to reach my AA goal of non-Equities, (money is fungible etc) as I don't want to pay taxes by selling my Non-IRA equities now.... To meet expenses, however, I plan to sell Non-IRA equities periodically, and balance with a corresponding purchase of equity within my IRA to maintain my AA. At that time I will need to pay taxes on the Non-IRA sale.
So as I write this, and I think of the fin intent behind your q#2, The answer is probably a "yes" :happy
Last edited by Domadosolo on Thu Jul 16, 2020 4:03 pm, edited 1 time in total.
Topic Author
Domadosolo
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Re: Non-equity AA - where?: Bond ETF, or MM, or ???

Post by Domadosolo »

sycamore wrote: Tue Jul 14, 2020 4:34 pm One general idea to think about is using a fixed income investment that's appropriate to your investing goal, which might be something like "retire in 15 years".

If your investment goal is short term, a money market fund or savings account or even a short-term bond fund is fine.

If your investment goal is intermediate to long term, I would either (1) stick with your bond funds (this is simplest) or (2) seek out the higher-yielding CDs (this requires some effort to open new accounts and transfer funds around).

Thanks Sycamore,
My plan is to use this money after 12 years. I will look into the CDs for a portion of the Non-Equity portion, perhaps to tide over the C-19 uncertainty.

:)
Topic Author
Domadosolo
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Re: Non-equity AA - where?: Bond ETF, or MM, or ???

Post by Domadosolo »

dbr wrote: Wed Jul 15, 2020 8:09 am I think CDs have always been a credible choice for fixed income in a long term portfolio, but I would not shift long term fixed income from bond funds you have already selected to CDs just because you think something is different now, even if there are always things that are different.

Cash in a money market probably does not make any sense.
Thanks dbr,
Money Market, where it is now, does seem like a terrible choice :shock:
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