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I’ve mentioned my dumb luck at having most of our money in cash, earning about 4% as of 4/1. My strategy is to dollar cost average back into the market between now and the end of the year. If you ask my reasoning on this, I’d just say that I don’t want to be late to the party that follows the end of trade war. I have begun the process with my IRA, and will soon start on Chris’s.
My quandary has to do with our bond allocation. Thinking that the Federal Reserve would soon lower rates to stave off a possible recession I was considering fully investing the bond allocation at this time. It now seems that a wrench has been thrown into my plan. With other countries now demanding higher interest rates on U.S. debt due to the trade war, I’m not so sure of myself any longer.
Anyone want to jump in and help me think this through?
Update. Thanks everyone. HumbleDollar is kind of like a foodbank to me. It’s where I come when I need food for thought. And thanks for staying on topic. My thinking is influenced by a general weariness of today’s uncertainty. For our IRAs and brokerage account I believe my best course of action is to dollar cost average back into the market using a total bond ETF. I also have a small side bet on high yield bonds; I just can’t resist.
I’m happy to settle for 4% high yield savings in our emergency fund, but will put a portion of that into short a term bond ETF.
Dan, it sounds like you might find the fund I alluded to below interesting. Fidelity Total Bond FTBFX, and ETF version FBND. Using this lets pros manage the side bet on high yield bonds without me doing it.
FBND is indeed my pick
I think your concerns about investing during highly volatile times are quite accurate. I don’t have any special insights into it because it’s during these times that our old canards become useless.
That said, dollar cost averaging is the tested method for avoiding the fear of lump sum action during these periods of uncertainty.
Right now the bond market seems to be addressing currency risk. There’s a definite worry that a next step in the trade wars is currency devaluation, we’re already seeing currency trades reflect that. I don’t know if that helps.
Can you specify more precisely what your concerns are (like are you worried about yield? Are you worried about capital losses because you regularly sell bonds? If it’s just a general weariness I use dollar cost averaging and accept that I won’t maximize returns.