Sell Bond Index Fund and Buy TBills

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hafjell
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Sell Bond Index Fund and Buy TBills

Post by hafjell »

I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
lakpr
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Re: Sell Bond Index Fund and Buy TBills

Post by lakpr »

hafjell wrote: Mon Jul 08, 2024 11:11 am I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
What is the original purpose for which you felt that FXNAX was the appropriate investment?
Without knowing that purpose, it is difficult to answer this question.
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retired@50
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Re: Sell Bond Index Fund and Buy TBills

Post by retired@50 »

hafjell wrote: Mon Jul 08, 2024 11:11 am I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
If you want to match the duration of FXNAX, then you'd need to include some T-notes as well.

FXNAX has a duration of 5.93 years. T-bills are 52 weeks or less. T-notes run from 2-10 years.

If you're okay with the hassle of setting this sort of thing up, then I don't see much downside.

Regards,
"All of us would be better investors if we just made fewer decisions." - Daniel Kahneman
Johm221122
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Re: Sell Bond Index Fund and Buy TBills

Post by Johm221122 »

We don't have enough information but this post may interest you
viewtopic.php?t=411917

Cash is a terrible long-term investment
Topic Author
hafjell
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Re: Sell Bond Index Fund and Buy TBills

Post by hafjell »

lakpr wrote: Mon Jul 08, 2024 11:18 am What is the original purpose for which you felt that FXNAX was the appropriate investment?
Without knowing that purpose, it is difficult to answer this question.
This is the fixed income allocation of my retirement portfolio. Excepting an unforeseen windfall, I won't touch the money until 2040.
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hafjell
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Re: Sell Bond Index Fund and Buy TBills

Post by hafjell »

retired@50 wrote: Mon Jul 08, 2024 11:23 am If you want to match the duration of FXNAX, then you'd need to include some T-notes as well.

FXNAX has a duration of 5.93 years. T-bills are 52 weeks or less. T-notes run from 2-10 years.

If you're okay with the hassle of setting this sort of thing up, then I don't see much downside.

Regards,
Thank you for the reminder on duration. I am comfortable including notes in with the bills. Good catch.
BirdFood
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Re: Sell Bond Index Fund and Buy TBills

Post by BirdFood »

hafjell wrote: Mon Jul 08, 2024 11:11 am I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
Any reason for bills (maximum 1 year) versus notes or bonds or TIPS? (Ah, I see that you are OK with longer terms.)

My main concern would be to lock in the relatively good current interest rates for a while, for at least some of the money. I'm moving a good chunk of my bond allocation into TIPS of 5, 10, and (secondary market) 20 years. That makes it less liquid, but if you won't touch the money, that doesn't seem to matter much? If you're afraid of missing out on higher interest rates sometime in the future, you could hold some of it in the shorter term bills.

Edited to add: On the other hand, you're still earning. So you could put it all in at the current pretty good interest rates and then invest future earnings into future possibly perhaps even better interest rates.
Last edited by BirdFood on Mon Jul 08, 2024 11:39 am, edited 1 time in total.
Topic Author
hafjell
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Re: Sell Bond Index Fund and Buy TBills

Post by hafjell »

Johm221122 wrote: Mon Jul 08, 2024 11:24 am We don't have enough information but this post may interest you
viewtopic.php?t=411917

Cash is a terrible long-term investment
Thanks. Reading now.
p1db
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Re: Sell Bond Index Fund and Buy TBills

Post by p1db »

You can buy TIPS in secondary market with a maturity date in 2040. They currently offer around 2% real yield and inflation protection.

For example CUSIP number 912810QF8 maturing in Feb 2040.
Cah
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Re: Sell Bond Index Fund and Buy TBills

Post by Cah »

hafjell wrote: Mon Jul 08, 2024 11:11 am I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
Sounds like a sideways move and a lot of work.
rockstar
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Re: Sell Bond Index Fund and Buy TBills

Post by rockstar »

Auto rolling t bills will always leave cash on the side because you buy t bills at a discount. You still have to manage that cash.
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hafjell
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Re: Sell Bond Index Fund and Buy TBills

Post by hafjell »

Cah wrote: Mon Jul 08, 2024 3:29 pm Sounds like a sideways move and a lot of work.
It is intended to be a step forwards not sideways. Aren't I foregoing the guaranteed return of TBills by submitting to vagaries of the markets?
Topic Author
hafjell
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Re: Sell Bond Index Fund and Buy TBills

Post by hafjell »

rockstar wrote: Mon Jul 08, 2024 3:31 pm Auto rolling t bills will always leave cash on the side because you buy t bills at a discount. You still have to manage that cash.
Yes, I am considering what to do with discount. Do I let it roll into my monthly budget as a "tip" or do I accumulate it and buy more tbills? I am not laddering enough for the cash on the side to equal $1,000 or even the required $9,9XX.
rockstar
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Re: Sell Bond Index Fund and Buy TBills

Post by rockstar »

hafjell wrote: Mon Jul 08, 2024 3:57 pm
rockstar wrote: Mon Jul 08, 2024 3:31 pm Auto rolling t bills will always leave cash on the side because you buy t bills at a discount. You still have to manage that cash.
Yes, I am considering what to do with discount. Do I let it roll into my monthly budget as a "tip" or do I accumulate it and buy more tbills? I am not laddering enough for the cash on the side to equal $1,000 or even the required $9,9XX.
I’ve been a wild one and dumped mine into TQQQ. It’s not big enough for me to buy VOO or QQQ. So the alternative is to let it sit and earn pretty much nothing. So I started a BOXX position as a T bill alternative to test out. Less risky than TQQQ.
Mayacallie
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Re: Sell Bond Index Fund and Buy TBills

Post by Mayacallie »

I just set up a 5 year treasury ladder at Schwab today. Took 30 minutes of coaching with their fixed income desk and no fees. Very transparent and easy to do. No fees
BirdFood
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Re: Sell Bond Index Fund and Buy TBills

Post by BirdFood »

hafjell wrote: Mon Jul 08, 2024 3:56 pm
Cah wrote: Mon Jul 08, 2024 3:29 pm Sounds like a sideways move and a lot of work.
It is intended to be a step forwards not sideways. Aren't I foregoing the guaranteed return of TBills by submitting to vagaries of the markets?
Stock has higher risk and usually higher returns. But, again, higher risk.

T-Bills will give you a guaranteed, usually lower, return. Right now, that return is higher than usual, but there's no assurance that that will continue. When your T-Bills mature, the available rates may be much lower.

Longer term bonds will give you a guaranteed return for a longer period of time. When they mature, the available rates may, again, be much lower, but you can buy a 2 year, 5 year, up to 30 year Treasury note or bond, and lock in those rates until that maturity.

There's value in a mix of all three.
hafjell wrote: Mon Jul 08, 2024 3:57 pm
rockstar wrote: Mon Jul 08, 2024 3:31 pm Auto rolling t bills will always leave cash on the side because you buy t bills at a discount. You still have to manage that cash.
Yes, I am considering what to do with discount. Do I let it roll into my monthly budget as a "tip" or do I accumulate it and buy more tbills? I am not laddering enough for the cash on the side to equal $1,000 or even the required $9,9XX.
For T-Bills, the discount is your entire gain, so if you don't roll it back into something, your money will never grow. Right this minute, you could put it into a money market fund. But if you don't need this money for several years, why roll? Why not just buy longer duration bonds?

For Treasury Notes (the next level above T-Bills--2, 5, 7, and 10 year) or Bonds (20- and 30- year) you get both discount and interest, but, again, if you don't invest the discount, your money will grow slower.
Mayacallie
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Re: Sell Bond Index Fund and Buy TBills

Post by Mayacallie »

I just set up a 5 year treasury ladder at Schwab today. Took 30 minutes of coaching with their fixed income desk and no fees. Very transparent and easy to do.
I may swear off bond funds and etfs
bloom2708
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Re: Sell Bond Index Fund and Buy TBills

Post by bloom2708 »

I suggest you buy a few Short Term Treasuries at auction and try it out.

I've been buying 1-6 month T-Bills for about a year in my Traditional Rollover IRA (Vanguard). When they mature, the funds are back in my Settlement Fund and I buy another rung. No loss if you hold for the maturity and buy at auction.

It seems like the September-ish rate cut may finally happen, but nobody knows until it happens.

It will be interesting if the inverted rate curve un-inverts. That could mean short rates are falling but medium and long are staying flat. Basically the only way it can un-invert it seems right now. But, again I have no clue what will happen.
exodusNH
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Re: Sell Bond Index Fund and Buy TBills

Post by exodusNH »

hafjell wrote: Mon Jul 08, 2024 3:56 pm
Cah wrote: Mon Jul 08, 2024 3:29 pm Sounds like a sideways move and a lot of work.
It is intended to be a step forwards not sideways. Aren't I foregoing the guaranteed return of TBills by submitting to vagaries of the markets?
But T-Bills only guarantee you at most a year's worth of return. After that, you have to buy what's available, which may not be at an attractive rate.

You should match your duration to the need for the money.
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Re: Sell Bond Index Fund and Buy TBills

Post by RyeBourbon »

I only buy T-bills to cover current expenses. It doesn't make any sense for a long-term investment.

I have TIPS and Treasury bonds for long term liability matching. Everything else for my bond allocation is going into FXNAX. It's a great time to be in bonds. Don't sell when you're finally getting the good yields.
Retired June 2023. LMP (TIPS Ladder/SS Bridge) 25%/Risk Portfolio 75%, AA = 60/30/10
tibbitts
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Re: Sell Bond Index Fund and Buy TBills

Post by tibbitts »

Mayacallie wrote: Mon Jul 08, 2024 4:12 pm I just set up a 5 year treasury ladder at Schwab today. Took 30 minutes of coaching with their fixed income desk and no fees. Very transparent and easy to do.
I may swear off bond funds and etfs
If it was easy to do why did you need any coaching, much less 30 minutes of it?
rockstar
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Re: Sell Bond Index Fund and Buy TBills

Post by rockstar »

RyeBourbon wrote: Mon Jul 08, 2024 4:41 pm I only buy T-bills to cover current expenses. It doesn't make any sense for a long-term investment.

I have TIPS and Treasury bonds for long term liability matching. Everything else for my bond allocation is going into FXNAX. It's a great time to be in bonds. Don't sell when you're finally getting the good yields.
I can see it making sense for the emergency fund portion of your portfolio.
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Re: Sell Bond Index Fund and Buy TBills

Post by RyeBourbon »

rockstar wrote: Mon Jul 08, 2024 5:44 pm
RyeBourbon wrote: Mon Jul 08, 2024 4:41 pm I only buy T-bills to cover current expenses. It doesn't make any sense for a long-term investment.

I have TIPS and Treasury bonds for long term liability matching. Everything else for my bond allocation is going into FXNAX. It's a great time to be in bonds. Don't sell when you're finally getting the good yields.
I can see it making sense for the emergency fund portion of your portfolio.
T-bills would be great for an EF (as long as you had some coming due every month; although they are liquid and can be sold). I don't have an EF - I'm retired, my next 12 months of spending is in T-bills and MM.
Retired June 2023. LMP (TIPS Ladder/SS Bridge) 25%/Risk Portfolio 75%, AA = 60/30/10
Mayacallie
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Re: Sell Bond Index Fund and Buy TBills

Post by Mayacallie »

tibbitts wrote: Mon Jul 08, 2024 5:41 pm
Mayacallie wrote: Mon Jul 08, 2024 4:12 pm I just set up a 5 year treasury ladder at Schwab today. Took 30 minutes of coaching with their fixed income desk and no fees. Very transparent and easy to do.
I may swear off bond funds and etfs
If it was easy to do why did you need any coaching, much less 30 minutes of it?
Because I’m old and infirm
123
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Re: Sell Bond Index Fund and Buy TBills

Post by 123 »

Due to instability in the interest rate market a couple of years ago I switched from BND to a ladder of Tbills for our fixed income allocation. I use 52 week t-bills laddered with one rollover each quarter (4 t-bills per account). For simplicity I used the same t-bill maturity dates in all accounts that have them. Most of the t-bills are in Fidelity accounts so the MMF return on the interest payments is okay. Interest is used to periodically re-balence.

I'd rather use BND but I'm just not comfortable going back to it yet.
The closest helping hand is at the end of your own arm.
Cah
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Re: Sell Bond Index Fund and Buy TBills

Post by Cah »

hafjell wrote: Mon Jul 08, 2024 3:56 pm
Cah wrote: Mon Jul 08, 2024 3:29 pm Sounds like a sideways move and a lot of work.
It is intended to be a step forwards not sideways. Aren't I foregoing the guaranteed return of TBills by submitting to vagaries of the markets?
You will be sacrificing return for safety. But if you don't plan on cashing in principle there isn't much risk. I think you do what you think is best.
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Re: Sell Bond Index Fund and Buy TBills

Post by muffins14 »

hafjell wrote: Mon Jul 08, 2024 3:56 pm
Cah wrote: Mon Jul 08, 2024 3:29 pm Sounds like a sideways move and a lot of work.
It is intended to be a step forwards not sideways. Aren't I foregoing the guaranteed return of TBills by submitting to vagaries of the markets?
Market vagaries will also affect TBills. Eventually, they won’t yield 5% anymore. Perhaps 2% or 1% is on the horizon. then what? by continuing to own longer-term bonds you either lock in the coupons for many years, so you’d be profiting compared to the future 1-2% TBill yield, or you can sell the longer term bond at a profit at that time.

Your TBill return is only guaranteed for a few weeks or months, not forever. if you need money in 20 years, you have no idea what a TBill will return, but you can know exactly what a 20-year bond will return.
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Pepper11
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Re: Sell Bond Index Fund and Buy TBills

Post by Pepper11 »

tibbitts wrote: Mon Jul 08, 2024 5:41 pm
Mayacallie wrote: Mon Jul 08, 2024 4:12 pm I just set up a 5 year treasury ladder at Schwab today. Took 30 minutes of coaching with their fixed income desk and no fees. Very transparent and easy to do.
I may swear off bond funds and etfs
If it was easy to do why did you need any coaching, much less 30 minutes of it?

If one can learn to be proficient at a skill in 30 minutes, most reasonable people would say its pretty easy.
tibbitts
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Re: Sell Bond Index Fund and Buy TBills

Post by tibbitts »

Pepper11 wrote: Tue Jul 09, 2024 9:53 pm
tibbitts wrote: Mon Jul 08, 2024 5:41 pm
Mayacallie wrote: Mon Jul 08, 2024 4:12 pm I just set up a 5 year treasury ladder at Schwab today. Took 30 minutes of coaching with their fixed income desk and no fees. Very transparent and easy to do.
I may swear off bond funds and etfs
If it was easy to do why did you need any coaching, much less 30 minutes of it?

If one can learn to be proficient at a skill in 30 minutes, most reasonable people would say its pretty easy.
I'd say that if I can experiment on the website and figure out a task - even if it takes me 30 minutes the first time - it's reasonably transparent and easy to do. If I have to call and it takes a rep 30 minutes to walk me through a process... not so much.
gammalaser
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Re: Sell Bond Index Fund and Buy TBills

Post by gammalaser »

muffins14 wrote: Tue Jul 09, 2024 9:44 pm
hafjell wrote: Mon Jul 08, 2024 3:56 pm
Cah wrote: Mon Jul 08, 2024 3:29 pm Sounds like a sideways move and a lot of work.
It is intended to be a step forwards not sideways. Aren't I foregoing the guaranteed return of TBills by submitting to vagaries of the markets?
Market vagaries will also affect TBills. Eventually, they won’t yield 5% anymore. Perhaps 2% or 1% is on the horizon. then what? by continuing to own longer-term bonds you either lock in the coupons for many years, so you’d be profiting compared to the future 1-2% TBill yield, or you can sell the longer term bond at a profit at that time.

Your TBill return is only guaranteed for a few weeks or months, not forever. if you need money in 20 years, you have no idea what a TBill will return, but you can know exactly what a 20-year bond will return.
OP mentioned that they would be okay with T-Notes for duration matching. Probably OP does not want to use T-Bills.

But I don't think it makes sense to do this unless you want to have protection of principle on the fixed income allocation
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Re: Sell Bond Index Fund and Buy TBills

Post by Parkinglotracer »

I have done a 5 year treasury ladder for about 4 years. I like transparency of it. It has been a little tricky to do taxes at end of year so heads up. Some bonds pay interest, some are bought at discount, turbo tax can be a little confusing with non standard situation.

Regarding accrued market discount

viewtopic.php?p=7786443#p7786443
Last edited by Parkinglotracer on Wed Jul 10, 2024 10:58 am, edited 2 times in total.
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ruralavalon
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Re: Sell Bond Index Fund and Buy TBills

Post by ruralavalon »

hafjell wrote: Mon Jul 08, 2024 11:11 am I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
hafjell wrote: Mon Jul 08, 2024 11:27 am
retired@50 wrote: Mon Jul 08, 2024 11:23 am If you want to match the duration of FXNAX, then you'd need to include some T-notes as well.

FXNAX has a duration of 5.93 years. T-bills are 52 weeks or less. T-notes run from 2-10 years.

If you're okay with the hassle of setting this sort of thing up, then I don't see much downside.

Regards,
Thank you for the reminder on duration. I am comfortable including notes in with the bills. Good catch.
If you are okay with the extra work, then this will be a good idea for you.
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hudson
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Re: Sell Bond Index Fund and Buy TBills

Post by hudson »

hafjell wrote: Mon Jul 08, 2024 11:11 am I am considering selling all of my FXNAX (my fixed allocation) and auto-rolling T-Bills. Is this a bad idea? This would be a part of my annual review and re-balance. Thanks.
FXNAX is total bond.
I don't know about auto-rolling. I'd rather shop for the best deal and go all manual.
Trading treasuries is easy enough once one gets past the learning curve.
Why not buy individual treasuries...no more expenses!
I always look at FDIC/NCUA CDs in case they are a better deal after taxes.
I also throw in TIPS....duration matched.
Topic Author
hafjell
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Re: Sell Bond Index Fund and Buy TBills

Post by hafjell »

gammalaser wrote: Tue Jul 09, 2024 11:23 pm OP mentioned that they would be okay with T-Notes for duration matching. Probably OP does not want to use T-Bills.
But I don't think it makes sense to do this unless you want to have protection of principle on the fixed income allocation
I'm fine with TBills or TIPs or any instrument. Sorry for the confusion.
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