Having experienced high interest rates in the 1980’s I wouldn’t lock in anything long term at 5% or less. Until then I have a T-Bill step stool (not ladder). 4 tranches of 1-month T-Bills that mature each week. Until budget deficits addressed inflation not getting to 2%.
nothing be happy with a mutual fund that returns 8% with no mess……you are beating inflation and ahead of the game…….chasing rates will make you poorer in the long-run
I hold 15% of my fixed income in four- and eight-week T-Bills. The remainder is in an intermediate-term treasury index fund. I think the large allocation to cash equivalents in this higher yield environment isn’t terrible and will give me some protection if interest rates go higher. Cash does reasonably well in a rising interest rate environment. And rates may indeed rise. The future is absolutely unknowable.
It looks like the Fed will cut — but that doesn’t mean longer term rates will come down very far (if at all). I’ve been happy in CDs, short-term Treasurys held to maturity and I Bonds — there’s no risk of lost principal if interest rates were to rise. The only bond funds I own are light on Treasurys and heavy on mortgage securities and high yield, so they are a little less interest sensitive than the bond index funds, which are heavier in Treasurys. I’ll sell one of my I Bonds soon because the fixed rate is low, but may buy back in if new issues have a higher fixed rate. Also, there are US Treasury floating rate funds you can buy where the interest will quickly go up in case short rates head higher again.
I thought the trend is down; three cuts by year’s end? If this question is purely hypothetical, conventional wisdom is to sell interest-sensitive securities (utilities, banks, long term bonds, et al) and ride the wave up in money market and floating rate funds, and online bank accounts.
Having experienced high interest rates in the 1980’s I wouldn’t lock in anything long term at 5% or less. Until then I have a T-Bill step stool (not ladder). 4 tranches of 1-month T-Bills that mature each week. Until budget deficits addressed inflation not getting to 2%.
nothing be happy with a mutual fund that returns 8% with no mess……you are beating inflation and ahead of the game…….chasing rates will make you poorer in the long-run
I hold 15% of my fixed income in four- and eight-week T-Bills. The remainder is in an intermediate-term treasury index fund. I think the large allocation to cash equivalents in this higher yield environment isn’t terrible and will give me some protection if interest rates go higher. Cash does reasonably well in a rising interest rate environment. And rates may indeed rise. The future is absolutely unknowable.
It looks like the Fed will cut — but that doesn’t mean longer term rates will come down very far (if at all). I’ve been happy in CDs, short-term Treasurys held to maturity and I Bonds — there’s no risk of lost principal if interest rates were to rise. The only bond funds I own are light on Treasurys and heavy on mortgage securities and high yield, so they are a little less interest sensitive than the bond index funds, which are heavier in Treasurys. I’ll sell one of my I Bonds soon because the fixed rate is low, but may buy back in if new issues have a higher fixed rate. Also, there are US Treasury floating rate funds you can buy where the interest will quickly go up in case short rates head higher again.
I thought the trend is down; three cuts by year’s end? If this question is purely hypothetical, conventional wisdom is to sell interest-sensitive securities (utilities, banks, long term bonds, et al) and ride the wave up in money market and floating rate funds, and online bank accounts.