how would you invest money in fixed income now?

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luk
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how would you invest money in fixed income now?

Post by luk »

I want to sit my money somewhere for a year for a fixed income. What would you invest in?
Thanks
annu
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Re: how would you invest money in fixed income now?

Post by annu »

Tbills and ibonds
Atgard
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Re: how would you invest money in fixed income now?

Post by Atgard »

As the poster above said, Treasuries and I-Bonds are attractive right now.

Treasuries or CDs are paying a little under 3% for 1-year maturities now.

I-Bonds are a little more complicated, but are currently paying 9.62% for the first 6 months, then the rate will reset based on inflation for the next 6 months (and every 6 months thereafter). Redeeming after 1 year will incur a 3-month interest penalty, but even if you don't count anything for the second 6 months, you'd still earn 4.81% for the year. They are limited to $10K per person per year though. I like them more for longer-term holding (with the possibility to liquidate early in an emergency).
jvini
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Re: how would you invest money in fixed income now?

Post by jvini »

Last week I bought a 1 year Treasury at 2.9. I also bought a 3 yr. CD at 3.1. I'd park 1 yrs worth of fixed income in a t bill.
morfred
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Re: how would you invest money in fixed income now?

Post by morfred »

Are there Vanguard mutual funds for those?
AQ
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Re: how would you invest money in fixed income now?

Post by AQ »

muni is attractive to me now
chrisdds98
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Re: how would you invest money in fixed income now?

Post by chrisdds98 »

morfred wrote: Wed Jun 22, 2022 10:06 pm Are there Vanguard mutual funds for those?
Treasury ETFs: VGSH, VGIT, VGLT, EDV
ibonds you get from treasurydirect.gov
rossington
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Re: how would you invest money in fixed income now?

Post by rossington »

luk wrote: Wed Jun 22, 2022 7:33 pm I want to sit my money somewhere for a year for a fixed income. What would you invest in?
Thanks
It would help to give an approximate amount of the money you are investing.
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aristotelian
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Re: how would you invest money in fixed income now?

Post by aristotelian »

Stay the course, sit back, and wait for my now-higher yielding bonds to pay off. I moved my short term savings from HY savings to VUSB.
johnny
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Re: how would you invest money in fixed income now?

Post by johnny »

Make sure you pick funds that are duration matched to your investment timeframe! Intermediate and Long term bonds are *not* the place to put money right now that you expect to reallocate within a year. We may very well see more bond fund valuations drop as the Fed continues to raise rates.

1 year Treasury or IBonds are good.
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grabiner
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Re: how would you invest money in fixed income now?

Post by grabiner »

luk wrote: Wed Jun 22, 2022 7:33 pm I want to sit my money somewhere for a year for a fixed income. What would you invest in?
The key here is "for a year". If you are going to spend the money in a year, you don't want it in a long-term bond fund that could gain or lose more than 10% if interest rates fall or rise. A one-year CD would be appropriate, or in a high tax bracket, something like Vanguard Short-Term Tax-Exempt with a one-year duration.

If you are going to spend the money over several years, beginning one year from now, then your time horizon is a bit longer than one year, so you might use a short-term bond fund.
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luk
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Re: how would you invest money in fixed income now?

Post by luk »

Thank you! Do you guys buy T-Bills through regular brokers (ie Etrade,..)? Or is there a better way? There's no limit in buying T-bills, unlike i-bonds right?


For the penalty of
Atgard wrote: Wed Jun 22, 2022 7:44 pm As the poster above said, Treasuries and I-Bonds are attractive right now.

Treasuries or CDs are paying a little under 3% for 1-year maturities now.

I-Bonds are a little more complicated, but are currently paying 9.62% for the first 6 months, then the rate will reset based on inflation for the next 6 months (and every 6 months thereafter). Redeeming after 1 year will incur a 3-month interest penalty, but even if you don't count anything for the second 6 months, you'd still earn 4.81% for the year. They are limited to $10K per person per year though. I like them more for longer-term holding (with the possibility to liquidate early in an emergency).
Wow! penalty in redeeming! I thought they would happily keep your money after the maturity date.
How's the redeeming process? Any gotcha's?
exodusNH
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Re: how would you invest money in fixed income now?

Post by exodusNH »

luk wrote: Thu Jun 23, 2022 10:26 pm Thank you! Do you guys buy T-Bills through regular brokers (ie Etrade,..)? Or is there a better way? There's no limit in buying T-bills, unlike i-bonds right?


For the penalty of
Atgard wrote: Wed Jun 22, 2022 7:44 pm As the poster above said, Treasuries and I-Bonds are attractive right now.

Treasuries or CDs are paying a little under 3% for 1-year maturities now.

I-Bonds are a little more complicated, but are currently paying 9.62% for the first 6 months, then the rate will reset based on inflation for the next 6 months (and every 6 months thereafter). Redeeming after 1 year will incur a 3-month interest penalty, but even if you don't count anything for the second 6 months, you'd still earn 4.81% for the year. They are limited to $10K per person per year though. I like them more for longer-term holding (with the possibility to liquidate early in an emergency).
Wow! penalty in redeeming! I thought they would happily keep your money after the maturity date.
How's the redeeming process? Any gotcha's?
Regular brokers are fine.

I Bonds are 30 year bonds that you can redeem with a 3 month penalty after 12 months up to 5 years. After 30 years, they will redeem automatically.
averagedude
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Re: how would you invest money in fixed income now?

Post by averagedude »

My first dollars would go into Ibonds, up to the maximum amount. The rest of the dollars is a crap shoot.
anoop
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Re: how would you invest money in fixed income now?

Post by anoop »

1-yr T bills and 2 year T bonds.
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AerialWombat
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Re: how would you invest money in fixed income now?

Post by AerialWombat »

My living and lifestyle expenses for the next 12 months are in high yield savings and T-bills 52 weeks and less.
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Re: how would you invest money in fixed income now?

Post by JBTX »

https://www.wsj.com/market-data/bonds/tips

In addition to ibonds, I may even consider TIPS a year out from maturity. You would earn approx 2% less than inflation.
Atgard
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Re: how would you invest money in fixed income now?

Post by Atgard »

luk wrote: Thu Jun 23, 2022 10:26 pm Thank you! Do you guys buy T-Bills through regular brokers (ie Etrade,..)? Or is there a better way? There's no limit in buying T-bills, unlike i-bonds right?
Atgard wrote: Wed Jun 22, 2022 7:44 pm As the poster above said, Treasuries and I-Bonds are attractive right now.

Treasuries or CDs are paying a little under 3% for 1-year maturities now.

I-Bonds are a little more complicated, but are currently paying 9.62% for the first 6 months, then the rate will reset based on inflation for the next 6 months (and every 6 months thereafter). Redeeming after 1 year will incur a 3-month interest penalty, but even if you don't count anything for the second 6 months, you'd still earn 4.81% for the year. They are limited to $10K per person per year though. I like them more for longer-term holding (with the possibility to liquidate early in an emergency).
Wow! penalty in redeeming! I thought they would happily keep your money after the maturity date.
How's the redeeming process? Any gotcha's?
You can buy treasuries (including t-bills) through most brokers pretty easily, I would assume you could through E-Trade as well. No, there is no limit to buying treasuries.

Yes, for I-Bonds you can't redeem before a year, then there is a penalty of the last 3 months' interest if you redeem between 1 and 5 years, no penalty after that (maturity date is 30 years, when they are automatically redeemed with no penalty). Other than the penalty, I don't think there are any "gotchas," but I haven't redeemed any I-Bonds yet.
dbr
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Re: how would you invest money in fixed income now?

Post by dbr »

Atgard wrote: Fri Jun 24, 2022 10:25 pm
luk wrote: Thu Jun 23, 2022 10:26 pm Thank you! Do you guys buy T-Bills through regular brokers (ie Etrade,..)? Or is there a better way? There's no limit in buying T-bills, unlike i-bonds right?
Atgard wrote: Wed Jun 22, 2022 7:44 pm As the poster above said, Treasuries and I-Bonds are attractive right now.

Treasuries or CDs are paying a little under 3% for 1-year maturities now.

I-Bonds are a little more complicated, but are currently paying 9.62% for the first 6 months, then the rate will reset based on inflation for the next 6 months (and every 6 months thereafter). Redeeming after 1 year will incur a 3-month interest penalty, but even if you don't count anything for the second 6 months, you'd still earn 4.81% for the year. They are limited to $10K per person per year though. I like them more for longer-term holding (with the possibility to liquidate early in an emergency).
Wow! penalty in redeeming! I thought they would happily keep your money after the maturity date.
How's the redeeming process? Any gotcha's?
You can buy treasuries (including t-bills) through most brokers pretty easily, I would assume you could through E-Trade as well. No, there is no limit to buying treasuries.

Yes, for I-Bonds you can't redeem before a year, then there is a penalty of the last 3 months' interest if you redeem between 1 and 5 years, no penalty after that (maturity date is 30 years, when they are automatically redeemed with no penalty). Other than the penalty, I don't think there are any "gotchas," but I haven't redeemed any I-Bonds yet.
And when they are returned to you at 30 years the deferred tax is due. One should plan for this or, in some cases, consider paying the tax annually. It would depend on the expected tax bracket at 30 years.
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Re: how would you invest money in fixed income now?

Post by MikeG62 »

T-Bills.

No bond funds at this time.
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Atgard
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Re: how would you invest money in fixed income now?

Post by Atgard »

dbr wrote: Sat Jun 25, 2022 8:11 am
Atgard wrote: Fri Jun 24, 2022 10:25 pm
luk wrote: Thu Jun 23, 2022 10:26 pm Thank you! Do you guys buy T-Bills through regular brokers (ie Etrade,..)? Or is there a better way? There's no limit in buying T-bills, unlike i-bonds right?
Atgard wrote: Wed Jun 22, 2022 7:44 pm As the poster above said, Treasuries and I-Bonds are attractive right now.

Treasuries or CDs are paying a little under 3% for 1-year maturities now.

I-Bonds are a little more complicated, but are currently paying 9.62% for the first 6 months, then the rate will reset based on inflation for the next 6 months (and every 6 months thereafter). Redeeming after 1 year will incur a 3-month interest penalty, but even if you don't count anything for the second 6 months, you'd still earn 4.81% for the year. They are limited to $10K per person per year though. I like them more for longer-term holding (with the possibility to liquidate early in an emergency).
Wow! penalty in redeeming! I thought they would happily keep your money after the maturity date.
How's the redeeming process? Any gotcha's?
You can buy treasuries (including t-bills) through most brokers pretty easily, I would assume you could through E-Trade as well. No, there is no limit to buying treasuries.

Yes, for I-Bonds you can't redeem before a year, then there is a penalty of the last 3 months' interest if you redeem between 1 and 5 years, no penalty after that (maturity date is 30 years, when they are automatically redeemed with no penalty). Other than the penalty, I don't think there are any "gotchas," but I haven't redeemed any I-Bonds yet.
And when they are returned to you at 30 years the deferred tax is due. One should plan for this or, in some cases, consider paying the tax annually. It would depend on the expected tax bracket at 30 years.
Right, I didn't count this as a "gotcha" since it's actually a benefit, but yes be prepared that taxes on I-bond interest are deferred until you redeem them, at which point they are all due.
livesoft
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Re: how would you invest money in fixed income now?

Post by livesoft »

grabiner wrote: Thu Jun 23, 2022 2:06 pmThe key here is "for a year". If you are going to spend the money in a year, you don't want it in a long-term bond fund that could gain or lose more than 10% if interest rates fall or rise. A one-year CD would be appropriate, or in a high tax bracket, something like Vanguard Short-Term Tax-Exempt with a one-year duration. ...
OTOH, intermediate-term bond funds such as Vanguard Total US Bond Market Index fund have lost about 11% YTD. It would be unprecedented wouldn't it if the fund lost another 10%? I think the probability that this fund goes up 5% in the next year is much higher than if it is down 5% from here a year from now.
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Re: how would you invest money in fixed income now?

Post by David_w »

aristotelian wrote: Thu Jun 23, 2022 6:00 am Stay the course, sit back, and wait for my now-higher yielding bonds to pay off. I moved my short term savings from HY savings to VUSB.
Curious why you chose VUSB instead of t-Bills
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Re: how would you invest money in fixed income now?

Post by aristotelian »

David_w wrote: Sat Jun 25, 2022 8:29 pm
aristotelian wrote: Thu Jun 23, 2022 6:00 am Stay the course, sit back, and wait for my now-higher yielding bonds to pay off. I moved my short term savings from HY savings to VUSB.
Curious why you chose VUSB instead of t-Bills
I thought about T Bills. VUSB was just personal preference.
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Re: how would you invest money in fixed income now?

Post by ruralavalon »

luk wrote: Wed Jun 22, 2022 7:33 pm I want to sit my money somewhere for a year for a fixed income. What would you invest in?
Thanks
An intermediate-term bond fund.
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Re: how would you invest money in fixed income now?

Post by mikeanderson20 »

If you want an 80% approach and want a to be less hands-on with more automation, I would suggest a target date fund. Your portfolio is managed for you by automating diversification of your allocations across different stocks and bonds. The allocations are determined by your target retirement date (more aggressive allocations are placed in stocks early transitioning to a more safe and conservative approach in bonds as you get closer to retirement).
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Re: how would you invest money in fixed income now?

Post by ruralavalon »

mikeanderson20 wrote: Mon Jun 27, 2022 1:28 pm If you want an 80% approach and want a to be less hands-on with more automation, I would suggest a target date fund. Your portfolio is managed for you by automating diversification of your allocations across different stocks and bonds. The allocations are determined by your target retirement date (more aggressive allocations are placed in stocks early transitioning to a more safe and conservative approach in bonds as you get closer to retirement).
mikeanderson20, welcome to the forum :) .
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like2read
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Re: how would you invest money in fixed income now?

Post by like2read »

1 year holding period.

Do you want to ensure you get all of your initial investment (principal) back? Then CDs or individual treasuries. (Duration declining to zero).

If you are ok with getting approximately your initial investment back, more or less, then very short term bond fund (constant duration).

(Treasuries or CDs seem to me the obvious choice, unless you would like to wager that short term interest rates will fall, or at least remain the same over the coming year).

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Frank2012
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Re: how would you invest money in fixed income now?

Post by Frank2012 »

livesoft wrote: Sat Jun 25, 2022 3:16 pm
grabiner wrote: Thu Jun 23, 2022 2:06 pmThe key here is "for a year". If you are going to spend the money in a year, you don't want it in a long-term bond fund that could gain or lose more than 10% if interest rates fall or rise. A one-year CD would be appropriate, or in a high tax bracket, something like Vanguard Short-Term Tax-Exempt with a one-year duration. ...
OTOH, intermediate-term bond funds such as Vanguard Total US Bond Market Index fund have lost about 11% YTD. It would be unprecedented wouldn't it if the fund lost another 10%? I think the probability that this fund goes up 5% in the next year is much higher than if it is down 5% from here a year from now.
I concur...seems like 10-year treasury at 3.2% yield is a buying opportunity...maybe with yields above 3%, treasuries will act as ballast should we have a recession that tanks stocks. We'll see...
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