I realize that bond fund returns go up and down, but their abysmal long-term returns after the past year or so are astonishing. With CD yields so high right now, why not just ditch bond funds and put all the money in CDs? I can construct a 5-year CD ladder at Fidelity with every issue exceeding 5% and an overall yield of 5.34%. Jeez … I don’t own a single bond fund that can come close to that over the past five years and only one that tops that over 10 years. How many years would it take my bond funds to earn as much as this simple CD ladder? Answer: a lot.
The only fly in the ointment is that few of the higher yielding CDs are call-protected, so if yields drop a lot, I suspect that many of these banks will be calling in their CDs.
Crash, why not buy CDs through Fidelity? The yields are extremely competitive.
I like global bonds as a hedge against a falling dollar. I’ve been moving my small bit of cash in and out of a GNMA etf, buying in at near 4% on the 10 year and unloading them when the 10-year nears 3.5%. So I’m currently out with the 10 year around 3.6%. That game will work until it doesn’t. Likely, interest rates are headed higher over the long term - which would kill that goose.
There’s no certainty any of the above will work out as planned. I usually operate differently than most here. So realize cash has been the “flavor of the month” for quite a few months now. The rates are currently attractive. Do I want to tear apart a balanced portfolio to throw a bunch into cash? No.
(PS - I don’t do TIPS. Others can debate the merits. I notice some added commentary below.)
The fund you reference, per M*, has a duration of 6.6. NAV for a fund like that is bound to suffer during a time like the bond market has been through for the past year-plus.
FWIW, I started small investments in VTIP and LTPZ, two ends of the duration spectrum. Both up slightly from my buy a few weeks ago.
This is why the TIPS funds pay out the inflation adjustments because they are a taxable event and treated by the IRS as income. If anything, I'd rather have the payout in hand from the funds to help pay the taxes. Interestingly, the same is not true for I Savings bonds. The income is completely deferred tax wise.
My more depressing problem is that I have to take an RMD sometime this year out of a retirement account with no gains or even breakeven recovery and almost certainly no prospects for same.
And boy, speaking of hoped-for steady eddies, has CCOR shit the bed since Halloween.
On the other hand, I imagine you can't win timing this either.
I've noticed despite it's defensive nature, it has these odd spikes in volatility at odd times. It tends to zig when the market zags, but still has risks apparently. It seems like they have a value tilt, which would mean when growth outperforms, they might underperform. But I also wonder if some of these spikes have to do with options expiring, sometime profitably and sometimes worthless.
Ya, the duration on my SCHP is 6.6 too. So it's not lighting the world on fire. But in the short time I've owned it, it IS up for me, rather than down. Probably a result of my original purchase price.
Re: CCOR - ”Options are then used to control portfolio volatility and to maintain cash flows. As a hedge, the fund may sell S&P 500 calls to finance the purchase of S&P 500 puts. This strategy may cause the fund to give up some upside potential in exchange for downside protection. Managers may utilize other option strategies like spreads for hedging and income generation as well.” - Source