Critique my portfolio (please)

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Topic Author
ryanbohle
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Critique my portfolio (please)

Post by ryanbohle »

Please critique my portfolio. I value all feedback. I vow not to argue or get defensive in comments. Thank you in advance.

Age 38
Annual income: $450,000
Portfolio value: $1,220,000.00
Net worth: roughly 1.6-1.7 million

Asset Allocation
Stock:$1,031,225 (85%)
US: $831,224 (80%)
International: $200,000 (20%)
Bonds: $51,000 (4.2%)
REITs: $107,924 (8.8%)
Crypto: $13,165 (1%)

Caveats:
My employer does not have a US total stock market index option, so I do the best I can.
The IVV in my taxable is from some tax loss harvesting I did, otherwise it would all be in VTI

403B
VINIX $162,873 (Large)
VIMAX $27153 (mid)
VSMAX $27,404 (small)

457B
VINIX $127,554 (Large)
VIMAX $25,817 (mid)
VSMAX $2,6082 (small)

401K
VINIX $8,3131 (Large)
VIMAX $8,283 (mid)
VSMAX $8,378 (small)

Roth IRA (me)
VUG $80,457 (Vanguard Growth)
VCIT $5,138 (Corporate Bond fund, intermediate term)
BND $5,839 (Bond fund)
VXUS $112,961 (International Index)
VTI $27,074

Roth IRA (wife)
VXUS $51,267 (international)
VTI $37792.91

Taxable
IVV $63,203 (Large Cap Index)
VXUS $35,064 (International)
VTI $126,019

Private REIT - "Housing Fund"
$107,425.17

TreasuryDirect
I - Bonds $40,000
Last edited by ryanbohle on Wed May 15, 2024 6:15 pm, edited 3 times in total.
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retired@50
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Re: Critique my portfolio (please)

Post by retired@50 »

ryanbohle wrote: Wed May 15, 2024 9:49 am
Private REIT - "Housing Fund"
$107,425.17

Treasury Bonds $40,000
Tell us more about these two items above...

With a high income comes a high tax bracket.

What's the term on the treasuries?

I-bonds might be better in a taxable account so you can elect to defer income taxes.

Does the Private REIT distribute income and provide a 1099 each year that you have to deal with on your income tax forms?

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
poor & ignorant soul
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Re: Critique my portfolio (please)

Post by poor & ignorant soul »

ryanbohle wrote: Wed May 15, 2024 9:49 am Age 38
Annual income: $450,000
Net worth: roughly 1.6-1.7 million
...noise...
You've already won. Family, community, hobbies.
Topic Author
ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

retired@50 wrote: Wed May 15, 2024 9:58 am
ryanbohle wrote: Wed May 15, 2024 9:49 am
Private REIT - "Housing Fund"
$107,425.17

Treasury Bonds $40,000
Tell us more about these two items above...

With a high income comes a high tax bracket.

What's the term on the treasuries?

I-bonds might be better in a taxable account so you can elect to defer income taxes.

Does the Private REIT distribute income and provide a 1099 each year that you have to deal with on your income tax forms?

Regards,
DLP "Housing Fund". I get monthly distributions (which I auto-reinvest) and an end of year pay-out. I get a K-1 for tax purposes and "tax-shelter" benefit.

30 year Treasury bonds, But I kind of have this money ear marked to be spent in about 12-15 years, I have three daughters, I will need to buy three cars in 4 years. I add about 10K to it per year.
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

poor & ignorant soul wrote: Wed May 15, 2024 10:01 am
ryanbohle wrote: Wed May 15, 2024 9:49 am Age 38
Annual income: $450,000
Net worth: roughly 1.6-1.7 million
...noise...
You've already won. Family, community, hobbies.
Im training for a triathlon, but I am slow as Sh*t :)
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retired@50
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Re: Critique my portfolio (please)

Post by retired@50 »

ryanbohle wrote: Wed May 15, 2024 10:04 am
30 year Treasury bonds, But I kind of have this money ear marked to be spent in about 12-15 years, I have three daughters, I will need to buy three cars in 4 years. I add about 10K to it per year.
The timeline doesn't quite add up... 30 year bonds for expenses in 4 & 12-15 years.

Can I presume the semi-annual coupon payments are being taxed at your marginal Federal rate (32%) ?

This isn't a huge problem, but if you keep adding money it will probably get worse as the years go by.

You might look into tax-exempt municipal bonds or a municipal bond fund from Vanguard if you live in CA, MA, NJ, NY, OH, or PA.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

retired@50 wrote: Wed May 15, 2024 10:23 am
ryanbohle wrote: Wed May 15, 2024 10:04 am
30 year Treasury bonds, But I kind of have this money ear marked to be spent in about 12-15 years, I have three daughters, I will need to buy three cars in 4 years. I add about 10K to it per year.
The timeline doesn't quite add up... 30 year bonds for expenses in 4 & 12-15 years.

Can I presume the semi-annual coupon payments are being taxed at your marginal Federal rate (32%) ?

This isn't a huge problem, but if you keep adding money it will probably get worse as the years go by.

You might look into tax-exempt municipal bonds or a municipal bond fund from Vanguard if you live in CA, MA, NJ, NY, OH, or PA.

Regards,
Thank you for the feedback. The T-bonds are 30 year bonds, but there is no penalties for cashing out as long as its been at least 5 years. Also, i meant I need to buy three cars in the span of 4 years. (not in four years) my daughters are all under age 6. :)

I'm not super concerned with optimizing the yield and tax implications of my bonds. I am really just looking to buffer the volatility of an already stock heavy portfolio.
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mhc
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Re: Critique my portfolio (please)

Post by mhc »

Usually one would put the investments with the highest expected returns in the Roth, and the lowest expected return investments in the tax deferred accounts. This means you might want to move your bonds from the Roth to a tax deferred account.

With your income, do you really need to save specifically for cars now? Can't you just cash flow them later on? It would be more tax efficient to not have interest paying investments in your taxable account.
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Topic Author
ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

mhc wrote: Wed May 15, 2024 11:22 am Usually one would put the investments with the highest expected returns in the Roth, and the lowest expected return investments in the tax deferred accounts. This means you might want to move your bonds from the Roth to a tax deferred account.

With your income, do you really need to save specifically for cars now? Can't you just cash flow them later on? It would be more tax efficient to not have interest paying investments in your taxable account.
Thank you for your response. I might be able to cash flow cars at the time, maybe not. I invest pretty aggressively, meaning I don't keep a lot cash reserves. I have a 30K emergency fund in a Chase savings account, but the rest is pretty much invested. I make $450K but I essentially live "pay check to pay check." Occasionally I have to sell some stock in my taxable account to cover an unexpected expense, but that is very rare.

You said "It would be more tax efficient to not have interest paying investments in your taxable account." I am not sure exactly what you mean by that, can you clarify?
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Re: Critique my portfolio (please)

Post by retired@50 »

See link for tax efficient fund placement.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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mhc
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Re: Critique my portfolio (please)

Post by mhc »

ryanbohle wrote: Wed May 15, 2024 11:30 am
mhc wrote: Wed May 15, 2024 11:22 am Usually one would put the investments with the highest expected returns in the Roth, and the lowest expected return investments in the tax deferred accounts. This means you might want to move your bonds from the Roth to a tax deferred account.

With your income, do you really need to save specifically for cars now? Can't you just cash flow them later on? It would be more tax efficient to not have interest paying investments in your taxable account.
Thank you for your response. I might be able to cash flow cars at the time, maybe not. I invest pretty aggressively, meaning I don't keep a lot cash reserves. I have a 30K emergency fund in a Chase savings account, but the rest is pretty much invested. I make $450K but I essentially live "pay check to pay check." Occasionally I have to sell some stock in my taxable account to cover an unexpected expense, but that is very rare.

You said "It would be more tax efficient to not have interest paying investments in your taxable account." I am not sure exactly what you mean by that, can you clarify?
Interest gets taxed as ordinary income, which means at your marginal tax rate. Long term capital gains and qualified dividends have their own tax brackets that are lower than your tax bracket for your ordinary income. For example, VTI is almost all qualified dividends. I would rather hold VTI in a taxable account than cash or bonds. Long term capital gains for you would probably be 15% + 3.8% NITT = 18.8%. Your marginal tax rate on ordinary income is probably 32%. This does not take into account state taxes.

The emergency fund may be one exception for holding cash in a taxable account. Once I had a large enough portfolio, I only kept 1-2 months of expenses in cash and got rid of the emergency fund. Many people get rid of the emergency fund with a sufficiently large portfolio.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Topic Author
ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

mhc wrote: Wed May 15, 2024 11:45 am
ryanbohle wrote: Wed May 15, 2024 11:30 am
mhc wrote: Wed May 15, 2024 11:22 am Usually one would put the investments with the highest expected returns in the Roth, and the lowest expected return investments in the tax deferred accounts. This means you might want to move your bonds from the Roth to a tax deferred account.

With your income, do you really need to save specifically for cars now? Can't you just cash flow them later on? It would be more tax efficient to not have interest paying investments in your taxable account.
Thank you for your response. I might be able to cash flow cars at the time, maybe not. I invest pretty aggressively, meaning I don't keep a lot cash reserves. I have a 30K emergency fund in a Chase savings account, but the rest is pretty much invested. I make $450K but I essentially live "pay check to pay check." Occasionally I have to sell some stock in my taxable account to cover an unexpected expense, but that is very rare.

You said "It would be more tax efficient to not have interest paying investments in your taxable account." I am not sure exactly what you mean by that, can you clarify?
Interest gets taxed as ordinary income, which means at your marginal tax rate. Long term capital gains and qualified dividends have their own tax brackets that are lower than your tax bracket for your ordinary income. For example, VTI is almost all qualified dividends. I would rather hold VTI in a taxable account than cash or bonds. Long term capital gains for you would probably be 15% + 3.8% NITT = 18.8%. Your marginal tax rate on ordinary income is probably 32%. This does not take into account state taxes.

The emergency fund may be one exception for holding cash in a taxable account. Once I had a large enough portfolio, I only kept 1-2 months of expenses in cash and got rid of the emergency fund. Many people get rid of the emergency fund with a sufficiently large portfolio.
I understand that logic and reasoning. To what asset or investment are you referring? What specifically would you switch or relocate?
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Re: Critique my portfolio (please)

Post by mhc »

ryanbohle wrote: Wed May 15, 2024 11:51 am It would be more tax efficient to not have interest paying investments in your taxable account.
Correct.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Topic Author
ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

mhc wrote: Wed May 15, 2024 11:54 am
ryanbohle wrote: Wed May 15, 2024 11:51 am It would be more tax efficient to not have interest paying investments in your taxable account.
Correct.
I understand that logic and reasoning. To what asset or investment are you referring? What specifically would you switch or relocate?
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Re: Critique my portfolio (please)

Post by momopi »

ryanbohle wrote: Wed May 15, 2024 9:49 am My employer does not have a US total stock market index option, so I do the best I can.
You can petition HR or Benefits Board to add index funds. To do this you'll need to make a convincing case to Leadership. They may or may not accept, or example if they already offer S&P 500 Index they may deem adding Total US stock index to be superfluous.
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Re: Critique my portfolio (please)

Post by mhc »

ryanbohle wrote: Wed May 15, 2024 11:56 am
mhc wrote: Wed May 15, 2024 11:54 am
ryanbohle wrote: Wed May 15, 2024 11:51 am It would be more tax efficient to not have interest paying investments in your taxable account.
Correct.
I understand that logic and reasoning. To what asset or investment are you referring? What specifically would you switch or relocate?
I would move the treasuries out of your taxable account. Sell them and buy VTI. I would also get rid of the bonds in the Roth. I would then put all the bonds in one of the tax-deferred accounts.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

mhc wrote: Wed May 15, 2024 4:54 pm
ryanbohle wrote: Wed May 15, 2024 11:56 am
mhc wrote: Wed May 15, 2024 11:54 am
ryanbohle wrote: Wed May 15, 2024 11:51 am It would be more tax efficient to not have interest paying investments in your taxable account.
Correct.
I understand that logic and reasoning. To what asset or investment are you referring? What specifically would you switch or relocate?
I would move the treasuries out of your taxable account. Sell them and buy VTI. I would also get rid of the bonds in the Roth. I would then put all the bonds in one of the tax-deferred accounts.
I actually did that this afternoon, I am rebalancing tonight. I sold the bonds in my Roth, will buy either VTI or VXUS. I sold some stock and bought some bonds in my 401K.

I’m keeping the T-bonds. I like them. :)
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Re: Critique my portfolio (please)

Post by mhc »

ryanbohle wrote: Wed May 15, 2024 5:02 pm
I actually did that this afternoon, I am rebalancing tonight. I sold the bonds in my Roth, will buy either VTI or VXUS. I sold some stock and bought some bonds in my 401K.

I’m keeping the T-bonds. I like them. :)
:sharebeer
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
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Re: Critique my portfolio (please)

Post by retired@50 »

ryanbohle wrote: Wed May 15, 2024 5:02 pm I’m keeping the T-bonds. I like them. :)
I'll bet the Secretary of the Treasury loves people like you.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

retired@50 wrote: Wed May 15, 2024 5:22 pm
ryanbohle wrote: Wed May 15, 2024 5:02 pm I’m keeping the T-bonds. I like them. :)
I'll bet the Secretary of the Treasury loves people like you.

Regards,
For real though. What do people have against treasury bonds. They are a very safe investment that is designed to match inflation. Are people against bonds in general? Or T bonds specifically?
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

mhc wrote: Wed May 15, 2024 5:16 pm
ryanbohle wrote: Wed May 15, 2024 5:02 pm
I actually did that this afternoon, I am rebalancing tonight. I sold the bonds in my Roth, will buy either VTI or VXUS. I sold some stock and bought some bonds in my 401K.

I’m keeping the T-bonds. I like them. :)
:sharebeer
For real though. What do people have against treasury bonds. They are a very safe investment that is designed to match inflation. Are people against bonds in general? Or T bonds specifically?
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Re: Critique my portfolio (please)

Post by retired@50 »

ryanbohle wrote: Wed May 15, 2024 5:28 pm
retired@50 wrote: Wed May 15, 2024 5:22 pm
ryanbohle wrote: Wed May 15, 2024 5:02 pm I’m keeping the T-bonds. I like them. :)
I'll bet the Secretary of the Treasury loves people like you.

Regards,
For real though. What do people have against treasury bonds. They are a very safe investment that is designed to match inflation. Are people against bonds in general? Or T bonds specifically?
There's nothing wrong with T bonds.

The mistake (for you) is holding them in a taxable account. You're subjecting yourself to paying additional income taxes (at 32%) that could easily be avoided. For someone with a low income this choice wouldn't be harmful.

If you are happy paying additional income taxes, then stick with your plan. If you're looking to reduce your income tax bill, consider reading the link I posted earlier about tax efficient fund placement.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

retired@50 wrote: Wed May 15, 2024 5:33 pm
ryanbohle wrote: Wed May 15, 2024 5:28 pm
retired@50 wrote: Wed May 15, 2024 5:22 pm
ryanbohle wrote: Wed May 15, 2024 5:02 pm I’m keeping the T-bonds. I like them. :)
I'll bet the Secretary of the Treasury loves people like you.

Regards,
For real though. What do people have against treasury bonds. They are a very safe investment that is designed to match inflation. Are people against bonds in general? Or T bonds specifically?
There's nothing wrong with T bonds.

The mistake (for you) is holding them in a taxable account. You're subjecting yourself to paying additional income taxes (at 32%) that could easily be avoided. For someone with a low income this choice wouldn't be harmful.

If you are happy paying additional income taxes, then stick with your plan. If you're looking to reduce your income tax bill, consider reading the link I posted earlier about tax efficient fund placement.

Regards,
Understood. Couple questions. Yes, my tax burden on the bond would be less if I had my bonds in a tax deferred account such as a 401K or 4013b, but I can only put so much money in those accounts. Wouldn’t it still probably be better to have those dollars invested in stock? Also, if I hold the T-bonds until I retire, won’t that accomplish kinda the same thing?
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Re: Critique my portfolio (please)

Post by retired@50 »

ryanbohle wrote: Wed May 15, 2024 5:40 pm
retired@50 wrote: Wed May 15, 2024 5:33 pm
ryanbohle wrote: Wed May 15, 2024 5:28 pm
retired@50 wrote: Wed May 15, 2024 5:22 pm
ryanbohle wrote: Wed May 15, 2024 5:02 pm I’m keeping the T-bonds. I like them. :)
I'll bet the Secretary of the Treasury loves people like you.

Regards,
For real though. What do people have against treasury bonds. They are a very safe investment that is designed to match inflation. Are people against bonds in general? Or T bonds specifically?
There's nothing wrong with T bonds.

The mistake (for you) is holding them in a taxable account. You're subjecting yourself to paying additional income taxes (at 32%) that could easily be avoided. For someone with a low income this choice wouldn't be harmful.

If you are happy paying additional income taxes, then stick with your plan. If you're looking to reduce your income tax bill, consider reading the link I posted earlier about tax efficient fund placement.

Regards,
Understood. Couple questions. Yes, my tax burden on the bond would be less if I had my bonds in a tax deferred account such as a 401K or 4013b, but I can only put so much money in those accounts. Wouldn’t it still probably be better to have those dollars invested in stock? Also, if I hold the T-bonds until I retire, won’t that accomplish kinda the same thing?
For you (and other high earners reading this), the entire bond allocation should be in a tax-deferred account if it will fit. If that means selling some stock index funds in the 401k or 403b to buy more bond funds, then so be it. This is all covered in the wiki page I linked.

Holding the T-bill to maturity doesn't help because the additional income taxes I referred to are based on the semi-annual coupon payments you receive, not the return of principal (face value of the bond) in 30 years. I'm presuming you're not allowed to defer the income taxes on the coupon payments, which is why I suggested I-bonds as a substitute. In that case, an I-bond holder can elect to defer the income taxes until redemption, which can be as long as 30 years.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
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ryanbohle
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Re: Critique my portfolio (please)

Post by ryanbohle »

retired@50 wrote: Wed May 15, 2024 5:51 pm
ryanbohle wrote: Wed May 15, 2024 5:40 pm
retired@50 wrote: Wed May 15, 2024 5:33 pm
ryanbohle wrote: Wed May 15, 2024 5:28 pm
retired@50 wrote: Wed May 15, 2024 5:22 pm

I'll bet the Secretary of the Treasury loves people like you.

Regards,
For real though. What do people have against treasury bonds. They are a very safe investment that is designed to match inflation. Are people against bonds in general? Or T bonds specifically?
There's nothing wrong with T bonds.

The mistake (for you) is holding them in a taxable account. You're subjecting yourself to paying additional income taxes (at 32%) that could easily be avoided. For someone with a low income this choice wouldn't be harmful.

If you are happy paying additional income taxes, then stick with your plan. If you're looking to reduce your income tax bill, consider reading the link I posted earlier about tax efficient fund placement.

Regards,
Understood. Couple questions. Yes, my tax burden on the bond would be less if I had my bonds in a tax deferred account such as a 401K or 4013b, but I can only put so much money in those accounts. Wouldn’t it still probably be better to have those dollars invested in stock? Also, if I hold the T-bonds until I retire, won’t that accomplish kinda the same thing?
For you (and other high earners reading this), the entire bond allocation should be in a tax-deferred account if it will fit. If that means selling some stock index funds in the 401k or 403b to buy more bond funds, then so be it. This is all covered in the wiki page I linked.

Holding the T-bill to maturity doesn't help because the additional income taxes I referred to are based on the semi-annual coupon payments you receive, not the return of principal (face value of the bond) in 30 years. I'm presuming you're not allowed to defer the income taxes on the coupon payments, which is why I suggested I-bonds as a substitute. In that case, an I-bond holder can elect to defer the income taxes until redemption, which can be as long as 30 years.

Regards,
So, funny story. I just logged into my Treasury Direct account. I TOTALLY have I-bonds. Lol. Thanks for talking to me. Have a wonderful evening. :)
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mhc
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Re: Critique my portfolio (please)

Post by mhc »

I'm not against treasuries. Good to hear you have I-bonds. Sounds like you are good to go.
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