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Low Risk Bond OEFs for Maturing CDs

dtconroe
in Fund Discussions
I have been using CDs and MMs for the past several years in my retirement IRA portfolio. As those CDs mature, I am now considering adding some very low risk bond oefs, which can produce at least 4% total return. I am interested in low volatility funds, which have done well in down markets, and would be interested if other investors have some favorites they would recommend. Thanks in advance for your bond oef ideas.
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Comments

  • hank
    edited September 5
    You might want to take a look at a new etf IBTM. Came across it today. According to James Stack, “The fund provides access to a portfolio of U.S. Treasury bonds that mature between January and December of 2032 (and) combines the defined maturity and characteristics of a bond with the benefits of ETF tradability.“ Perhaps more volatile than what you want at 6-7 years out on the curve. They might offer something similar in shorter maturities …

    Also - have read good things about Fidelity’s FSEC
  • Observant1
    edited September 5
    You may want to look into CBLDX, DHEAX, ICMUX, and RCTIX.
  • CrashCrash
    Look at WCPNX. I used to own it, but it was going nowhere fast. It was too tame for me. Solid, low risk. 4.85% current yield. Top 10 in portfolio is all Treasuries, except one listing of Fannie Mae.
    https://www.morningstar.com/funds/xnas/wcpnx/risk
  • AndyJ
    edited September 6
    You mentioned DHEAX in an earlier post, @dt, and I think it is right up your alley. SEMRX, the IG cousin of SEMPX/SEMMX, has tracked DHEAX closely since a management change in 2023, when Semper and a group called Medalist merged. In the last year, the DHEAX and SEMRX charts are practically indistinguishable, with barely a blip during the April swoon.

    Might be worth a look for another holding in the DHEAX ballpark, if only to spread the risk a bit in what's been and may well continue to be an attractive space.
  • Chinfist
    If you want low risk, short term or ultrashort term bond funds would need to be considered. I like BBBIX, RPHIX, and PTSHX
  • dtconroe
    edited September 6
    +
  • dtconroe
    Hank thanks for the suggestion

  • dtconroe
    Observant1 said:

    You may want to look into CBLDX, DHEAX, ICMUX, and RCTIX.


    I am pretty familiar with these funds. DHEAX use to be one of my major bond oef holdings before the 2020 crash. Thanks for the recommendations.
  • dtconroe
    Crash said:

    Look at WCPNX. I used to own it, but it was going nowhere fast. It was too tame for me. Solid, low risk. 4.85% current yield. Top 10 in portfolio is all Treasuries, except one listing of Fannie Mae.
    https://www.morningstar.com/funds/xnas/wcpnx/risk

    Thanks, I will take a closer look at this fund
  • dtconroe
    AndyJ said:

    You mentioned DHEAX in an earlier post, @dt, and I think it is right up your alley. SEMRX, the IG cousin of SEMPX/SEMMX, has tracked DHEAX closely since a management change in 2023, when Semper and a group called Medalist merged. In the last year, the DHEAX and SEMRX charts are practically indistinguishable, with barely a blip during the April swoon.

    Might be worth a look for another holding in the DHEAX ballpark, if only to spread the risk a bit in what's been and may well continue to be an attractive space.

    Yep, I am very familiar with DHEAX, having owned it for years. I am also very familiar with SEMMX, also having owned it in the past, but dumped it after its terrible performance in the 2020 crash. I have not looked at it since Medalist took it over
  • dtconroe
    Chinfist said:

    If you want low risk, short term or ultrashort term bond funds would need to be considered. I like BBBIX, RPHIX, and PTSHX

    Thanks for the suggestions--I know RPHIX very well, but not as familiar with BBBIX and PTSHX
  • WABACWABAC
    Listed in order of standard deviation from low to high: FCNVX, BUBIX, FGUSX, and PYLMX are all really boring with M* standard deviations from .48 to .73.
  • AndyJ
    edited September 6
    dtconroe said:

    Yep, I am very familiar with DHEAX, having owned it for years. I am also very familiar with SEMMX, also having owned it in the past, but dumped it after its terrible performance in the 2020 crash. I have not looked at it since Medalist took it over

    Just to be clear, I'm not suggesting SEMMX/SEMPX, but the other, investment grade fund for the reasons I mentioned.
  • larryB
    I am in the same situation with tons of CD’s maturing each month. I got spoiled with a decent risk free return that was good enough for us. While it is not particularly low risk DODLX offers experienced management and international diversification.
  • msf
    Lots of good funds mentioned here. We went through this exercise not too long ago. Here's my post from Aug 9 where I suggest PYLMX (mentioned by WABAC in this thread) and BBBIX and RPHIX (mentioned by Chinfist here). I also commented on the apparently ever popular NEAR.

    https://www.mutualfundobserver.com/discuss/discussion/comment/196330/#Comment_196330

    The testfolio comparison of those funds from my post: https://testfol.io/?s=0BFRT0Myjgd

    Many of the funds mentioned in this thread have M* risk scores around 3-5 (out of 100). ICMUX (13) and RCTIX (9) are a little higher as reflected in their std of 3+. Of course the funds with intermediate durations, WCPNX (14), FSEC (16), and DODLX (21) tend to have a bit more risk.

  • yogibearbullyogibearbull
    Several good ultra-ST bond mutual funds have been mentioned. There are also several ETFs - ICSH, JPST, USFR, etc.
  • fundly
    If you are considering an ETF, I like PULS, which has a better overall return vs JPST, ICSH and a M* risk score of 2 out of 100!
  • dtconroe
    fundly said:

    If you are considering an ETF, I like PULS, which has a better overall return vs JPST, ICSH and a M* risk score of 2 out of 100!

    I am not considering ETFs, but some other lurkers or posters may get some benefits from those listings. If you have bond oef ideas, I would be interested.
  • fundly
    @dt. Consider BUBIX which I own. Very low risk 3/100 from M*.
  • dtconroe
    Here are a few other "low risk" bond oefs that I have retained on my M* Watchlists. You should remember that the M* risk numbers, noted by msf, are relative to the category the fund is in:
    DBLSX, short term bond, Risk Score 5
    BSBIX, short term bond, Risk Score 6
    LALDX short term bond, Risk Score 9
    FPFIX, nontraditional, Risk Score 9
    HOSIX, Multisector, Risk Score 10
    RSIIX, High Yield, Risk Score 8
    WDHYX, High Yield, Risk Score 12

    Ultra Short Term Bond funds are in a very low risk category, but I wonder if their total returns will start decreasing and fall below my 4% TR threshold, much like fixed income categories like CDs, due to their high usage of treasuries and investment grade bonds. If you subscribe to the falling interest rate scenarios, then maybe junkier bond oefs will benefit due to their higher correlation to equities. The M* risk numbers largely shadow Standard Deviation scores over past 3 years, but some of the riskier categories have some standout funds that handled risk much better than others.

  • yogibearbullyogibearbull
    Very old Morningstar risk scores were within the categories and were quite confusing to use.

    Morningstar has been tweaking its stats.

    Its current MPRS risk scoring system is no longer relative to the categories. It's an absolute scoring system that can be used to assess different asset classes as well as multi-asset funds. Of course, each Morningstar category would have typical MPRS ranges. This is also why MPRS results are quite similar to much simpler SD based risk systems.

    https://pdfhost.io/v/E..d~yHtX_MStar_MPRS_102024
  • msf
    I'm not a big fan of ETFs, feeling that they have as many downsides as upsides. Still, trading high volume ultrashort ETFs seems to be much easier than trading most ETFs. Narrow spreads (a point or two) and good intraday price stability. So even market orders can get you fair prices. Just in case that is a concern of yours (it is for me).

    A reason one might want to consider ETFs is that they open up a wider range of fund types. IG floating rate funds like FLOT and FLRN. (OEF floating rate funds are typically below IG.) AAA CLOs (I'm still on the fence with these and want to see how they react if/when the Fed drops rates) like PAAA.

    Still thinking about what could replace CDs, you might also consider fixed annuities. They yield more than CDs. So they're reasonable substitutes in IRAs even though you don't get "extra" tax sheltering with them.

    As yogi posted, TIAA's IRA annuity is currently yielding 4.0% and is liquid.

    If you're looking to lock in rates for a few years, fixed rate annuities can get you rates north of 4% for 3+ years. See, e.g. Fidelity's rates. Fidelity sticks with sold rated issuers. You can get better rates by looking at less sound issuers, but that's taking on more risk.

    Here are Schwab's rates. The first set of offerings, from Midland National, are somewhat higher. But Midland National is rated only A+ by all the ratings agencies, vs AA range or better for the other insurers.

    The major downside of these fixed annuities is that you're locking in the investment for a period of years (3+ with Fidelity's offerings). Onerous penalties to get out early.
  • msf
    Very old Morningstar risk scores were within the categories and were quite confusing to use.

    Like star ratings, risk ratings are subject to distortion with funds that are difficult to classify.
  • FD1000
    edited September 7
    DT:I am now considering adding some very low risk bond oefs
    No fund achieved lower loss than 1.5% in 2020 + 2022 + performance over 4% since
    1/1/2020.
    Even RPHIX lost more than 3% in Q1/2020.

    Since 2023, I no longer hold more volatile funds for months. Only short term for 1-2 weeks trades. Think ICMUX,PIMIX,RCTIX.
    I have been holding funds with low SD with good performance.
    Of course, I add timing and always near the exit.

    Since early 2023 bond OEFS had one of the best performances for 2 years; several had very low SD and made 20% in 2 years. Think HOSIX, CLOZ which I held for many months.
    ICMUX made more than HOSIX in these 2 years by 1%, but I preferred HOSIX.
    chart (https://schrts.co/pMytFkvN)

    2025 proved again that volatility can show up any time. The only way was to be out.
    Since mid-April bond OEFs did great.

    Bottom line: there are no funds with very low SD (under 1-1.5% loss any time) with good LT results that you can hold for years.

    But, bond OEFs should perform well in the next 1-1.5 years.
    So, looking at the last 3 years...
    HOSIX would be a good choice with dist close to 6%. The manager, whom I spoke with, is about low SD.
    SEMIX/SEMRX and DHEAX are also good and similar. SEMIX has lower SD per the chart.
    Chart (https://schrts.co/CuANzpzj)
    BUBIX looks good, but I prefer funds that can make 1-2, maybe 3% more annually.
    Just YTD, the 3 funds I mentioned lost about 0.5%, but are 1-2% ahead of BUBIX.
    Someone who is very risk averse and holds mostly bonds, would love to make another 2% more annually.

    Disclaimer: currently, I don't own any of the funds above.
  • yogibearbullyogibearbull
    OP had a limited question. But posters have included broader solutions that may benefit general readers.

    TIAA product that @msf mentioned is available only in TIAA plans and TIAA IRAs (recently made accessible to most). You will need an account at TIAA.

    However, those inclined to go the annuity route may look at MYGAs - multi-year guaranteed annuities. Beware that once in an annuity, there are limited exists before 59.5 - not a limitation for older retirees. Insurance companies can offer better rates than CDs because the annuity money is almost captive, long-term money. Of course, 1035 exchanges are possible to other annuity providers on maturity or after the surrender periods expire.

    https://www.annuityadvantage.com/annuity-rates-quotes/multi-year-guarantee-annuities/?sort=guarantee_period_yield&limit=20
  • FD1000
    Fidelity has a free fund screener.
    I looked for all bond fund (risk tab) + sorted by Sharpe ratio(risk/reward) + SD<2.
    See this (<a href="https://fundresearch.fidelity.com/fund-screener/results/table/risk/sharpeRatio3Yr/desc/1?assetClass=TBND&amp;category=BL,CI,CL,CS,EB,GI,GL,GS,HY,IB,IP,MU,NT,PI,RR,TP,TW,UB,WH,XF,XP&amp;order=assetClass,category,standardDeviation&amp;standardDeviation=LS,2">link)

    Then I switch to the overview tab, see (link).
    To see 1,3,5 year performance.
    The best funds for 3 years are
    HOSIX leads the pack by a wide margin with Sharpe>3 and SD=1.28 and 3 years average of 9.1%. $49.95 fee at Schwab
    LCTRX is great too. NTF at Schwab
    CBLDX, SEMIX, SCFZX, DHEAX

    The best for one year
    HOSIX+DHEAX

    For YTD
    DHEAX, CBLDX, HOSIX
  • dtconroe
    edited September 8
    HOSIX, DHEAX, CBLDX, and maybe DBLSX, look pretty good. LCTRX is interesting--I need to spend some time looking at this fund.
  • WABACWABAC
    Perplexity AI does a nice job of scraping the web for opinions on the risk of securitized credit in a recession. I also prefer the look, writing style, and placement of links to sources to other AI's I have tried. YMMV.

    https://www.perplexity.ai/search/what-is-the-risk-of-securitize-3MH3N5ljRee2I4BZmJhKmw

    Something to keep in mind when evaluating bond funds.

    I tested the link to make sure it works; but I don't know how long it will work.

    For comparison, if they work that is:
    https://copilot.microsoft.com/chats/Bqn2Du6dRa2y1gfr4hV2f
    https://gemini.google.com/app/933349ea80bfb854
  • DrVenture
    My question, at this point in time, is whether "low risk" is a good choice with rate cuts on the near horizon? And with inflation around 3%, possibly going higher. I do realize that that is not the OPs question. But, wonder what various posters are thinking in this regard.
  • larryB
    And what low risk are we talking about? Interest rate risk? Sorta a function of duration. Or default risk? Sorta a function of quality of the bonds and the broader business climate. If one defined low risk as short duration and high quality that would lead to a short term treasury and or high investment grade fund no? I see suggestions of funds with higher yields and generally higher yields come with higher risk.
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