My bond strategy...Does this make sense??

[murray t turtle]

I think you have pretty much nailed everything, Mr.Cabin.
Any investment that shortens an enjoyable life is not doing its job.
Three month T-Bills are fetching close to 5.40% at Schwab.
"A bird in the hand ..."
I think the unthinkable (higher rates) will become thinkable.
I think we can hit 10.00% in some of the ladder.
"Bond vigilantes" is a term from the 1970's (previous inflationary cycle)
But I bet the really cool bond traders with really cool AAPL gadgets
have no idea what that term means.
And the people who know are either dead, or "getting their affairs in order".
As said
"Pride goeth before the fall."
... (Proverbs 16:18)
***
Good ..... to you Mr. Cabin.

%%
1]Good , I also like some SCHW money market; I read everything she is in + buying.
And some SPY + related , 2024. Good private sector income .
2] I like some SPY +occasional QQQ , SH + related..... , has more risk + reward, than fixed income .
LIKE Forbes magazine motto notes ''With all thy getting, get understanding'' [Proverbs 4]
And like the SCHW warning notes, '' SH= NoT suitable for most investors''

 

[traderjo]

I prefer U.S. government bond ETFs (SGOV/TFLO/USFR/etc...). Very liquid.
Most are currently yielding 5.25-5.35%.
No need to keep track of maturity dates & the yield will be adjusted automatically if rates rise.
Most are currently yielding 5.25-5.35%.
Have a pile of CDs but when they mature I move them to bond EFTs.
I'll think about CDs when rates are looking to go lower.

Do you consider BOXX?

 

[BKR88]

Do you consider BOXX?

I have a small position in BOXX but not as comfortable with the risk as with US treasury ETFs.
From what I've read, the risk is small but anything based upon equities is more risky than US treasuries IMO especially when options are involved but I could be wrong.

Counterparty risk is the concern but I split my cash reserves with SGOV/TFLO/USFR/CLIP/BIL/XBIL for the same reason.

 

[traderjo]

so would this be correct to say
1) although BOXX and SGOV mimic the Treasury Bill returns + a bit?
the risk with BOXX is they use BOX options on SPX where as SGOV/ TFLO uses direct investment in treasury bills?
In both cases teh ETF coudl do fraud but in case of BOXX there are additional strategy execution risk?
2) Then why not purchase treasury bill direct?

 

[BKR88]

so would this be correct to say
1) although BOXX and SGOV mimic the Treasury Bill returns + a bit?
the risk with BOXX is they use BOX options on SPX where as SGOV/ TFLO uses direct investment in treasury bills?
In both cases teh ETF coudl do fraud but in case of BOXX there are additional strategy execution risk?
2) Then why not purchase treasury bill direct?

I’m not knowledgeable enough in this area which is probably why I’m hesitant to put too much in BOXX.

I purchased some treasuries directly also but it’s not as flexible as treasury ETFs since it’s better to hold to maturity so can’t convert to cash quickly if needed.
I’ll use this cash for making farmland purchases & certain stocks if they fall hard for some reason so need it readily available.

 

[mbquant]

Sticky inflation (or whatever you want to call it), I don't buy it. We know the debt...We know we can not grow our way out of the Fed mess.

We also know that China is stepping back from buying US bonds (as we are stepping back from buying junk products from China)...

What I have chosen to do (when a CD or US Treasure bond matures), is look for the best yield US Treasure between 3-9 months out.

The market is indicating there will not be an easing of rates anytime soon!!

If I don't see value in the market (as a retired old dude)...5.??% looks very good with little downside.

To sum it up, for the past year, I have looked for the highest treasure yields...Since I see no lowering of rates in sight.

Nutzo...Or common sense??

Sounds good!

But you might just have to take care of two potential downsides:

1. Opportunity cost: While the current yields are attractive, you might miss out on potentially higher returns if the market shifts and interest rates start to decline.
2. Reinvestment risk: As your shorter-term bonds mature, you'll need to reinvest the proceeds. If interest rates have declined by then, you might have to accept lower yields on your reinvested funds.

 

[engineering]

Reinvestment risk: As your shorter-term bonds mature, you'll need to reinvest the proceeds. If interest rates have declined by then, you might have to accept lower yields on your reinvested funds.

Except that if interest rates are falling he'll want to get into stocks anyways.
To me, locking up you money in long term bonds when the yield curve is inverted is ridiculous.
https://www.ustreasuryyieldcurve.com/b/NUbyby
It amazes me to see so called professionals still talking about things like bond ladders in the current environment.

you might miss out on potentially higher returns if the market shifts and interest rates start to decline.

Or you could miss only on an almost 50% loss if markets revert to a more sensible PE ratio. When you can beat a PE ratio of 20 essentially risk free with bonds, a PE of about 30 for the sp500 is not that attractive.
https://www.multpl.com/s-p-500-pe-ratio