I've had a Vanguard Target Retirement fund for a few years now but this year I started playing around with some stocks and bonds with some extra cash I had laying around. I thought the 90% stocks / 10% bonds thing was a smart idea just in case equities pop. I'm not really a fan of the 100% stocks thing, just ain't for me, I definitely see the value in having some diversification.
Well some quick searching led me to Vanguard's Total Bond Index ETF (BND). I didn't put a whole lot in there but I put enough.
First big lesson I'm learning: generalized investing advice doesn't always work for all economic situations. Bonds suck right now. They're getting sold off because the real rate of return is 0 or negative (correct me if I'm wrong), and this is only going to get worse if inflation spikes.
I've taken a small loss on this ETF thanks to the sell off. Nothing major but at this point cash would have been better.
One thing I had been interested in was series I bonds. However, currently the fixed interest rate they're paying is 0%. Sucky. The good news is that in May they'll be issuing new ones with an updated fixed interest rate. I assume that since yields are up, they will have to raise the fixed rate above 0%. I assume it will be low, but low is better than 0.
So anyway, I'm thinking about selling BND for a minor loss and holding the proceeds in cash until May, at which point I will pick up the (hopefully) updated series I bonds. The theory is that I can just hold these bonds without the market affecting them (unlike a bond index), and the inflation-adjusted interest plus the fixed interest will be better than cash. That way I'll continue to get the diversification benefits without the downsides that other bonds are facing at the moment. It's like keeping some extra cash but on steroids.
Of course, I could just hold BND and wait for it to recover... but who knows how many years. That's wasted money.
Thoughts? Did I miss anything with my analysis? Any other suggestions?
Submitted March 28, 2021 at 08:13PM by shortyafter https://ift.tt/3fngIb6
