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I prefer USFR to SGOV personally but honestly they are going to behave pretty similarly. In addition to USFR I also hold VCRB, which is Vanguard’s actively managed core bond fund. It holds the bulk of my bond holdings. I have some EMLC (emerging market local currency) as well, but that’s just a small hedge against the near term monetary policy continuing to weaken the dollar.
bond yield and price are inversely correlated. So if fed cuts rates, price will go up. Fixed income is fixed. If you buy a bond that will give you 10 dollars in interest, you will get 10 dollar in interest. If rates are substantially higher, your bonds is less appealing so it will be cheaper. But it will still need to give you that 10% at the end. so if you buy the bond cheaper, the rate will be higher. Same as if rates are cut, your bond is more appealing... leading to higher price and lower interest rate. One thing about bond fund is that it might be better to find a low cost ***active*** fund like VPLS or VCRB. Active bond fund with good manager can see the rates change adjusting, and adjust the composition accordingly. If you have index fund, it will carry the whole basket and if the rates jumps, you can't adjust.
Behavioral risk is huge. Perhaps a bigger risk than other forms of market risk. I’ve started to recognize my own behavioral errors and am seeing the light in beginning to build a core holding of bonds. Starting to buy into VCRB for this purpose.
I don’t like BND. But, if you look at something like VCRB the 1-yr yield is like 3.6% and the 30-day yield is 4.6%. That basically the same as SGOV but with more diversification and potential for the ETF to demand a premium (higher price) if the equities move into correction or recession. I’ve been a hold-out in bonds for a long time until now. I think a case can be made to hold a little bit of bonds at any age now in the current market climate, sort of like u/bkweather was saying.
I’ve parked about a half mil in CDs earning easy money and serves as nice dry powder in case of a correction. However, just saw that the 30-day yield in VCRB was 4.6%. Check it out if you’re not familiar. That’s pretty wild for a core bond fund that serves as a nice hedge to US equities. Shifted some money over to that and will probably move more over to that and SGOV as CDs mature. At least with SGOV I could avoid paying state income tax!
I’ve parked about a half mil in CDs and SWVXX for this reason. Been easy money and serves as nice dry powder in case of a correction. However, just saw that the 30-day yield in VCRB was 4.6%. Check it out if you’re not familiar. That’s pretty wild for a core bond fund that serves as a nice hedge to US equities. Shifted some money over to that and will probably move more over to that and SGOV as CDs mature. At least with SGOV I could avoid paying state income tax.
I just added 10% VCRB to my portfolio (Vanguard’s new actively managed core bond ETF with only a 0.1 ER). Haven’t held bonds (other than short-term treasury) directly before. I figure VCRB is a nice complement to my portfolio that’s mostly VOO. Help smooth the eventual turbulence that lies ahead. Maybe even net out a little better in the end with the low correlation.