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Are you okay wirh a 40% drop in value at year 4? You could consider doing a ladder of buffered S&P500 ETFs: MMAX, MAXJ, SMAX, DMAX and PAAA or BOXX (20% of each). Some market upside potential with drawdown protection. It all depends on your risk tolerance. I'm very comfortable with this very limited risk profile for a short-term investment, others may not be.
If you need the money in a year, you want something like SGOV or a CD ladder. Maybe PAAA if you want to throw caution to the wind, but nothing more than that.
Read "The Income Factory" by Steven Bavaria, this shows how to get about 10% yield on your cash through owning a diverse group of CEFs, BDCs, etc. I keep some cash in SGOV 4%, some in PAAA 5.4% and a lot in a blend of BIZD 12% and mREITS like NLY/AGNC/DX 15%, so my dry powder is doing something while I wait for the next market correction
Open Fidelity brokerage and Roth accounts, move HYSA to brokerage and buy 50% SGOV and 50% PAAA. Max out Roth IRA for this year and every following year. After maxing out Roth account(s) (another Roth account if you're married and they have a job too), put the rest in your brokerage account. The other investments for your brokerage and Roth(s) should be something like 40% VOO, 20% SCHG, 20% SPMO, 20% AVDE.
Why cash? Why not PULS, PAAA, SGOV ... basically, anything except cash.
There is no "very safe and provides returns above inflation." There is "somewhat/mostly safe and provides returns above inflation." If you are okay with that, PAAA, AOK, SGOV, GSY and thinkgs like that might be worth looking at. Low expenses, passive management, and excellent returns also don't go together in the fixed income space in my experience. This chart shows total real returns (inflation-adjusted) as well as volatility and how the funds did each year. You can see AOK has the best overall returns but is also the most volatile. [https://totalrealreturns.com/s/USDOLLAR,PAAA,AOK,SGOV,GSY](https://totalrealreturns.com/s/USDOLLAR,PAAA,AOK,SGOV,GSY)
PAAA probably has the best current yield around 5.12%
A mixture between stocks and bonds. like 60% VT + 40% BNDW. For corporate bonds, you may buy JAAA/PAAA/CLOA, but honestly BNDW is fine as it includes corporate bonds
It really depends what you mean by "a bit". TIPS ETFs are the most direct way to hedge inflation, but they’re still bonds—so they can have drawdowns when rates rise (2022 showed that clearly). If you want something less rate-sensitive, AAA CLO ETFs like JAAA or PAAA give you floating-rate exposure (income rises with short-term rates) and generally behave more like “enhanced cash”, though they carry some credit risk. For true short-term parking, ultra-short Treasury or money-market ETFs are safer, but they won’t keep up with inflation if it really spikes.
I'd go with somehting like a combination of SGOV, PAAA, BINC for a 3-4 year time frame. If you want some equity exposure, maybe some BALT. If you want to avoid taxes for the next 3-4 years, consider BOXX, BALT, SUB
I will. Interesting PULS has almost 1% in PAAA. I'll have to dig into this more. As you point out, even within CLOs, there are levels of risk. In a corporation, what is higher quality/lower risk of default than CLOs (and short term) - ST bonds, repos, ?
also look at PAAA run by PGIM - Prudential, paying 5.45% 30 day SEC yield, all AAA, and holds senior triple A compared with JAAA, holding more junior AAA
No, a lot of stuff is going down this week. The Fed meeting happens, and while it’s almost a lock that they won’t cut, people are wanting to see if they forecast anything or want the other Fed board members say or vote on. Secondly, the jobs report comes out as well. Lastly, it’s an important week for corporate earnings with Amazon, Apple, Meta and Microsoft. If above estimates and guidance is good, market up. If they underperform or cut guidance, then a drop may happen. While nobody knows from day to day, (I m an advisor and this market is not logical) especially with this admin, I would dollar cost average into the market and you can have the funds in a CLO ETF while waiting for 3 or 6 months. That way, it avoids market timing, which is my all VA’s (variable annuity) have that option to smooth out your average price. On CLO thing, JAAA or PAAA is safer or can go w/JBBB for interest, but it’s a little more volatile/risky as rating suggests.
PAAA $29C sept QQQ $539P July 31💀
I also prefer PAAA over JAAA. All those funds are more risky during SGOV. Expect volatility between 1-5% during a market crisis.
JAAA (tho I prefer the slightly less risky PAAA) is a solid choice, however it is not really an alternative to SGOV. It is low risk but in very bad times you could possibly even lose on your total return. In the moderate bad times year to date, JAAA is +1.63% versus SGOV's 1.63%. (PAAA is +1.90%.)
I have a question for you...is the cause of this "1-way liquidity" the lack of market makers for corporate bonds in general, or is there some other aspect of this that I don't understand? I got fooled by the "AAA" in the names, thinking it described the underlying loans. I bought a small amount of PAAA and then started investigating CLO ETFs more carefully. I kept reading about these "tranches" wondering what that was all about. Within a couple of days I had digested a lot more information, including the paper I linked to, and then I realized what these products really are. I like your way of putting it ... "the advantage of CLOs is strictly in the structure not in the underlying quality of the loans." To put it another way, you have a giant stack of shit but the AAA tranche holders get paid first ... hence the over-collateralization you speak of.
I looked into AAA CLO ETFs back in February. After buying some PAAA, I read a paper about them over a weekend, and closed my position the next monday. Here is the paper: [https://papers.ssrn.com/sol3/papers.cfm?abstract\_id=3379979](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3379979) The authors identify a bunch of different issues, but my biggest take-away was that ETFs provide an illusion of liquidity, not actual liquidity. Because the underlying assets are traded over the counter, there is no market maker for them. The authors argued that during times of financial stress, the market dries up, and the ETFs, which normally provide daily liquidity, can no longer do so. It was eye-opening.
Some prominent examples include the Panagram BBB-B CLO ETF (CLOZ), the VanEck CLO ETF (CLOI), and the BlackRock AAA CLO ETF (CLOA). Other options include the PGIM AAA CLO ETF (PAAA), the Invesco AAA CLO Floating Rate Note ETF (ICLO) and the AXS First Priority CLO Bond ETF (AAA).
A couple of months ago I briefly dabbled in AAA CLO ETFs. I put a little money into PAAA, and that gave me the incentive to read up these investment vehicles. I came across this interesting paper, written in 2019, and immediately closed out my position. [https://papers.ssrn.com/sol3/papers.cfm?abstract\_id=3379979](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3379979) I don't remember the details as well as I would like, but I e-mailed a link to a friend back then. My summary of the risk factors is listed below. But my the top line takeaway was that the ETF structure masks the lack of liquidity in the underlying debt instruments, which are traded over the counter and don't have market makers. In other words, the ETF structure provides the illusion of liquidity but that liquidity disappears during times of financial stress. 1. Lack of market-making and other regulatory changes that will impede price discovery in the next downturn 2. Masking of the deterioration of underlying collateral and “rearview mirror” analysis 3. New versions of the old games played by the rating agencies 4. Explosion in Asset-Liability mismatched structures 5. Regulatory changes in compliance of financial institutions
i don't think. I just react! I have no clue. I can say when I saw AAA CLOs break down in Feb/early march , I dumped my sizeable CLO positions. JAAA / PAAA. Along with various other things. I've owned a lot of PULS ultrashort bond ETF...it's also broken down in the last week. Slowly declining (It does own some PAAA). I've zeroed it out. Now into < 1 year treasuries and Schwab MMFs. The 5 year chart of the 10Y yield, in early 2022 it also climbed quickly due to Fed Funds rate change I think.
Yes. And if I want to sell some and buy something in a dip, it’s pretty much immediately sold and available in my Schwab account. I just choose last in, first out, so I get the dividend on the older purchases. I’m really happy with it. Holds only investment grade corporate bonds, over 100 of them and diversified, as I recall. Holds a very small amount of treasuries, and also a small amount of their AAA CLO, which is PAAA. But the expense ratio for PAAA is a little higher, so it’s a way to get a little PAAA for a lower expense ratio.
why are you even on reddit then thinking about all this? If you are "ignoring it" for 20+ years...you wouldn't even think about the market at all nor care. You'd look as you got closer to the 20 year mark. I have a small pension from part-time work at the library. It's only like $15,000...but I almost NEVER look at it -- because I chose the 8%/year option rather then a self-directed or whatever. I think that's what it is. I've looked at the balance less then the fingers on my hands over the past # of years. The analogy is if one thinks the "market always goes up" and has a average return of \_\_\_%...then don't bother ever looking! Cause it's "in the bag." As for majority of other liquid assets -- I don't have a 20 year time horizon....much shorter. With that said...don't even need to be in equities for my purposes. That's why I was mostly in bonds / fixed income already / MMF. Part of that was in "safer" investments like AAA CLOs, Which I realized wasn't that safe. I exited those in Feb/early March. JAAA / PAAA. At the same time I exited Pimco multi-asset fund (PHK, PAXS), etc...and some high yield bond ETFs and JBBB CLO. It's not "stressful" per se much. Just study and asset allocation. A game. Would I like to make some extra $$ with the "gambling" percent of my portfolio I've specified - sure. But I've reduced this to now just <1% in equities. If in theory if I missed everything and the market screamed higher the next month or two. or three..I wouldn't lose sleep over that. Don't try to time the absolute top nor bottom. It's just reward-risk analysis. .I do see a good opportunity to buy low - coming soon?
was mostly in bonds/bills already. sold longer held positions (months-years) in early March / late Feb though. Like EPD, GLW (@ 50!). Also higher yield type assets (CLO, HY bond, Pimco HY) - JAAA, PAAA, SPHY. PHK Though got a very very minor burn from entering in small position on Int'l Value stocks though...but dumped remaining just before Friday's bigly down (which means < 2% loss on those positions rather then 7%+ now?) < 1% overall in equity mutual funds. And just keeping that for old time's sake.... now...what to do about my < 5% gold position?
Put a third each in JAAA, CLOA and PAAA. All are private credit CLOs. They may all be at a discount to NAV now, at least JAAA is. JAAA may carry more junior debt than the other two.
Take a look at some of the AAA rated CLO funds like CLOA, CLOI, or PAAA or JAAA, etc.. those are paying out around 5.5% - 6% APY currently. or if you have the appetite, check out the BBB rated ones for even higher returns. (7% - 9%)
Right now I have my “cash” in PAAA, paying about 5.8% and PULS about 5.5%. Corporate ultrashort bonds and loans. It’s possible the returns can change, so you should keep an eye on them, but the price doesn’t fluctuate much, like a dollar. Very liquid. They pay better than treasuries, SGOV. If you’re worried about taxes, you could buy IBonds, but you can’t touch them for the first 12 months, then you could redeem them anytime, and they compound. Rate right now is only around 3.5% I think, but double check. The rate changes again May 1. Will probably go up depending on inflation.
You might do better with PAAA or PULS. I’m not comfortable with any treasury backed anything because of musk now but your mileage may vary.
I’m liking AAA corporate ultra short bonds and debt PULS and PAAA, and I like SPMO for growth. Not as tech heavy. I’m not a huge fan of BRK-B. Doesn’t pay any dividends and is inconsistent.
Check out PULS and PAAA. Better returns than treasuries, not subject to Musk doing something insane. They are ETFs that buy ultra short high rated corporate bonds and debt. Price stays basically the same, so no price risk. They pay dividends which you can set to keep reinvesting. They pay dividends monthly.
I’m moving my treasury money that’s available soon (tbills) into PULS and PAAA. I really don’t trust treasuries right now because of the Musk geek squad in it. Even before, though, I don’t like gov instruments as an ETF, with fees. Why pay a fee for something I can buy with no volatility and no fees directly from the government? I also don’t like long government bonds, anyway, where I can lose principle if I want to redeem early. I prefer savings bonds I can cash out in a year. YMMV
If you’re okay with 5%, look at some safer funds like PULS and PAAA. They are based on high rated corporate bonds and debt and not so volatile. The market may be way down in 5 years. By the way, if you can work 10 years full time for a US company, you will qualify for Social Security retirement, unless Trump destroys it. If you could stay 10 years instead of 5, it would also be less risky to own VOO. Also, consider an equal weighted fund like RSP. The S&P 500 is too weighted in tech right now.
I’m moving out everything I can and into funds not backed by treasuries for my similar investments: PULS (ultra short corporate bonds), PAAA and maybe JAAA (AAA rated collateral loan obligations). I might even get a better return in funds I would never have researched.
Kind of a weird mix. Getting out of most of my treasuries or anything backed by treasuries until the adults are back in charge of the treasury department. So, a little S&P 500, some equal weighted, some ultra short corporate bonds, some AAA CLOs. PULS, PAAA, maybe some JAAA, SPMO for a little excitement, RSP, a little SCHB for those random small amounts left in cash. I have a little BKLC still limping along. And hopefully my t-notes and savings bonds will still be there, that I can’t redeem yet.
I don’t think it’s crazy to be conservative right now. It won’t kill your future by putting your funds into something safer for the next 6 months and then see how you feel and dollar cost averaging some into index funds every month. Some people here will look like a genius in a year, but it could be any of us. I am buying PAAA and PULS which will earn me probably more than a HYSA, and will be easy to sell when I want to move some slowly into index funds. I’m nervous about the treasury department and team Musk, so I’m moving out of anything related to treasuries right now. I might look like an idiot or a genius. But, I would rather be safe than foolishly greedy right now. As I say, we don’t know who will look the fool. We just need to be comfortable with our own risk tolerance. Good luck.
I’m nervous about having money in treasuries right now with the Elon mob in there, so all the treasuries I can move out, I started buying PAAA and PULS. I also like JAAA and might buy some next month. Funds not based on treasuries. And I’m slowly dollar cost averaging back into the S&P 500 a bit each month. I’m already in retirement but don’t need the extra income. I need it to grow for future long term care, but as safely as possible. I sold my equities Thanksgiving weekend during the high and put them into 4 week tbills and some savings bonds, to wait and see what happened with Trump, figuring the treasury department was the safest place for the money. No longer, unfortunately. It’s frightening. But I think the ultra short bonds and AAA CLO ETFs are a good place and should earn more than the tbills, too.
your comparison off your comparing Bank Loans to Equity CLO's you need to be using DEBT Clo's like PAAA or CLOZ or JAAA or JBBB to BKLN and SRLN(or FLRT or FLBL)
I am an American living in Thailand. One of the problems is that other countries may not pay any interest to speak of and their currency may be in worse shape than the dollar. I get where you’re coming from, and what I’m doing is moving the money I have in treasuries into ETFs that are not tied to treasuries in Schwab, like PAAA and PULS. These are fixed income dividend funds. Unfortunately, I have some treasury notes and savings bonds I can’t touch for a year, but I’m moving the bulk out that I have in tbills this month. You could move money into Wise and convert it to euros or GBP, or whatever. You would have to pay some fees and deal with the exchange rates. This is the biggest pain with different currencies. If you have more than $10,000 in an account you have to file a report every year to Homeland Security, I think. It’s not the IRS. Not a big deal, but I’ve kept mine under that amount so I don’t have to deal with it. I’m a bit paranoid about getting on some homeland security list. What could go wrong? 😬
Why do you like PAAA better than JAAA? Seems less liquid.
I made a CD ladder at the beginning of the year but never went through with purchasing the next rung after they matured. The funds are in SGOV and SNSXX currently. Thanks for the suggestion of PAAA and PULS.
Personally I like PAAA. If you want to diversify, I’d suggest a mix of a money market fund or hysa, bills such as SGOV, an ultra short term bond fund such as PULS, and a AAA CLO, such as PAAA