Should Cash Replace Bonds In A Retirement Portfolio?

With cash earning 5% or more and intermediate-term bonds earning less than 5%, many have asked me if they should move all of their fixed-income portfolios to T-bills.
In this video, I share why I think that would be a big mistake.
Resources:
Savings Accounts: www.allcards.com/savings-acco...
Fidelity Fixed Income Rates: fixedincome.fidelity.com/ftgw...
10-year / 2-year Treasury Spread: fred.stlouisfed.org/series/T1...
History of Inverted Yield Curve: get.ycharts.com/resources/blo...
Asset Return Rates: pages.stern.nyu.edu/~adamodar...
Bengen Paper: finalytiq.co.uk/wp-content/up...
Timestamps
0:00 - Should Cash Replace Bonds In A Retirement Portfolio?
1:00 - Interest rates
3:53 - Credit risk
7:15 - Interest rates on shorter/longer maturity
9:58 - Recession
11:02 - Annual Returns on Investments spreadsheet
15:38 - The 4% Rule
17:25 - Recap
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ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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[@rob_berger]

I've added links to the resources mentioned in the video.

[@AP-ex6yd]

Thanks Rob!

[@MAnderson5]

I'm 55 and approaching retirement. Having avoided stocks since the pandemic, I want to give it another go. I am considering a 70/30 stock : bond ratio with $800k received from sales of my Bel-Air properties. What stocks do you think have the best chance to 10x in 5 years?

[@bukki07]

look at top-performing stocks like Nvidia, however its advisable to diversify your portfolio to mitigate risks using a financial advisor

[@arlenehill4ril]

Exactly, getting proper financial advise is invaluable, my portfolio is well-matched for every season of the market and recently hit 140% rise from early last year. I and my CFP are working on a 7 figure ballpark goal, tho this could take another year.

[@LupeBaptista]

I've worked in real estate for over 25 years and have neglected a major stock portfolio, but I need a different plan now... mind if I look up the professional guiding you please?

[@arlenehill4ril]

Karen Lynne Chess is the licensed advisor I use. Just research the name. You’d find necessary details to work with and set up an appointment.

[@okaydamian]

excellent share, curiously inputted Karen Lynne Chess on the internet, spotted her consulting page ranked top and was able to schedule a call session. Ive seen commentaries about advisors but not one looks this phenomenal

[@Muller_Andr]

U.S. t bills are the same as junk bonds. In order to get buyers you need to keep raising yields as the national debt keeps going higher. things are not improving. I'm looking at high-yield dividend stocks.

[@FranciszekPawal]

Selling 200k worth of equities is stupid without reinvesting it. I might turn to cash soon if I don't invest it. Any particulars? (Buying bonds or CDs is not for me)

[@EmmaFritz90]

Don't get any such ideas. If I were you, I would bother less and buy gold. There are more institutional investors in long bonds than individuals and they are all relinquishing their long term holdings.

[@BenBak-wt7qi]

I agree, while higher interest rates increase bond yields, they also hurt long-term bondholders who can't wait for their bonds to mature. IMO You are better off for next 5 years by buying the dip now.

[@EmmaFritz90]

These institutions want to hold your money for the longest in the worst bond bear market in history. Do not subscribe. Look for alternatives to keep passive income coming. I think the commodities market is looking good, but consult with a planner like I do before putting your money into these markets.

[@Muller_Andr]

I am new to alternate investing, bonds were sold off, now this pump and dump scheme by the fed. What other alternatives have you tried that bring you passive income?

[@cathylonehand]

No more intermediate Bonds like BND. I feel good by simply building portfolio of VOO/VGT/SCHD, and 2+ years of cash w TBills/MM?

[@qualityreviewer3927]

I'm retired (74) and am very happy with a sustained return of 5% with CD's and T-Bills. Won the game, stop playing.

[@rosaoddin4338]

Agreed, but seems pretty obvious rates are going to be dropping.

[@pensacola321]

I​@@rosaoddin4338 I'm not so sure.

[@billl1127]

@@rosaoddin4338 So when they do, adjust. Timing here isn't as crucial as in equities, in my opinion.

[@candeffect]

I have been selling some IRA shares at the highs to build up cash (making 5%) in the IRA. If a crash happens I'll buy shares at lower prices. If no crash I'll do retirement distributions from the cash as needed. I've been through crashes since 1987 so having cash ready in the IRA is better than watching all share prices crashing.

[@OffGridandOutdoors]

@@candeffect I like this thought. I've been doing similar thinking with trailing stops

[@rodeleon2875]

i have been doing the same but with the dividends instead of selling shares.

[@swingstar1980]

This is one of the best explanation of how rates, maturity dates and the inverted curve works. Thanks!

[@johndherman75]

What about a minus 12% 5-yr loss to principal for BND?

[@rjb7260]

Very good explanation.. love your channel thanks Rob!

[@amyjohnson7604]

You always explain everything so clearly. Thank you! Just subscribed to New Retirement.

[@daveschock4959]

NewRetirement is the best. Also just subscribed .

[@michaelgreskamp1093]

As usual Rob excellent presentation. providing the necessary background to make an informed decision. I think a lot of investors that have a well funded retirement and want to leave an inheritance are looking at vehicles to park some of this return. Personally if a take a portion of my returns this year and lock into 10 year bonds at the current rates (I am 75) I am not going to lament the fact that I missed out on a higher return with the allocated dollars. Retired at 60 and have made minorr adjustments to my plan. However, looking at kicking up my bond allocation that will not impact our retirment spending. Really really appreciate the presentations and the weekly news letter!!!

[@TES-bt8sv]

Rob, I agree that it is inevitable that interest rates will go down and the benefit of holding excess cash will end. I am one of those people that, based on the poor performance of my bond fund (FXNAX) and attractive CD rates, I temporarily switched all my bond funds to cash. I am ready to get out of cash and go back to bonds, yet I still am leery, which is why I'm watching this video. I am also looking into using a high dividend yield fund instead of bonds. I can easily sit out downturns in the market. I just believe there must be a better alternative to bonds. Thanks for your video.

[@chrisa.515]

There are, it's called a Fidelity cash management account which is currently paying a 2.72% fixed rate, beating out most so-called investment grade bonds over the past 10 years and is more liquid and carries less risk. This rate is likely to remain more or less stable even during interest rate cuts and when rates are high as they are now you have the option of putting your cash into a Money Market fund within the CMA to take advantage of the higher interest and your money isn't locked in as with traditional CD's. High yield bonds and floating bank rate funds are also better options. Both have been blowing the doors off the so called "safer" bonds over the past 10 years. They are supposedly more risky than traditional bonds but I'm not seeing it. Ultra-short bonds are another option. While their rate of return is nothing to write home about they don't lose money like traditional bonds do. Fidelity's Conservative Income Bond Fund (FCNVX) currently has a 5.21% yield and has never lost money over the past ten years, not even in 2022. Why anybody continues to push investment grade/government bonds over these options is beyond me.

[@davidweden1413]

When I graduated college in 1980, my first job was to invest cash for a large public utility, usually in repos, commercial paper, and CDs. At one point in 1981, overnight rates were 22%! My salary was about $20,000, and I remember thinking, if I had $100,000, I could sit back and invest that money and make as much as I do in my job! That was a highly inverted yield curve, which was due to the Fed's Paul Volker fighting inflation. Today, I doubt we will see the low short term rates we saw during the ten yeas leading up to 2021.

[@billl1127]

I graduated in 80 too and recall similar thoughts and then later that decade I bought a house and my mortgage was upwards of 11%.

[@pattyk8594]

Great video thank you! You are the first person I've heard explain what the inverted curve is in layman's terms so that I actually understand it! And there have been many on TV and radio that keep throwing around the "inverted curve" and don't explain it, or try to explain it and are unsuccessful :o)

[@BillF-h2d]

Thanks - always enjoy your videos. I had invested my Bond fund in VBIRX (short-term Vangaurd Fund) a few years back since I was getting close to retirement (when I moved from an advisor to do-it-yourself), and have since retired at the end of March. It's performed better in the rising interest rate environment, but I've been contemplating moving it to VBTLX. Target percentages are 70% stock and 30% Bond, but I'm currently at 28.3% Bond/Cash (split between 19.6% VBIRX and 8.6% VMFXX). So I have the exact timing problem you referenced in your video. All retirement spending so far has been out of my settlement fund (VMFXX).

[@marksteven3534]

T-bills, notes, bonds are state tax free. I'm in NYS at 6.85%. I think this is worth considering but was never mentioned.

[@JoeS97756]

Great point.

[@pmmahone1]

Exempt from state tax in a non qualified account, unless distributed from an IRA- then it is taxed as ordinary income. Your 1099-R doesn't delineate what was earned in a government treasury.

[@joehook9635]

​@@pmmahone1True. We have to calculate the amount of federal interest to report on our state tax return, using supplemental information from our brokerage.

[@user-py3ex2ym9f]

Short answer: Cash only has inflation risk. Individual bonds have credit risk and bond funds have interest rate risk in addition to inflation risk. Cash has less risk, so it wins if rates are similar.

[@rnish2958]

Also if the cash is in a high yield saving account it is FDIC insured.

[@danieldavidson1506]

Thank you Rob! You do such a great job simplifying the complex. I manage three portfolios right now and this is the exact situation I've been dealing with. Since stock funds have been doing so well I decided to shave a bit off the top of those and move them to some fixed income position. These are retirement accounts. I have BND or equivalent funds in each of the accounts to counter balance the stock funds/ETFs. When I look at the funds the gain/loss is either negative or less than one percent positive. When I review the performance over one year it is less than 4 percent although 30 day yield is 5.25 percent. So I haven't moved any money out of those funds but the money I just shaved off I've put into a one year treasury as part of a ladder up to 1.5 years. As we're retired these are funds that will need to be distributed anyway. I don't like the bond funds but I think they're necessary. They tamper any gains in an up market and lessen any losses in a down market. Thanks again for your insight.

[@garya2223]

It sort of depends what you want the "fixed income" side of your portfolio to do. If it's just ballast then cash works fine. If you want income then cash works for now but may not in the future, in which case you might need a bond fund of some sort.

[@thekarltonkrill]

@rob_berger Rob, you need to get to the point sooner. Try beginning the video by making a statement, then backing it up with the data. You have great content as usual, but it takes you 12 minutes of tables and charts just to arrive at “historical data tells us bonds will eventually pay higher yields than cash.” Perhaps try starting with something like “People ask me if they should sell their bonds and my opinion is, no, cash may have a slight edge now, but historically bonds will have the upper hand, and in the next 20 minutes I will show you the data to support my viewpoint.” I think it will really help your viewership and it will help your viewers understand what you are driving at.

[@geoffgordon9569]

I agree. I end up reading the transcript and give a 👎.

[@ingridl321]

I put it on 1.5 times speed. I do that with most KZbin videos, and then I slow down the parts that I want to focus on.

[@richj011]

It's the same as if you're writing a song "don't bore us get to the chorus" lol

[@dl777]

Using the number keys help too to get to whatever percentage of the video you want or move forward 10%.

[@bobbydazzler8051]

He knows that not all of his viewers are as educated as you are and may need to know the why’s behind decisions and definitions of certain investment vehicles. You are like the orchestra sections telling the conductor when to start your section on a piece of music. I appreciate his patience in explaining to the nth degree - for my kids’ sake.

[@huntsail3727]

Good solid, conservative, mainstream advice. Great job!

[@tombkk1322]

Good video, Rob. Vanguard Total Bond Market Index is a good bet. Thanks

[@calmbbaer]

While I do that, I'm not sure whether there's as much evidence that indexing the best approach for bonds the way it is for stocks. I think a lot of people see that indexing works well for large-cap U.S. stocks and assume it works equally well for other types of investments. For stocks, market proportionality rewards performance. For bonds, market proportionality rewards debt. Do we investors want bonds according to who can rack up the most debt, or according to what type of bonds achieve our investment goals?

[@suzanneemerson2625]

@@calmbbaer I’ve been thinking about that.

[@janesmith506]

Thank you, that was helpful and thought-provoking.

[@samialkhammash1985]

BIL ETF pays good too, its for 1-3 months t-bills

[@stevecarroll5011]

Rob, great video..and timely for me. I am 9 months out. Here are my follow up questions: 1). I current have about a 70/30 split between equities and bonds..you mentioned bond allocation in relation to the 4% rule, what is the recommended ratio in retirement assuming a 30 year horizon? 2). I have one year of cash set aside and had been contemplating setting side another two years of cash, but after watching your video I am now thinking that I should stand pat with my intermediate bonds that are paying 5% until I need to fund my second year of retirement, etc…At that point perhaps interest rates will have gone down and I can sell what I need to fund expenses at a premium?

[@vanguardvaluist2614]

Also worthy of mention is when the stock market crashes the flight toward safety raises the prices of intermediate bonds. So you benefit by selling your bonds, not stocks, at higher levels unlike cash.

[@chrisa.515]

It didn't in 2022. You would've been far better off holding cash during that period.

[@ib23579]

Closer to retirement it may make sense to take their risk in stocks, and pick cash as a safe asset. The advantage of cash is that nominally it does not go down. Bonds can go down, as we have seen recently. The 60/40 portfolio of stocks/bonds can be easily approximated by a stocks/cash portfolio with comparable expected returns and volatility.

[@markwarren4093]

Great video as always

[@yhckelly]

Ally Bank is paying 3.9% on a 5-year CD. That's 5 years of FDIC insured cash pulling darn close to a safe withdrawal rate... If I already won the retirement game, that would be pretty hard to resist. Love the channel, thank you!

[@lesbolstad]

better off with TIPS if you want to go 5 years.

[@murraypassarieu9115]

All my cash is in t bills. They’re easy to understand. It sounds like I’m making a mistake but I haven’t been impressed with the bond funds I’ve been in and I find buying individual bonds confusing.

[@gulfstrmcaptbob4124]

How much did your bond fund lose when rates where rising?

[@GotGracexxxxx]

It isn’t a matter of “timing” to look at a chart and see which offers more return: an intermediate term bond ETF or money market mutual funds. I believe there’s a bigger interest rate cycle at play here, related to government levering up or deleveraging. From 1980 to 2020, rates were trending down and bond holders looked like geniuses for locking in higher interest. But, if you look at the 40 years before that, from 1940 to 1980, rates trended up and the dumbest thing you could have done is locked up your money at a lower rate. Unfortunately, I believe the research on bonds and their effects on portfolios do not consider the rising interest rate environment we had before, and have entered again. The boomers are halfway into retirement and removing money from the capital markets, while government treasury auctions have experienced long tails meaning that private borrowers have to pay higher rates in order to make actual productive uses of that money in ways that could grow the economy.

[@papster33]

Thanks for the detailed and timely information. One of the things I do often get confused on in these discussions is the difference in owning individual bonds vs bond funds. You spoke a lot today on individual bonds. However you also mentioned that BND has a 4+% yield. That's all well and good, but it also has a negative YTD return. So when people are looking at replacing their fixed investments from bond FUNDS to more cash investments, how should they look at that? Would love to better understand that further. Bond fund total returns have been poor for a long time - but my confusion comes in where you keep bringing in the current yield into the discussion, which makes them 'appear' much better.

[@AGrandJourney]

I agree. No matter which 10- or 20-year period I look at, Bond Funds seem to have a terrible total return. I'm happy buying government individual bonds or CDs with a fixed maturity rate that will mature in 3 or 4 years. I know I will get my principal back even if interest rates rise. But I stay away from bond funds. And at least for now, I only have enough bonds in my bond ladder to cover the next 3 years of spending.

[@OffGridandOutdoors]

@@AGrandJourney This has been my experience with Bond Funds and ETFs also. I would rather build a bond ladder with an ETF product like the iShares or Invesco BulletShares bond ladder tools ... or just buy them direct in my brokerage or at Treasury.

[@steveh802]

I agree with what you're saying. For those of us that had individual bonds (like me), everything was called when interest rates went down. Bond fund performance has not been good. I doubt I will ever buy bond funds again unless it's short term.

[@OffGridandOutdoors]

Seems to me right now that MYGAs could be your friend. Oh not forever, but with a guarantee lock for up to 10 years right now at up to 6+% they look pretty good. All be it am only going no more than 6 years out.

[@imrobmeer]

Great video (as usual). There are 2 things not mentioned here: 1. Bonds can go negative, but a savings account doesn't (maybe technically it can, but not in real life i'd say). So that's a plus for a savings account type of asset allocation. 2. Selling bonds to buy cash would be a bad idea, i agree with that. But for me i have some money in CD's for one year. So not in bonds. And for a person to have money in cash at the moment, the answer might be different. You mention you'd be "in trouble" and you'd try to "time the market", but if a person has money already in cash, i'd argue that it might be a good idea to keep it there and start buying bonds when the yield curve changes?

[@eduardogarza6306]

I think so too. But can we find ourselves “missing the boat” sort of speak if we don’t buy bonds now? Can we missed that opportunity?

[@imrobmeer]

@@eduardogarza6306 Honestly? I think not. If your cash is liquid, you can buy intermediate or long term bonds whenever the curve changes. Would that require you to watch 'the market'? Sure, but it's not like you need to watch it like a hawk every... single... day?

[@poolmilethirty2859]

Thank you, Rob, for this insight. Is there a video where you share your retirement portfolio allocations? Is it conservative? Or moderately conservative?

[@user-cc7uf9go2w]

For me I feel I need to consider my remaining lifetime and if I want to take on the risk of further investments vs just keeping my passive income in cash. I'm lucky in that I don't need my investments (now at least) for income as I have a good pension and no debt. So I just put my dividends and interest into a money market fund and also spend a lot of it on things that make my life easier and bring me enjoyment. At this point in my life I think I've got enough in investments to cover me whatever might happen. Why take on more risk when I don't need to.

[@johnurban7333]

I feel the same way. What are the percentages of someone dying with zero money. Passive income is good. Greed and trying to have more money than the other guy is why people are always looking to beat the stock market. If you can live on it be happy if what you have

[@suzanneemerson2625]

⁠​⁠@@johnurban7333 I agree. I’m sure I have enough, and I don’t want to think about maximizing returns anymore. I have a great, secure pension, and I only started taking money out of retirement accounts when I reached RMD age. The RMD money goes to charity and a high yield savings account. I could spend it, but I don’t need or want anything. Did you mean to say, “If you can live on it, be happy with what you have.” ? That’s how I feel.

[@oiris4591]

Currently retired, I sold my bond mutual fund AND bond ETF two years ago. I am now laddering TBills 6 months/1 year. The bond mutual fund gave me a meager return for the past twenty years considering expenses and commissions... When the current TBill interests go below 5% I'll buy a REIT. I also believe that even in retirement a 80/20 equities/bond ratio is appropriate. Thanks, Rob, for the very instructing video.

[@Iamironman76]

I’ve been putting cash in SGOV earning 5+%. Short term government bonds. I can’t get CDS because I live overseas, even as an American.

[@CaptainBenjamins]

SPAXX and chill

[@user-vs3jj5wn3y]

Great points about the long-term view Rob. My current "compromise" is to split my bond portfolio between an intermediate bond fund and a *short-term* TIPS fund (VTAPX). It seems to have worked really well for me. Where am I going wrong, unless inflation suddenly craters?

[@rossjackson2929]

I think that rates may go down a bit 1bip in a year or so. U.S. govt debt is huge, with neither party willing to deal with it. Even if the fed cuts rates, the debt is still there. Interest rates will still be in 3.5 to 4.5 range.

[@krisskogs2532]

@Rob, I would like to see a study that compares say a 30 year period of investing in only mid-term bond funds vs investing in cash when the yield curve is inverted and mid-term bond funds when the yield curve is normal.

[@gmshapiro4309]

Rob, Thanks for your thoughtful work and analysis. Love your KZbin videos. The question you cover here is one I think about often. A question, not a criticism. Isn't the discussed intermediate bond strategy simply a disguise for market timing? A way I think about the issue is: if I have been in intermediate bonds for some time period after the Fed began raising rates, how much money in return spread vs. money market/high yield savings accounts have I left on the table? Folks have been predicting the Fed would begin to raise rates for a year or longer. If one gets a "no risk" 5+% for all that time vs. intermediate bonds, why not take that return? Then, when the Fed raises rates, one has the option to switch the money market/high yield savings investment to intermediate bonds based on what the Fed actually did, rather than guessing when the Fed will raise rates. Is that strategy market timing, if basing the investment on the reality of Fed action. Just a thought. Thanks again for your thoughtful analysis.

[@LarryWilliams-xu8qs]

Rob, great comments. I don’t see the link to the Bengen article. Could you post that link?

[@pware9643]

Asset allocation models like the 60/40 used in the 4% rule always use bonds like BND fund.. so what is the long term average of this asset.. 4-6% return? IF you can lock in greater than the average return from your 40% bond allocation, why not? Like a cd from an insurance co.. 6.55% for 7 years locked in.. called a MYGA.. (canvas annuity) tax deferred interest till maturity. With the advent of Buffer ETF's that limit your loss on SP500 from 0 to 10% but cap your gains at 9-18%... would this be a good substitute for ALL your bond money?!

[@jayhinytzke3269]

Rob: I don't see the link to the NYU School of Business data. Could you please provide. Thanks, in advance. Keep fighting the good fight.

[@bizpo1286]

Have you reviewed the new automated bond ladder offering from Wealthfront? If so, do you feel the convenience is worth the 0.25% fee they charge for that convenience?

[@user-vs3jj5wn3y]

Rob, I find it interesting that you dismiss the idea of getting a 1-2% better return for a time (your concerns about timing things notwithstanding) as if it's no big deal, yet you have a real (understandable) strong aversion to even a few basis points of expense ratio (though that's a known quantity so to speak). Am I off for seeing a small disconnect there? Could you explain in a future video? I realize some of it is "known vs unknown", but still, a basis point is a basis point, yes? ;-)

[@michaell6580]

Great comment as I have noticed his fixation on Exp Ratio only to leave "money" on the table by promoting advantages of TIPS for example. We all time because we are human.

[@josh9231]

Excellent video. Does Bill Bengen’s chart on percentage in T- bills vs intermediate treasury take into account rebalancing in the retirement account?

[@OffGridandOutdoors]

Rob I'm doing 3-6 year 6.15% MYGAs with a 10% annual withdraw with some of my cash right now. Better than HYSAs right now and I can lock in that rate for up to 10 years (although I'm only going out 6). Most sources I can find do not expect the SnP to preform as well over the next decade as the previous. So 6.15% locked now don't seem too bad.

[@selma5885]

With who?/what companies?

[@OffGridandOutdoors]

@@selma5885 Gainbridge 6.15% (A-) 6 year & Canvas 6.2% (B++) 3 year direct. Also research Rates and Terms at Blueprint income.

[@OffGridandOutdoors]

​​@@selma5885 Gainbridge, Canvas and Blueprint for research

[@OffGridandOutdoors]

Clearly KZbin will not allow me to answer you. I've tried twice and KZbin has deleted both comments.

[@OffGridandOutdoors]

@@selma5885 try searching the web. The 2 that get the better rates are sold on their own web sites. You can find them easily. Look for B++ or better and keep the B++ no more than 3 years

[@Muriel-1112]

Bonds might not be giving us amazing returns, but they at least provide some stability. Cash barely keeps up with inflation.

[@Andres_853]

But with the way the market's been swinging lately, maybe some cash on hand wouldn't be a bad idea.

[@chrisa.515]

Most so-called investment grade bond funds (government and corporate) returned an average of 1.50% over the past 10 years. I hardly call that keeping up with inflation.

[@sunshineiv1]

So are you saying that instead of one using their dividend payouts to purchase short term T-bills it would be wiser to also purchase more into my BND fund?

[@clbcl5]

You failed to mention the fidelity savings you quoted are paid with min. $100,000 deposit. That is 5.14%. The normal savings is 4.96%

[@couldbe8348]

Rob sorry my family are Big Blue Wolverines forever BUT I love your show. Would CDs fit into the cash category? 12 month CDs are 5.3% and would make more sense than cash, since rates will probably drop?

[@SpookyEng1]

If the liquidity isn’t an issue a portion of cash in CDs/short term treasuries makes sense.

[@Wuyifrom]

It is a great idea and I have been converted most of my bond part to cash for the yield over 5 percent.

I'm not seeing the link to the NYU spreadsheet you reference. Am I looking in the wrong place?

[@jimroberts6176]

What is the ticker for the Int TIPS you refer to?

[@brutherford462]

Had a windfall last year and it's still in cash earning 5.15% and we are happy with that. Won the game...stop playing is our motto. Yes, we realize what the S&P has done in the past year, but that's okay.

[@evelynmurphy9102]

“Can’t take it with you!” 😉

[@ph5915]

Thanks for those details, definitely makes sense! Right before the Fed changed course and started - shockingly rapidly - raising interest rates, I had bought a MYGA at 3.15% for 3 yr duration. I felt burned to be locked in like that. But with the rest I bought a 2 yr CD ladder with Fidelity and one CD matures every 6 months so that gives me an extra comfort level even tho I only need to cash in one per year. These are call protected so they are a little less than that Fidelity front screen shows, but all still over 5%.

[@lubokanev7436]

If you scripted those videos or at least break them down by points beforehand, it would make it a lot more succinct. Love you.

[@richardlarson2969]

I have been taking advantage of the short end of the yield curve for the last two years, knowing that this too will end and the curve will go back to normal. But, Bob, here is my question; how do you see the curve normalizing? Will the short end go way down and the medium and long end stay about the same? Or, will the short end go way down and the longer end go up moderately? In the later case the value of those existing longer bonds (and bond funds) will go down and rates will be higher. If the longer end stays about the same and the short end goes way down, then can't I just start investing in the longer bonds as my short Tbills mature? The long term average of the 10 year Treasury is very close to the current yield. Thanks for your thoughts. I very much enjoy your channel.

[@keithw32123]

Excellent question.

[@LeeScherlpc]

Hi Rob, You imply that buying a bond fund requires timing the market, or leaving it in longterm. I'm assuming from what you said that bond funds are better than buying actual bonds, which don't require timing. In the last few years this has all been moot because bonds have performed so poorly. I got out of them completely last year. I imagine that when bonds start to recover, those bond funds will shoot up in value, and pay higher yields? If this is the case, would you recommend bond funds instead of bonds and if so, any particular ones?

[@wcg66]

The question for me is cash or bond *funds* (or ETFs)? Presumably there time to shine is coming soon as rates drop. However, their performance even before the current rate increases has been poor. As for timing the market, the banks will do it for you. They will greatly reduce these high interest rates once we get back to the "normal" state. Why not switch to bonds or CDs when their rates are better than cash?

[@tdmulligan3813]

Because once interest rates come down, the price of the bond funds will go up. Rates and fund price move opposite. Right now you can get lower prices on bond funds.

[@billl1127]

I'm not a fan of market timing, but in the case of cash and bond investments, I do like the idea of riding the cash wagon until I see a shift in the yield curve and then make the transition.

[@pentiumlxf]

It seems that bond price moves slower than stock. Can we move more cash to bond when the trend is clear? Bond's role is stability, not growth, anyway.

[@ChrisAbbey-c6p]

Symbol BND: 3 yr: -3.03%, 5 yr: -.21%, 10 yr: 1.34% - I would not call this a better alternative to cash, Rob. Inflation each year makes this a loser.

[@markwolovetz]

Long Treasuries should do even better than the 10yr.

[@JaredHoutsma]

Maybe I just haven't seen it before, but I would love for you to do a deep dive into bond funds. I conceptually understand what I'm buying when I buy a total stock fund like VTI, but what does a total bond fund like BND hold?

[@alcw625]

he reviewed this in one of monday nite live shows...as usual he goes to Morningstar and walks through the data available there.

[@kw7292]

Rob has done a video on BND, it contains thousands of good quality bonds

[@brianlaskey5072]

@@kw7292 That are sold at a loss whenever interest rates increase. I prefer capital preservation with my fixed income.

[@victorperry4122]

I might be missing something, but I do not see the link to the NYU data.

[@Saddlegait45]

About a little over a year ago I moved most of my money that was in bond ETFs into brokered CDs laddered from 3 months to 5 year terms. I’ve been rolling them into new CDs as they mature. I think now that the fed is likely to start lowering interest rates at the end of the year or the start of the new year, I’ll be rolling my expired CDs back into bond ETFs going forward.

[@luigipetrocelli1959]

In the approaching environment of lower interest rates, when bonds held in ETFs mature, they will need to be replaced with bonds carrying lower yields, so over time your overall yield will continue declining until there comes a time when rates pick up again. A safer strategy then may be to self-select individual bonds with longer maturities - say, 5 years or more - to lock in the current rates. If inflation is a concern one can get at least partial protection with 5 year (or longer dated) TIPs, though those have tax issues, so the ideal place to hold them would be in an IRA account, ideally, a Roth IRA.

[@johnbirman5840]

“Discount” on Bonds due to Interest Rate changes: Is a fancy term to mean Losses to Principle. Agree with what you say, but it is curious how well in comparison to US Bonds how well Gold has performed (except curiously 1931 when S&P rose 40+ percent and Gold dropped 20+ percent) An advantage to long term holding of Gold vs Bonds is the compounding without a yearly tax on interest. The disadvantage is the tax rate at selling is much higher UNLESS one has minimal taxable income at retirement. In 2021 - present there is NO comparison to the performance. Longish Bonds sold lost over 40% of Value. Gold rose in Value. Of course Everything has a time to Buy, and Everything has a time to Sell. Being able to Choose When is the best way to accumulate wealth. Cheers.

[@user-jl7ui4sc7q]

Thanks Rob. I would be interested in your opinion of the etf BOXX.

[@yolanderiche7476]

My original retirement plan was to retire at 62, work part-time, and save money. However, high prices for everything have severely affected my plan. I'm concerned if people who went through the 2008 financial crisis had an easier time than I am having now. The stock market is worrying me as my income has decreased, and I fear I won't have enough savings for retirement since I can't contribute as much as before.

[@bernisejedeon5888]

I’m 77 and still working full time. I do enjoy my work, it provides me with purpose and has secured my financial future. Most people are too eager to retire as early as possible. Even if you do retire early, best to get a part time job for the reasons cited above, as well as following many if not all of the suggestions in this video.

[@belobelonce35]

Accurate asset allocation is crucial. Some use hedging or defensive assets in their portfolio for market downturns. Seeking financial advice is vital. This approach has kept me financially secure for over five years, with a return on investment of nearly $1 million.

[@valeriepierre9778]

Talking about advisors, do u consider anyone worthy of recommendations? I have about 100k to taste the water now that large cap stocks are at a discount... Thanks.

[@belobelonce35]

Sharon Marissa Wolfe is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.

[@fresnaygermain8180]

I looked her up, and I have sent her an email. I hope she gets back to me soon. Thank you

[@Steve_SEC]

Besides $300k in my non-retirement emergency fund in an FDIC HYSA (5.35%), I would be thankful if you provide me with your thoughts on my retirement portfolio, where I plan to retire in ~5 years, of $800k in VTI, $40k in VSCIX, $10k in VTPSX (& $400k in two other foreign stocks from my workplace 1/3 of which vests each year), $100k in BND, & $900k in VMFXX (since BND has been disappointing the past 5 years). Besides your general advice, a specific question as I want to increase my passive gains as I approach retirement, is if I should also have a position in a dividend fund that does not overlap too much with VTI, e.g., SCHD or VYM (since VIG seems to approximate almost half of VTI) and, if so, how much would you recommend? Thank you so much for your valuable time.

[@eduardogarza6306]

How is buying bonds timing the market. Dont bonds price typically stay very much the same?

[@kevinsmith9899]

This seemed like a disconnect to me in the video. Bond funds can fluctuate quite a bit, but individual bonds (if you buy and hold to maturity) are stable.

[@clsanchez77]

Interesting question. Ben Stein advises against bonds for personal investing and recommends 80% equities and 20% cash, regardless of market, age or retirement status. I personally hold 70% stocks, 15% bonds and 5% cash in retirement accounts, but 80% stocks and 20% cash in my HSA.

[@1jet55]

What about a MYGA? Many insurance company CD's are well over 5.6% out several years with the ability to take out interest plus 10% each year without penalty, and they are A+ rated companies?

[@hoss6981]

Rob what do you think about USFR? You save the state taxes

[@ethancanin]

I'm DCA into longer bonds. Just bought a tax free municipal revenue bond with a 10 year yield of 3.6 which converts to at least 4.6 for me! AA rating.

[@frankhaynes763]

BOXX is a new option I'm tipping my toe in. About the same income and no taxes chipping away.

[@geoffgordon9569]

I'm a contrarian. I believe putting money into a bond is a smart move. As interest rates go lower, bond prices will rise. It could take months ir a few years. Just have to be patient.

[@glasshalffull2930]

While you’re being patient, over the last year and a half the S&P 500 has had about a 38% return. The bond fund my employer offered has averaged 5.7% over 35 years and their S&P500 has averaged over 10% over the same time frame.

[@benm5678]

What impact does the price of BND [or similar ETFs] have? It seems it was going sideways for ~10years and dropped sharply since Covid.

[@JJS73]

Rob, one thing you did not mention was the tax benefits of treasuries. For example, I live in a high income tax state and using treasuries saves me 10+%. Right now bnd is paying about 4.61% with a cost of .03% (small mgmt fee, sure, but still a fee) and is taxable at the federal and state level. A 2 year treasury is paying about 4.77 on the secondary without any fee or state income tax. What am I missing?

[@SpookyEng1]

Duration. BND is intermediate term (6-7 yrs). What will rates be in 2yrs when the treasury matures? In the current environment BND is not very attractive.

[@JJS73]

@@SpookyEng1 sure, I understand that, so at that time, if treasury rates drop I just buy into bnd or some other taxable instrument or maybe a hig paying divi stock like MO. What am I missing?

[@the_wiki9408]

@@JJS73 When rates drop, the share price of BND will immediately increase. Just as it decreased when rates rose. So by the time you can do anything, the bond funds will be be much more expensive. You will have missed maybe a 20% gain. And not only that, future yields will be lower for BND and everything else. The bond market is efficient and you can't pull a fast one on it.

[@JJS73]

@@the_wiki9408 thank you. That's what I was missing....So, I suppose, I need to decide if the tax savings is worth it.

[@johnhollister3]

Where do iBonds fit into this picture?

[@car348fed]

Dear Rob and fellow subscribers, I need some assistance with the following questions: Where can I find the complete calculation of an ETF/Mutual Fund's performance based on its portfolio? How can I view the full performance of an ETF/Mutual Fund before deducting fees, expenses, and other costs? Where can I find detailed information about fees and expenses? If a target fund shows an expense ratio of, for example, 0.12%, and the fund's composition includes investments in several other funds, sometimes from third-party companies, where can I find the expenses associated with these underlying funds? Thank you for your help, and I apologize for my lack of knowledge on this topic.

[@frankrusso7745]

I have a account with vanguard Ira about 500000 my advice wants to start Roth Ira 23000 before the rule runs out in July 2025 I pay no taxes now at 68 good or bad move

[@dwights1464]

Long term, do bonds really provide a return commensurate with their interest rate risk? Stocks provide a much greater return potential along with much greater risks. Do bonds also have an appropriate relationship between risk and return? Early 2022 may have been an unusual time for interest rates and the bond market but it does demonstrate a great example of what interest rate risk can mean compared to cash.

[@rob_berger]

It does, but I suspect when we go through another 2000 to 2002, people will fall in love with bonds again. Right now stocks are higher each day and cash is 5%, so nobody likes bonds.

[@griffith4830]

Paralysis analysis there Rob. Never understood the allure of bonds. Atm - 1% is a lot to give up. Cash is king - be flexible. Lock in a hi-yield savings account. Easy and agile

[@saintsandsin3885]

In a tax deferred account what is the harm in staying in cash while rates are higher and then just moving back to bonds when the inverted yield goes back to normal? I use a money market fund in place of bonds in the current market. Even if I somehow miss "timing" the market I might lose some bond fund gains but I don't see the huge drawback?

[@coltondotdev]

The big problem would be missing out on the big boost in bond price that would happen if interest rates decline. That's kinda why yields are inverted, investors don't think interest rates will stay this high, so people want to lock in 10-30 years of decent yields, thus intermediate/long term bonds are very popular, so their yields are slightly lower. It's a bit circular, but it does make sense and the pricing is efficient.

[@janethunt4037]

I agree!

[@the_wiki9408]

You can't game the bond market, it is too efficient. When rates drop, the higher yielding bonds or bond funds will be worth more money. You will have to pay more than face value to buy them. The end result is the same overall yield.

[@saintsandsin3885]

@@the_wiki9408 I still don't see the down side other then it might be more expensive for me to take money out of a low risk money market fund and then buy back into a bond fund that is still low risk? I agree I won't make money when the bond fund increases in value but I will not lose money.

[@WhiskeyCurious]

I moved out of bonds into cash.

[@chrisa.515]

My Fidelity cash management account is paying a 2.72% interest rate, more than twice the returns of most investment grade bonds over the past 10 years and is more liquid with almost no risk. This rate will remain stable even during interest rate cuts and when rates are high I have the option of putting my cash into a Money Market fund within the CMA to take advantage of the higher interest. So tell me why I should buy bonds again?

[@johnoneill1011]

Tax complicates things. As a "non-resident alien" my simplistic understanding is that Interest from Treasuries is generally taxable at the federal level, but not at the state level. This differs from bank savings or money market funds which are exposed to both levels of tax. However, SALT (State & Local Taxes) can be deducted from Federal income tax up to $10k p.a for taxpayers who itemize their deductions. Depending on how much cash you have exposed to SALT, and your other income, this can tip the balance between cash and bonds.

[@charlesbyrneShowComments4all]

Inflation is a hidden tax. It is the government printing money. The federal reserve can slow inflation, but without the US government actually cutting spending, not the annual growth of spending, but actual spending then raising interest rates doesn't stop federal fiscal policy. These two items need to have a correlation. So if the Fed raises interest rates then Fedzilla needs to lower spending in an appropriate level. Just a one percent across the board cut would make a world of difference. American families have cut their expenses and there's plenty of Washington waste (studies of mating habits of Japanese quail, studies of the flow rate of ketchup, multiple travel conference and training, foreign aid, etc) Inflation, the hidden tax also affects Roth, HSAs and similar Roth retirement accounts.

[@joehook9635]

Such a huge issue that doesn't get its due attention. Our nest egg has been decimated by it over the past few years. Yeah, we're doing ok investing but those gains will be taxed too.😢

[@BobBennett-ve8hq]

If I can get a good yield (5% plus) in cash now, and it is paying better than intermediate bonds currently (investment grade corporates), why not stay in cash until the intermediate bond rates rise. I am talking about buying new issue individual bonds. I get that we can't time the market, but I can look at the bond yield on new issue corporates and see when the yield goes to say 6% or more and then can start deploying my cash then. I can't imagine that even if I have to wait 30 or 90 days for a T Bill to mature that I will miss the only window to invest in higher-yielding bonds.

[@molten_ice]

I wonder if Stocks + 1-2 years of cash outperforms a Stocks + Bonds portfolio. Cash doesn't beat bonds long term but by having way more in Stocks should mean better performance with cash as a hedge during down markets.

[@tomm.8892]

Laddering Ts that are currently paying better than 30-day yields for both short and intermediate bond etfs. Ts are maturing approximately every 30-days forcing me to inspect rates for Ts, bond etfs, stocks and MM. Some people like to have their investments on autopilot (Great!). Others like to fuss and play. Who does better? Probably the former but fussing and playing with your money can give you a sense of being connected and perhaps, allow you to course correct if these start to go really wrong -- just don't panic sell!!!!!

[@keithmachado-pp6fv]

I bought a 20 year bond about 3 months ago paying 4.75% at $98 (YTM 4.86%). It is now at $102 so in addition to the 4750 of interest I will be getting that is an additional 4000 of cap gain so if I sell I will have 8.75% total gain for 1 year.

[@bryonsview]

20years is a long time lock up funds. However if that 4.75 guarantee works for your projections then I love it

[@kw7292]

20 yrs is a lifetime for some retirees

[@markphillips2648]

If you bought this 20 year bond I hope you didn’t buy it for the yield, the reason should be the convexity!

[@keithmachado-pp6fv]

I bought it because I rolled over a lump sum pension payment into an IRA and it will provide annual income that I can withdraw if needed but can reinvest each year if not needed. I won’t need the principal unless something very bad happens in which case I won’t be thinking about whether I got the best rate and if I die my heirs get the bond which they would not get if I took the annuity payment instead of the lump sum.

[@bryonsview]

@@keithmachado-pp6fv makes total sense to me. Did you purchase in taxable or after tax?

[@VideoRansack]

PLEASE repost the formula (or the link to the episode where it was discussed) regarding how to determine the approximate amount of time a bond mutual fund will maintain its current yield. I've googled it multiple ways, but cannot find it.

[@ericj9011]

You double the average duration, was it, And add one year

[@ericj9011]

Please note that a short-term bond fund will have a break even period of five or six years as in that formula. I always thought it sounded too long, but here we are and they are taking about that long to get back to even. Of course, they don't drop by a very large amount, when they do drop.

[@lawrenceralph7481]

Cash for the first 2 years withdrawals. Diversified Bonds for the next 5 years. Diversified stock for remainder. Convert a bit each year. From stock ETF if PE high. From cash if stockneth pe is low.

[@vikalp77]

Fixed annuity is better alternative to invest in bonds. It offers better rate visibility, flexibility in take out, better tax control as not force to get interest if you dont need. That way dont need to worry about bonds duration, rates etc...