Again, you have to pick and choose your bonds.
My Fidelity portfolio is about 40% bonds. My average yield-to-maturity is right at 5.5%. Best MM fund at Fidelity is right now paying 4.11%.
I’d consider that a significant premium and worth the risk, but YMMV.
Which risk?
If you own a 5 or 10 year bond that pays 4%, you know it’ll pay 4% until then. If you have a MM account that pays 4%, you know it’ll pay 4% until tomorrow when it might go down to 2% and stay there for 5 years. Or maybe go up to 6% and stay there for 3 weeks, then settle back down to 4% for 3 years. Or …
Which risk are you taking by owning which and which risk are you avoiding? Bonds and MMs both have interest rate risks. Just different interest rate risks.
I guess I am thinking more about bond funds rather than individual bonds.
An individual bond will redeem at maturity (assuming the issuer is still solvent).
So if you have a longer timeframe, that may make sense.
You will get interest over time, plus the face value back (though in dollars which have almost certainly lost value through inflation).
Whereas a bond fund will fluctuate. So you have to evaluate any bond fund as an investment compared with stocks: is it likely to produce a better return over time, considering total return?
In the current environment, my guess is that bond funds are not a good bet at the moment.
Your Mileagy May Vary… 
Which is essentially the same as a time-deposit (CD), or, for that matter, a savings or money-market account.
FWIW, I have never considered a bond fund a good investment.
Bonds can still default. That’s where the whole “rating” thing comes in, AAA, BBB, junk, etc.
Generally, the higher the yield, the greater the risk of default. Or, better said, the greater the risk of default, the higher a yield that the issuer needs to offer to convince anyone to buy in.
The Fed is legally bound to try and maintain inflation at 2%. Any bond or other instrument that’s paying less than 2% is basically shrinking in value relative to the price of surviving in the world that we live in. At 2%, you’re effectively just padding your money out over time with no gain nor loss (you’re just not losing to inflation).
In general, if you want to get into the higher rates of bond payments, you need to dip into junk bonds. At that point, an ETF makes sense since defaults are much more likely.
OTOH, if you’re okay with a relatively steady return of about 5%, corporate bonds (including BBB rated bonds) offer a fairly low-risk investment.
Capital Adviser’s Group states
the average default rate of BBB issuers since 2009 is just 0.08%, and there have been zero BBB defaults since 2014.
This was the first link that popped up when I Googled ‘BBB default rate’. I haven’t done any further digging.
Me either – and I will almost certainly be dead before the 2035 maturity date of the example I cited. But my investment would be only about 5% of my total net worth and I have about 10% in cash and physical gold & silver as well. I guess my goal here isn’t to get a huge return on my investment, but instead to balance my current very large investments in US stock & bond index funds with gobal investments, since I see the US as heading for fiscal trouble over at least the next decade.
Nope, and you bring up an excellent point about the exchange rate! Thank you!
Well – certainly not when compared with the ROI of stock funds. But the US is, IMO, in uncharted fiscal territory right now, and probably will be for 10+ years. I’ve always been a buy-and-hold investor in low-fee index funds and that strategy has served me well, even through 2000, 2008, and 2020. But Project 2025 is intent on burning existing US government institutions to the ground so they can remake them according to their own perverted “ideals” and monetary policy is one of the arsonists’ prime targets. So I have been diversifying into as many different markets as I can this year.
Fidelity does offer a low-fee New Markets Income Fund (FNMIX, 7% yield YTD) concentrated in Latin America that I am considering as well.
Are any of you all feeling the similar compulsion to diversify? What baskets are getting your eggs?
2009 is when the housing market crashed.
Continuing from the previous:
Default rates for BBBs were slightly higher during the financial crisis, at 1.01% in 2008 and 0.92% in 2009 vs. 0.40% and 0.24%, respectively for A-rated issuers. BBB defaults spiked to 0.91% in 2022, reflecting Russian defaults related to the Ukraine-Russian war.
So they’re 100% during stable times but about only 99 in 100 during rocky times.
I’d say that the 99 in 100 is the more meaningful metric.
You’ve arrived long after the party started.
This entire thread has been about exactly that: how to rearrange our portfolios to survive and maybe even thrive in the trump / project 2025 years.
I know it’s sorta unfun to go back and read 600 posts, and kinda dickish for somebody to say “go read the thread”, but they’re all fairly recent posts and cover several well-informed folks’ opinions on what they’re buying and why.
I think Ai has been keeping the US out of recession for the last 3 years or so, and respected economists are claiming Ai is now too overvalued. Same economists are predicting stagflation caused by tarriffs and reduced immigration, interest rate changes stymied by deficits and tax cuts. I dont see the unbelievably regressive p2025 peoples idea of the “future” helping near or long term. Trump acts unabated by sense (or knowledge) on whims and grievance and revenge.
I’m in money market and a bit in funds of international holdings. I dont want to short anything or buy inverse funds, etc. as some people above have done— too risky for me. I need to see clarity before I can get fully behind US equities, and all I see now is mud.
Yes. I’m repeating myself, but since you asked:
I always kept about 10% in a broad, super safe bond index fund (FTBFX, 5% yield). I’ve upped that to 20%. For the most part my recent moves have been away from my S&P 500 holdings
I added a high yield corporate bond fund for yield (SPHY), paying about 7.5% (although these are junk bonds, the fund focuses on short duration and as someone noted, defaults are actually pretty uncommon)
I was almost 80% S&P 500 going back to when I started working in the late 90s. I’ve moved about 20% of that (so what, 16% of the total?) to a European index fund, VGK. That’s proved so far to be a smart move
I’m holding more cash than I ever have, in a MM. But mostly that’s money I’ve been saving but not deploying, rather than a move away from something else.
About six-eight months ago I moved a smallish amount to VO and VTWO because I felt the S&P 500 was really high, and the smaller caps hadn’t seen the same runup, but that had nothing to do with Trump/risk, and it hasn’t proved to be the greatest move I’ve ever made.
I’m still pretty heavy in the S&P 500 but I just don’t see how the current administration doesn’t put us in recession, and I don’t see how the 40% of revenues for the 500 that come from overseas are NOT hurt by this.
I’m 51 and would like to bow out at 55, but that in part is based on my wife’s assertion that she’ll never quit working.
Give the fellow a break… looking back over a few posts, he seems to be fairly on point, and has at least offered a thought for consideration.
So I’ve had a look at FNMIX.
As I’ve said, with bond ETFs you have to consider total return over time: interest and current price.
For consistency, I like to check the dividend history over many years.
From Yahoo, it looks as if it pays monthly at a rate of about 0.05 per month while the price was around $12. So about 5%.
A check on
seems to be in line. And it seems to be fairly stable over a reasonably long term.
I recommend ADRs or other foreign instruments while the current administration is messing around with the economy.
Besides tariffs, his team has also discussed things like:
Obviously, none of that might come to pass, but it is all worth taking into account.
In general, the expected outcomes of most of the above are radical inflation, with an optional side of dollar devaluation and US government bonds becoming high risk instruments.
Bonds or anything tied to the price of the US dollar would find itself shrinking rapidly against the price of goods. But, likewise, US stocks are likely to perform poorly as well.
While the international markets are liable to take damage from any big hits to America, we would expect them to fall less (which, if you’re competing against other Americans, who are unwilling to invest in foreign stocks, allows you to gain ground even while falling). And, with international bonds, dollar devaluation would be sidestepped as your payments would be tied to the other currency.
And some of our reactions weren’t even in this thread! On a different thread mid February this was mine:
I’m staying in the same allocation of equities but pulled the trigger on moving out of most in the S&P index as my allocation, followed by a mid cap growth fund, and a smaller selection of individual stock picks pulling up the rear. Now I’m in VEIRX (Vanguard Equity Growth Administration Fund) in equal shares with the two other fund choices. It gets classified as large cap value. Compared to the S&P500 index VEIRX total return (dividends reinvested) was 10 year avg 10.73 compared to 13%. But less volatility. When the S&P500 dropped 18% in ‘22 VEIRX was flat, albeit in ‘18 it dropped 5.6 while the S&P500 only dropped 4.4%.
My gold etf is at about 9%. 20 something in various bonds. Those aren’t changes other than that gold has gone up in value so is a larger share. And maybe 6% cash with a planned use coming up (youngest returning to grad school).
Approaching 66. No plans to retire. I enjoy my job; it is what I do for fun. Some X amount tied up as business equity illiquid until the venture capital firm invested in us decides it is time for a next equity “event”.
Sorry, guilty as charged!
Thank you @OldOlds, yes I remember your previous posts now. There have been so many intervening events and so many different recommendations that I’m blanking out.
Check, same here!
I considered the Fidelity equivalent (FCBFX, corporate bond fund), but am trying to get my assets out of the US markets as much as possible – hence the interest in FNMIX. This is probably irrational on my part.
Check again, put about 30% into the Fidelity Europe fund & a couple of international stock index funds.
Check again, plus I made a couple of expensive home improvements that were not essential but desireable, on the theory they would be even more expensive or unavailable in the near future.
So far, the big changes I’ve made haven’t affected my total $ invested much. I’m down about 9% from my 2024 high, but I figured the market at that time was unsustainable anyway.
I hope our similar takes on things are prudent & you are able to retire as planned. I retired at 60 and it’s been great!
We just resumed laddering CDs as a minor part of our portfolio. Decent rates, and if you stagger a few you’ll have access to a chunk of that coin every couple of months (if needed.)