Personal Finance and Investing

Last edited Thu Jan 9, 2025, 12:42 PM - Edit history (2)

First, I said a high 4's return, not 4% return. As for high fees, VMFXX's expense ratio is 0.11%, while SPAXX's is 0.42%, and no bank or advisor fees on top of that. (I'll admit I'm a little disappointed by the 0.42%, I made a note to do something about that).

Since only my best intermediate term bond funds are doing about the same in current yield (high 4's), I've been OK with _some_ in money market for my fixed income portion of my allocation.

For those fearing interest rates rising - a very reasonable concern -- money market funds and other short-maturity funds would be a better idea than intermediate term or longer-term bond funds. Treasury yields beyond 1 year maturity have been rising sharply since early fall.

1 year is about breakeven https://www.cnbc.com/quotes/US1Y
above one year, they are all way higher than their September 19 levels when the first rate cut occurred...
2Y https://www.cnbc.com/quotes/US2Y
5Y https://www.cnbc.com/quotes/US5Y
10Y https://www.cnbc.com/quotes/US10Y
30Y https://www.cnbc.com/quotes/US30Y

Despite Fed rate cuts Sept 19 (-0.50%), Nov 9 (-0.25%), Dec 19 (-0.25%)

My overall fixed income -- mostly in intermediate-term bond funds -- has had total returns well below inflation since from just before the pandemic, the last time I looked at a couple or three sample funds. I certainly would be most interested to hear of any bond funds that have come close to matching inflation in total return, let alone beating it, since 2019, except perhaps some ultra-short-term ones.

I don't advocate now selling equities and getting more money market funds (or bond funds either), except to get back closer to my long-term target allocation, which I mostly did in October to rebalance closer to my target allocation. (Actually, I still have a ways to go to get within my target allocation, but have been held back by my best choices for doing that would, unfortunately involve capital gains tax, so I'll have to sell some equity(ies) in my IRA account where capital gains taxes isn't an issue. And use the proceeds to buy something fixed income in the IRA; I certainly wouldn't be withdrawing anything from an IRA as I'm well aware that would be a taxable event )

I'm fully well aware of the superiority of equities (like averaging close to 10%/year in total returns which means doubling about every 7 years on average)

More generally, I don't think timing the market is a "fools errand" - I'm kind of a buy-on-the-dips kind of person (speaking of broad indexes and I usually wait til its down 20 or 30% before I go off-allocation to overweight equities). Historically, anybody that has done that in the U.S. has gained every time. Personally, I think anyone who passes up these buying opportunities (called buying equities when they are on sale) is being foolish.

Also, many advise bucket strategies e.g. having some money in historically less volatile fixed income, so when the market is down, and one needs to make withdrawals for living expenses or other needs, one is advised to withdraw from the fixed income rather than selling equities at low values. That is a form of market timing that doesn't sound foolish to me.