CASH versus BONDS

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SemiRetire
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CASH versus BONDS

Post by SemiRetire »

Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
000
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Re: CASH versus BONDS

Post by 000 »

Most of my fixed income is in cash. I hold some bonds but I'm planning to dump them in their next rally. I prefer cash to bonds because I want the short term optionality without taking a bet on declining interest rates. Also, HYSA has higher yield than ST treasuries right now.
Marseille07
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Re: CASH versus BONDS

Post by Marseille07 »

000 wrote: Mon Feb 15, 2021 12:33 am Most of my fixed income is in cash. I hold some bonds but I'm planning to dump them in their next rally. I prefer cash to bonds because I want the short term optionality without taking a bet on declining interest rates. Also, HYSA has higher yield than ST treasuries right now.
Are we going to see a rally in bonds? I'm not so sure, seems to me like lots of downside not much upside, unless equities somehow come crashing down.
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Re: CASH versus BONDS

Post by 000 »

Marseille07 wrote: Mon Feb 15, 2021 12:48 am
000 wrote: Mon Feb 15, 2021 12:33 am Most of my fixed income is in cash. I hold some bonds but I'm planning to dump them in their next rally. I prefer cash to bonds because I want the short term optionality without taking a bet on declining interest rates. Also, HYSA has higher yield than ST treasuries right now.
Are we going to see a rally in bonds? I'm not so sure, seems to me like lots of downside not much upside, unless equities somehow come crashing down.
I don't know. I may have to exit the position without a rally. The intermediate term (til 2030) is not likely to be kind to bonds. But I think bonds probably still have one rally left in them - equities are feeling bubbly.
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Re: CASH versus BONDS

Post by Marseille07 »

000 wrote: Mon Feb 15, 2021 2:08 am
Marseille07 wrote: Mon Feb 15, 2021 12:48 am
000 wrote: Mon Feb 15, 2021 12:33 am Most of my fixed income is in cash. I hold some bonds but I'm planning to dump them in their next rally. I prefer cash to bonds because I want the short term optionality without taking a bet on declining interest rates. Also, HYSA has higher yield than ST treasuries right now.
Are we going to see a rally in bonds? I'm not so sure, seems to me like lots of downside not much upside, unless equities somehow come crashing down.
I don't know. I may have to exit the position without a rally. The intermediate term (til 2030) is not likely to be kind to bonds. But I think bonds probably still have one rally left in them - equities are feeling bubbly.
I see. I'm ready to be outta here, not liking LTTs at all. Almost feeling like I should've moved out earlier.
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Re: CASH versus BONDS

Post by 000 »

Marseille07 wrote: Mon Feb 15, 2021 2:10 am I see. I'm ready to be outta here, not liking LTTs at all. Almost feeling like I should've moved out earlier.
I bought EDV during the March 2020 liquidity crunch and sold a month later :D

Then I bought EDV again in December and am now down 10%+ on the position :oops:

The rising rates of the last two months don't feel real to me. Not because rising rates aren't coming (they are), but because the last two months feel more like the optimism tap has been turned up to 11.
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Re: CASH versus BONDS

Post by Marseille07 »

000 wrote: Mon Feb 15, 2021 2:15 am
Marseille07 wrote: Mon Feb 15, 2021 2:10 am I see. I'm ready to be outta here, not liking LTTs at all. Almost feeling like I should've moved out earlier.
I bought EDV during the March 2020 liquidity crunch and sold a month later :D

Then I bought EDV again in December and am now down 10%+ on the position :oops:

The rising rates of the last two months don't feel real to me. Not because rising rates aren't coming (they are), but because the last two months feel more like the optimism tap has been turned up to 11.
Do you think the yields would go down though? I don't see that happening and I think the bonds would continue to perform poorly, unless equities suddenly crash or something.

Either way, to be honest I'm still accumulating and I don't think I need bonds to dampen the volatility. If equities tank, I just buy more on the cheap.
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Re: CASH versus BONDS

Post by 000 »

Marseille07 wrote: Mon Feb 15, 2021 2:23 am Do you think the yields would go down though? I don't see that happening and I think the bonds would continue to perform poorly, unless equities suddenly crash or something.
I think yields could come down short term due to an equity pullback or due to yield control.
Marseille07 wrote: Mon Feb 15, 2021 2:23 am Either way, to be honest I'm still accumulating and I don't think I need bonds to dampen the volatility. If equities tank, I just buy more on the cheap.
It's not just volatility. Despite the "stocks always recover in the long run" meme here, stocks have real risk and could be negative for decades, during which time one might discover that one's investment horizon is shorter than anticipated.
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Re: CASH versus BONDS

Post by jimkinny »

I don't see much benefit from owning bonds now. If you have a enough money saved it can be a bit difficult to find an alternative to a Treasury because of FDIC limits. I recently chose a savings account over a bond fund. It seems the best solution but not a very good one.
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Re: CASH versus BONDS

Post by Stinky »

You can get over 2% on a 3 year MYGA.

Just be sure that you’ll be able to leave the money with the insurance company for the full 3 years. And, if the money is in a taxable account and you are under 59.5 at time of withdrawal, you will owe a tax penalty of 10% of interest earned, plus normal regular taxes.
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Corgitodd
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Re: CASH versus BONDS

Post by Corgitodd »

Would VTIP, Short term ETF be preferable to cash if inflation is a concern?
dbr
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Re: CASH versus BONDS

Post by dbr »

I don't. I have had a 50/50 stock/bond allocation and bonds half intermediate Treasuries and half intermediate TIPS for years and years and I don't change that around.

We have cash as it comes and goes with cash flow ins and outs and whatever sloshes around as transactions are made. For example dividends in taxable are paid directly into a checking account and so is the annual RMD. But managing cash flow is not asset allocation.

Over the last twenty years cash including cash in the checking account has averaged about 2% of the total portfolio value. I count the checking account in the portfolio.
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Re: CASH versus BONDS

Post by vineviz »

Corgitodd wrote: Mon Feb 15, 2021 9:44 am Would VTIP, Short term ETF be preferable to cash if inflation is a concern?
There's always something "preferable to cash", regardless of what kind of inflationary regime you expect, but VTIP probably isn't it.

I'd look at some combination of an intermediate-term or long-term TIPS fund and a short-term bond fund.


Perhaps Schwab US TIPS ETF (SCHP) along with either Vanguard Short-Term Bond ETF (BSV) or iShares Core 1-5 Year USD Bond ETF (ISTB).
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Re: CASH versus BONDS

Post by 50ismygoal »

I was 50% equities/50% bonds (BIV and BSV) but sold most of the bonds around a year ago and put those funds into high yield savings at Ally and Vanguard MM funds. My portfolio is now 50% equities, 40% cash and 10% bonds. As mentioned by other posters, I may sell the remaining bonds if they rally and just go 50% equities/50% cash. I don’t like having that much in cash, but there aren’t a lot of great alternatives. I hope that if inflation spikes, interest rates on my cash increase so that I don’t loose too much to inflation.
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Re: CASH versus BONDS

Post by Marseille07 »

000 wrote: Mon Feb 15, 2021 2:32 am It's not just volatility. Despite the "stocks always recover in the long run" meme here, stocks have real risk and could be negative for decades, during which time one might discover that one's investment horizon is shorter than anticipated.
Stocks have real risk. However given I was already 90/10 anyway, it's not like the 10% in bonds would have saved much if stocks are negative for decades. Unless you're 30/70 or something, we all take a massive hit in that scenario.
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Re: CASH versus BONDS

Post by aristotelian »

It is a bit of a bummer that yields are low right now, but long term I like bonds for their potential (not guaranteed) to go up when stocks are down and overall producing better risk adjusted returns. You don't get that diversification power from cash plus over time cash loses to inflation. It may be that bonds are at heightened risk of going down right now, but in a diversified portfolio I am OK with the risk of assets going up and down from time to time. If rates do rise, I would only be giving up paper gains from when rates were falling.

Certainly it is prudent to have a year or so expenses in cash or short bonds.
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Re: CASH versus BONDS

Post by Dandy »

My overall allocation is about 45/55 in mid retirement age 73. I hold about 25% of fixed income in cash, about 25% in short term bond funds and about 50% in intermediate bond funds.

The goal is to have enough "safe" fixed income (cash and short term bond funds) to fund retirement drawdown needs to age 90. As I age the mix will likely be shifting more to bond funds than cash. The cash is for stability and "insurance" not for sole funding each year's withdrawals. My RMD comes from a mix of cash and all bonds and equities funds --so far.

I've always had a decent allocation to cash -- in my working years that was mostly a Stable Value Fund in my 401k.
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Re: CASH versus BONDS

Post by birdog »

My AA is based on stocks and bonds/cash. Cash is becoming a larger portion of my bonds/cash side.
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Re: CASH versus BONDS

Post by ohboy! »

aristotelian wrote: Mon Feb 15, 2021 11:30 am It is a bit of a bummer that yields are low right now, but long term I like bonds for their potential (not guaranteed) to go up when stocks are down and overall producing better risk adjusted returns. You don't get that diversification power from cash plus over time cash loses to inflation. It may be that bonds are at heightened risk of going down right now, but in a diversified portfolio I am OK with the risk of assets going up and down from time to time. If rates do rise, I would only be giving up paper gains from when rates were falling.

Certainly it is prudent to have a year or so expenses in cash or short bonds.
It seems in the short-term holding cash instead of bonds is just a small bet on bonds losing a point or two. I wonder at which point cash holders should then deem it worthy to move back into bonds. I would think this is ideally a written plan.
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Re: CASH versus BONDS

Post by Wiggums »

Same here.

I was 100% stock in my retirement accounts, but always held cash/cash like funds in taxable during my working years. I now know, thanks to BHs, that I was never truly 100% stocks.

People holding bonds made money as the interest rates fell. It works out just fine for people who continue to hold bonds in the long run. bond duration is an important concept right now. Intermediate term bonds is probably the sweet spot for most people.

I have no plans to jump out and back into bonds.
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Re: CASH versus BONDS

Post by Angst »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
I do not have an "emergency fund" per se and my cash (bank checking acct) is almost always less than 0.1% the value of my entire investment portfolio. When I need more cash (every other month or so), I sell from my ST bonds fund. Sometimes when rebalancing periodically I add to bank cash that way too. If/when I have an exceptional need for more cash, I can go to any of my taxable bond funds or just sell some taxable equity. I also always have the option of redeeming some of my I Bonds holdings, but they are such a good deal these days with the real yield curve entirely negative, that as long as the market is up and/or I have enough taxable bonds available to raise cash, I wouldn't touch those I Bonds.
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Re: CASH versus BONDS

Post by Outer Marker »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
I hold 75% of my fixed income allocation in Stable Value within my 401K. Current SEC yield is about 2.2%, which is better than BND is paying at the moment (1%), and is insured against interest rate risk. Bonds have significant interest rate risk at the moment whereas cash and stable value do not.
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Re: CASH versus BONDS

Post by Marseille07 »

Wiggums wrote: Mon Feb 15, 2021 2:02 pm I was 100% stock in my retirement accounts, but always held cash/cash like funds in taxable during my working years. I now know, thanks to BHs, that I was never truly 100% stocks.
Same situation, but I'm fixing that by going 100% stocks in taxable as well. I'm starting to realize I don't really need bonds in taxable for a couple of reasons:
a) Withdrawal volatility isn't an issue since I'm not withdrawing anything
b) Downside protection is also unnecessary. If equities crash, I buy more on the cheap using income from a full-time job.
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Re: CASH versus BONDS

Post by jhsu802701 »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
Bonds are close to cash when it comes to yields but are far away when it comes to interest rate risk.

Bonds are a bubble. It's the most idiotic bubble in history. Other bubbles at least had the hollow promise of a jackpot. This one doesn't.
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Re: CASH versus BONDS

Post by SimplicityNow »

I am about 60%/40% stocks/fixed income investments.

About 20% of FI is bonds, mostly intermediate bonds but some TIPS. About 40% spread among several stable value funds and another 40% in cash.

I'm pretty good with that and don't plan on changing it.
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Re: CASH versus BONDS

Post by Noobvestor »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
Yes, I hold cash. I have a target of safe, intermediate-duration fixed income. Currently, a lot of that is in a barbell of cash and long-term Treasuries that even out to my target duration. Why? Well, partly the shape of the yield curve, and to balance inflation/deflation protection, but also it's just following my plan. In addition, I hold Series I and EE savings bonds - the former track inflation, the latter double in 20 years - plus some TIPS (in a fund).

My recommendation is to pick a target like I did - basically decide (1) how safe do you want your fixed income, (2) what's your overall duration, (3) what split do you want between nominal- and real-return bonds. Then either stick with a fund or just make sure things add up the way you want (e.g. cash + long bonds = target). A mix of cash and bonds is fine, just treat cash as a zero-duration Treasury in your duration/safety considerations.
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Re: CASH versus BONDS

Post by Corgitodd »

I had a CD come due and am a bit cash heavy right now. Cant decide between VTIP and ViPSX, (VG Intermediate TIP fund). The only TIPs I own are a slice in a Target date fund.
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Re: CASH versus BONDS

Post by birdog »

ohboy! wrote: Mon Feb 15, 2021 1:56 pm It seems in the short-term holding cash instead of bonds is just a small bet on bonds losing a point or two. I wonder at which point cash holders should then deem it worthy to move back into bonds. I would think this is ideally a written plan.
I think waiting for short term treasuries to yield more than an HYSA might be a starting point.
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Re: CASH versus BONDS

Post by watchnerd »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio?
Yes.

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t.c.
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Re: CASH versus BONDS

Post by t.c. »

This is my current fight: HYSA sitting at half a percent, but at least it's positive. I've never really been too pro bonds, but now I'm feeling a little dumb with $100K in cash making nearly nothing a month. When the HYSA was pumping a little more this direction it felt OK, if a bit of a drag on the portfolio, but now I'm trying to figure out what to do with the "safe" money. Stick it in a CD? Connexus Credit Union is offering .90 to 1.01% on a 3 to 5 year CD. Still not great, but outperforming the bond market the last few years and probably into the near future at least. Not trying to time the market, but also not really interested in sinking it into a losing proposition when I could just keep the cash in a HYSA or CD for next to or better returns.

Also starting to rethink the idea of the cash holdings. It's a little less than 20% of my after tax holdings, with the rest of my non-401K money invested into VTSAX and a slice in VIGAX for some growth stock exposure, but should I really be sitting on $100K in cash? I used to justify this as growing up in a relatively low-income family, I was overcompensating for the fact I didn't want to ever be "poor" again, but the odds of that are pretty slim and there are better ways to weather a storm if I needed to. And, oh boy, there've been a few storms over the past few years I've weathered and weathered fine... So would it just make more sense to drop down to $30K or something cash, enough to give me some cushion if ish does hit the fan, but allow 70% of that money to actually grow in VTSAX instead. Had I done that three or four years ago it would be worth a heck of a lot more than $70K today, but I always made that excuse of, "It helps me sleep well at night." I just don't know if that's true, or even necessary, anymore.
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Re: CASH versus BONDS

Post by corn18 »

My 40% fixed income is all in my 401k stable value fund.
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Re: CASH versus BONDS

Post by Pawpatrol »

I would advise people to go revisit the numerous threads that popped up in march/april about the dumping of munis and people selling them because of default risk and moved to cash or treasuries. That was the cheapest munis had ever been relative to treasuries. Anyone who bought munis in march made an absolute killing.

Here we are today and now we see numerous posts about people dumping bonds/treasuries because interest rates are going higher. Everyone is asking how high interest rates can go while no one is asking how low they can go? That is telling. Just stick to your IPS and ignore the noise. This board often acts as a negative indicator.
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Re: CASH versus BONDS

Post by geerhardusvos »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
It is totally reasonable to hold cash in a MM or HYSA instead of bonds. If you're going to hold a lot of fixed assets, you might as well hold some different types of bonds (BND, TIPS, iBonds, etc.) in addition to some cash/CD, just for diversification.

For me, both bonds and cash have abysmal returns, so I don't hold much of either of them.
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Re: CASH versus BONDS

Post by jocdoc »

I am keeping the bond funds I have held for years. All new money allocated to fixed income goes to stable value fund and High yield Savings account. That said 90% of my fixed income is in the bond funds I have held for years.
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Re: CASH versus BONDS

Post by Marseille07 »

Yes, very important to stick with your IPS. I'm 100% following my IPS after 3 revisions in as many months.
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Re: CASH versus BONDS

Post by birdog »

Marseille07 wrote: Mon Feb 15, 2021 7:07 pm Yes, very important to stick with your IPS. I'm 100% following my IPS after 3 revisions in as many months.
Hah! I've felt like that at times as well.
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Re: CASH versus BONDS

Post by ohboy! »

birdog wrote: Mon Feb 15, 2021 5:20 pm
ohboy! wrote: Mon Feb 15, 2021 1:56 pm It seems in the short-term holding cash instead of bonds is just a small bet on bonds losing a point or two. I wonder at which point cash holders should then deem it worthy to move back into bonds. I would think this is ideally a written plan.
I think waiting for short term treasuries to yield more than an HYSA might be a starting point.
Is it possible that doesn’t happen? That HYS rise in parallel?
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Re: CASH versus BONDS

Post by Marseille07 »

ohboy! wrote: Mon Feb 15, 2021 7:39 pm
birdog wrote: Mon Feb 15, 2021 5:20 pm
ohboy! wrote: Mon Feb 15, 2021 1:56 pm It seems in the short-term holding cash instead of bonds is just a small bet on bonds losing a point or two. I wonder at which point cash holders should then deem it worthy to move back into bonds. I would think this is ideally a written plan.
I think waiting for short term treasuries to yield more than an HYSA might be a starting point.
Is it possible that doesn’t happen? That HYS rise in parallel?
Highly unlikely unless the Fed raises interest rates.
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Re: CASH versus BONDS

Post by UpperNwGuy »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
All bonds here, no cash.
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Re: CASH versus BONDS

Post by Marseille07 »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
Moving toward 100% stocks, no bonds. I'll hold 1% of AA's value as EF separately in checking to pay my bills.
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Re: CASH versus BONDS

Post by Call_Me_Op »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
Cash is essentially a bond with zero duration - so you are splitting hairs.
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Re: CASH versus BONDS

Post by hudson »

UpperNwGuy wrote: Mon Feb 15, 2021 8:15 pm
SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
All bonds here, no cash.
Me too...100% fixed...including some high yield savings for solving problems.
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ThriftyGeorge
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Re: CASH versus BONDS

Post by ThriftyGeorge »

Just paused all future bond purchases in my retirement accounts. I have enough in there for my allocation, and their value will most likely decline over the years as rates go up. Between the frenzied housing market with people bidding way over asking price, kids on Robinhood thinking they’ll get rich overnight, who weren’t alive to remember the dot com crash, and general euphoria and FOMO with this insane stock market that thinks it’s invincible, I don’t feel comfortable pouring more cash into the market right now. Only cash for me going forward. If I miss out on future gains, so be it, but I feel like I’ve seen this story before and I don’t like how it ends.
Last edited by ThriftyGeorge on Tue Feb 16, 2021 1:33 pm, edited 1 time in total.
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Marseille07
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Re: CASH versus BONDS

Post by Marseille07 »

ThriftyGeorge wrote: Tue Feb 16, 2021 10:44 am Just paused all future bond purchases in my retirement accounts. I have enough in there for my allocation, and their value will most likely decline over the years as rates go up. Between the frenzied housing market with people bidding way over asking price, kids on Robinhood thinking they’ll get rich overnight, who weren’t alive to remember the dot com crash, and general euphoria and FOMO with this insane stock market that thinks it’s invincible, I don’t feel comfortable poring into the market right now. Only cash for me going forward. If I miss out on future gains, so be it, but I feel like I’ve seen this story before and I don’t like how it ends.
Same, I regret holding LTTs since last Oct or so. I just sold'em and loaded up more equities. Will stay 100/0 plus 1% cash in EF.
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Re: CASH versus BONDS

Post by willthrill81 »

SemiRetire wrote: Mon Feb 15, 2021 12:25 am Does anyone just hold cash as part of their portfolio? Bonds currently seem very close to cash anyway.

In terms of just bonds for safety, was wondering a mix of cash and bonds?
What is your strategy behind holding the cash?
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Re: CASH versus BONDS

Post by chrisdds98 »

Marseille07 wrote: Tue Feb 16, 2021 11:23 am
ThriftyGeorge wrote: Tue Feb 16, 2021 10:44 am Just paused all future bond purchases in my retirement accounts. I have enough in there for my allocation, and their value will most likely decline over the years as rates go up. Between the frenzied housing market with people bidding way over asking price, kids on Robinhood thinking they’ll get rich overnight, who weren’t alive to remember the dot com crash, and general euphoria and FOMO with this insane stock market that thinks it’s invincible, I don’t feel comfortable poring into the market right now. Only cash for me going forward. If I miss out on future gains, so be it, but I feel like I’ve seen this story before and I don’t like how it ends.
Same, I regret holding LTTs since last Oct or so. I just sold'em and loaded up more equities. Will stay 100/0 plus 1% cash in EF.
i'm doing the opposite, buying LTTs while they are cheap and selling equities. buy low sell high!
Marseille07
Posts: 5392
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Re: CASH versus BONDS

Post by Marseille07 »

chrisdds98 wrote: Tue Feb 16, 2021 12:27 pm
Marseille07 wrote: Tue Feb 16, 2021 11:23 am
ThriftyGeorge wrote: Tue Feb 16, 2021 10:44 am Just paused all future bond purchases in my retirement accounts. I have enough in there for my allocation, and their value will most likely decline over the years as rates go up. Between the frenzied housing market with people bidding way over asking price, kids on Robinhood thinking they’ll get rich overnight, who weren’t alive to remember the dot com crash, and general euphoria and FOMO with this insane stock market that thinks it’s invincible, I don’t feel comfortable poring into the market right now. Only cash for me going forward. If I miss out on future gains, so be it, but I feel like I’ve seen this story before and I don’t like how it ends.
Same, I regret holding LTTs since last Oct or so. I just sold'em and loaded up more equities. Will stay 100/0 plus 1% cash in EF.
i'm doing the opposite, buying LTTs while they are cheap and selling equities. buy low sell high!
That's the right move to preserve the same amount of protection to the downside.

I didn't have a whole lot of LTTs and it turned out my risk tolerance for bonds going down is really shallow. I have diamond hands to hold equities.
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ThriftyGeorge
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Re: CASH versus BONDS

Post by ThriftyGeorge »

chrisdds98 wrote: Tue Feb 16, 2021 12:27 pm
Marseille07 wrote: Tue Feb 16, 2021 11:23 am
ThriftyGeorge wrote: Tue Feb 16, 2021 10:44 am Just paused all future bond purchases in my retirement accounts. I have enough in there for my allocation, and their value will most likely decline over the years as rates go up. Between the frenzied housing market with people bidding way over asking price, kids on Robinhood thinking they’ll get rich overnight, who weren’t alive to remember the dot com crash, and general euphoria and FOMO with this insane stock market that thinks it’s invincible, I don’t feel comfortable poring into the market right now. Only cash for me going forward. If I miss out on future gains, so be it, but I feel like I’ve seen this story before and I don’t like how it ends.
Same, I regret holding LTTs since last Oct or so. I just sold'em and loaded up more equities. Will stay 100/0 plus 1% cash in EF.
i'm doing the opposite, buying LTTs while they are cheap and selling equities. buy low sell high!
The nice thing is that with the monthly interest, you’re automatically DCA’ing and buying low. That’s why I’m not selling any of my current bond positions.
“Advertising has us chasing cars and clothes, working jobs we hate, so we can buy sh*# we don’t need.”...Tyler Durden
DetroitRick
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Re: CASH versus BONDS

Post by DetroitRick »

I always keep the bulk of my fixed income in intermediate term bonds, mostly via bond funds. This matches my needs now, and probably always will. But yes, I'm currently increasing cash and decreasing SHORT-term bonds (mainly individual issues) at this moment. These are fairly small amounts in total for my portfolio, not my entire bond positions. The portion I'm switching is basically close to my 3-year withdrawal needs (I'm retired). So just a hair of duration matching is going on.

For the bigger piece that I'm NOT changing, that rationale is simply because of the tendency of intermediates to outperform short-terms and cash long term (yes, there can be and have been exceptions). I could be right this time, or I could be wrong. But my BIGGER concern than return here is having the portfolio ballast that fixed income tends to provide. So that piece is not changing and I've instead just made a few shifts to funds that can better weather this environment (lower cost, more experienced managers, more moderate durations, etc.). Standing pat is perhaps also tempered a bit by the fact that my overall fixed income positions are low for my age anyway - around 30%/6 years of withdrawals.

But in the short-term end of all this, yes. I'm heading to cash for a while. I always change fixed income tactics according to market conditions (shape of yield curve, relative compensation for risk). No, that doesn't mean I think I can predict interest rates. I can't, or I would be a billionaire. It just reflects this current short-term yield curve. Which is clearly impacted by a number of factors, especially the Fed's bond-buying program.

Short-term yields are just plain low. Meanwhile, I can easily get 0.4% to 0.6% on cash right now. As I check yields (today) for fixed income instruments of under 3 years on any major trading platform (I used Schwab's, and looked at municipals, treasuries, investment-grade corporates, and mortgage-backed) there are simply no better deals. Most are much lower. I see a slight upside and an extremely unlikely downside to this modest change. As a result, I'm choosing cash for that piece of fixed income. This is unusual, but it is what it is. Really, it's not a big deal in income dollars either way, but I prefer to squeak out what I can when it takes me virtually no effort. Heck, even if those 0.4% to 0.6% savings rates go to zero tomorrow (the risk in doing this), I would barely care.

Again, this is a narrow portfolio slice and I consider this a minor shift. I'm not advocating getting out of bonds in any way, shape or form. Just one person's opinion....
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watchnerd
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Re: CASH versus BONDS

Post by watchnerd »

chrisdds98 wrote: Tue Feb 16, 2021 12:27 pm
Marseille07 wrote: Tue Feb 16, 2021 11:23 am
ThriftyGeorge wrote: Tue Feb 16, 2021 10:44 am Just paused all future bond purchases in my retirement accounts. I have enough in there for my allocation, and their value will most likely decline over the years as rates go up. Between the frenzied housing market with people bidding way over asking price, kids on Robinhood thinking they’ll get rich overnight, who weren’t alive to remember the dot com crash, and general euphoria and FOMO with this insane stock market that thinks it’s invincible, I don’t feel comfortable poring into the market right now. Only cash for me going forward. If I miss out on future gains, so be it, but I feel like I’ve seen this story before and I don’t like how it ends.
Same, I regret holding LTTs since last Oct or so. I just sold'em and loaded up more equities. Will stay 100/0 plus 1% cash in EF.
i'm doing the opposite, buying LTTs while they are cheap and selling equities. buy low sell high!
Me, too.
60% Global Market Stocks (VT,FM) | 38% Global Market Bonds | 2% crypto & securitized gold || LMP TIPS/STRIPS || RSU + ESPP
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