I can't add anything myself as my retirement funds/investments are crappy. It seems right now is a bad time for short term investments.

I don't consider companies like Exxon, Johnson & Johnson, Procter and Gamble, Colgate Palmolive, Abbvie "playing with stocks", but then I'm 63 and have been into it a while. Truly, you could do very well with just a bit of time invested.

I mention these because of their dividends, well north of what you're seeking and their ongoing dividend growth.

Yesterday, I bought treasury bonds that will mature in March with a coupon rate of 1.5%. Since I paid 99.683, the yield to maturity will be 1.71% which is better than any CDs I could find.

quote:

Originally posted by trapper189:
Yesterday, I bought treasury bonds that will mature in March with a coupon rate of 1.5%. Since I paid 99.683, the yield to maturity will be 1.71% which is better than any CDs I could find.

For comparison, if you had bought Series I Treasury Bonds (the I Bonds I've been discussing), they would be redeemable in April, and even with the 3 month interest penalty for redeeming them before 5 years you'd still earn 5.34%. Or more, since their variable interest rate is going up again next month.

That's over 3x what these other Treasury bonds will have earned at 1.71%.

I think it depends on your intended purpose for this money and what part it plays in your overall finances. And, I guess, the two are interrelated.

I'll just focus on the intended purpose.

The I Bond previously mentioned is a good compromise.

If you're going for inflation protection during this time, I don't think you can go wrong with gold as William Devane offers.

If you're looking for income, then consider one of the many different annuity flavors but just keep it as simple as you can get with the minimum of riders and those riders cost you.

My two recommendations are just focused on your intended purpose and just assumes they will fit in your overall finances.

Money Market funds are currently yielding about .2 percent and will go up as the fed rasises interest rates which is expected to take about two years I believe most are predicting.

If you can accept some risk ultra short bond funds may be worth a look. The ones (fund and ETF) from Vanguard are down about 1 percent which is not much considering what has happened to other bond funds but the divident rate has also gone up about 1.25 percent. I bought some VUSB a couple days ago because to me the reward versus risk looked worthwhile. Current yield is 1.75 percent.

https://investor.vanguard.com/...ile/performance/vusb

https://investor.vanguard.com/...ss/month-end-returns

quote:

For comparison, if you had bought Series I Treasury Bonds (the I Bonds I've been discussing), they would be redeemable in April, and even with the 3 month interest penalty for redeeming them before 5 years you'd still earn 5.34%. Or more, since their variable interest rate is going up again next month.

^^^^^^^^^^^^^^
Clunky is an understatement. I deal with accounts all the time and this website is Government Stupid. If they want any business borrow some folks from Amazon who know how to make things easy.

Yeah, it's pretty bad. TreasuryDirect hasn't really been updated since 2002.

They've reportedly started working on an update, but who knows when that will roll out.

^^^^^^^^^^^^^^^^
I got it figured out. Yeah I bet SLO Joe boys will have it completed in four of five years. Thanks BTW I am ipressed with your knowledge base from investments to World War Two history.

You used to be able to purchase paper I Bonds through your bank, but that option went away in 2012.

Now your only options are to get electronic I Bonds through the terrible TreasuryDirect.gov website, or get your IRS tax refund issued as paper I Bonds that they mail to you.

quote:

Originally posted by RogueJSK:
For comparison, if you had bought Series I Treasury Bonds (the I Bonds I've been discussing), they would be redeemable in April, and even with the 3 month interest penalty for redeeming them before 5 years you'd still earn 5.34%. Or more, since their variable interest rate is going up again next month.

That's over 3x what these other Treasury bonds will have earned at 1.71%.

Assuming I hadn’t bought or won’t be buying the Series I. I’m still reading up on it. It says the combined interest rate will never go below zero, but it seems there’s no reason the fixed rate can’t go below zero, which it’s at right now, thus lowering the combined rate below the inflation rate.

quote:

Originally posted by trapper189:
It says the combined interest rate will never go below zero, but it seems there’s no reason the fixed rate can’t go below zero, which it’s at right now, thus lowering the combined rate below the inflation rate.

The current fixed rate is 0%. The current variable rate is 3.56% for 6 months (7.12% annual).

Neither rate can ever go below 0%. You won't ever lose money, even in a deflationary period.

Besides, the fixed rate is locked in when you purchase the bonds. So bonds purchased right now will always have a fixed rate of 0%, even as the variable rate goes up and down with the current inflation rate. So even if the fixed rate on I Bonds could go into the negative at some point in the future (which it can't), the fixed rate portion on I Bonds bought today will never change from 0%. That's why it's "fixed".

I missed that when I read about them last night. The combined rate can go to zero, but the fixed rate is fixed at the time of purchase and never changes. The other issue I have with them is losing three months worth of interest if you cash out before holding them for at least five years. The bonds I bought yesterday were a place to park some cash I don’t need right now, but could be useful in a year. Not to worry, I still have a little cash I can throw at the Series I Bond.

The website is a blast from the past. It’s just one step up from a BBS.

Yeah, the 3 month penalty can be disappointing. But as I pointed out above, even factoring in that penalty, it still handily outperforms any other current options for risk-free 1 year returns. It's just best if you can hold them for 5+ years.

But here's the fun part... Let's say you buy some I Bonds today with a fixed rate of 0% and a good variable rate due to the current high inflation. Then let's say at some point within the next 5 years the rampant inflation gets completely under control, and we drop to a 0% inflation or even a negative inflation deflationary period. (Unlikely, but this is a hypothetical example.)

As a result of the zero/negative inflation, your I Bonds then begin earning 0%... 0% fixed + 0% variable rate. What do you do? Well, you hold them for 3 more months, then redeem them, and invest the money in something else that's performing better. Because you redeemed them before 5 years, you lose out on the last 3 months of interest. But they've been earning 0% for the last 3 months. So you've lost nothing, other than the opportunity cost of not being able to reinvest that money for those 3 months they were earning 0%. Penalty-free redemption.

And if you've held them for at least 5 years by the time they start underperforming, you just cash them out right away when they drop and reinvest the money in something that is performing better at that point, still with no penalty.

The other good thing is that you buy the last day of the month and earn interest from the first. Interest is paid the first of the month.

Yep. And you can redeem them at the start of the month at the 1 year mark. So you can basically earn 12 months of interest in 11 months and a day. (Well, 9 months of interest with the penalty, if you cash out at 1 year.)

Also, the current variable rate is guaranteed for 6 months. So an I Bond bought today will earn 3.56% for the next 6 straight months, regardless of what the rate changes to in May. Then will earn the new May rate for 6 solid months next. So you are always guaranteed 6 months of the variable rate at a time, regardless of when you bought them during that rate period.

Yes. I only wish I could buy them in a brokerage account which would be less hassle. I can live with a Govt. website. Will purchase some after I see how big my tax liability will be.

RogueJSK has it correct above. It's (I-Bond) a good alternative. I've personally invested in the I-Bond even though the Treasury Direct site sucks.

In my case, I also invest in a few dividend paying stocks like Philip Morris International (PM-paying ~5%)) and British Tobacco (BTI-paying ~7%) knowing the world will continue to smoke like chimneys and pay me a good dividend rate while doing it. I also believe the US will continue to need and use gas during what left of my lifetime: Chevron (CVX-paying~3.4%). As you can see, I have no shame.

You can loose money in Stocks as well. I'm down about $7k in an ETF called ARKK. I expect ARKK wont recover until after 2023 in order for me to break even on that investment.

quote:

Originally posted by 2PAK:
In my case, I also invest in a few dividend paying stocks

You can loose money in Stocks as well.

I Bonds are not intended as a replacement for stock investment, especially for those who have a long investment horizon (decades). I Bonds still underperform the average performance of the stock market in the long run.

However, unlike stocks, I Bonds are zero risk. So there's a place for them, especially amongst those who are risk-adverse, such as those already in retirement. And they can be a nice supplement for stock investments during periods like we're currently experiencing, with high inflation (and therefore high variable I Bond rates) but a great deal of fluctuation/uncertainty in the stock market.

And currently, they're certainly a better investment than any other zero risk investment, like a savings account or CD.

No risk and high return does not exist...

Three fund strategy is the antithesis of proper diversification based on your risk tolerance. It is marginally successful in the accumulation phase of assets, but a travesty when it comes to providing income.

I believe Bald1's question was what to do with cash that will produce a better return than a savings account. The practical answer is nothing.

In reality, don't keep any more cash on hand than you need for your emergency fund and your spending needs. Those are what cash are for. If you have more cash than needed for those two items, you need to chose a great diversified portfolio. If you don't know, don't care to know, or don't have time to know how to do it, find a CFP and pay someone to do it for you. the cost of professional management is worth it, that is why there are over 9,000 mutual funds in the marketplace.