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Author: alwayspl Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35344  
Subject: bond vs bond fund vs mmf Date: 8/30/2006 2:50 PM
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Is it better to buy a bond fund or buy the actual bond for the conservative part of my rollover IRA. The money market rate with my broker is currently 4.45. Would it be better to ignore bonds altogether and just leave the money in the money market fund.
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Author: jrr7 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18066 of 35344
Subject: Re: bond vs bond fund vs mmf Date: 8/30/2006 4:25 PM
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Is it better to buy a bond fund or buy the actual bond for the conservative part of my rollover IRA. The money market rate with my broker is currently 4.45.

You haven't told us anything about your needs or what you define as "conservative". What is the purpose for the money? When will you need it? What will you do with the intermediate cashflows?

There are money market funds paying a bit more than 5% -- see www.imoneynet.com

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Author: Crosenfield Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18070 of 35344
Subject: Re: bond vs bond fund vs mmf Date: 8/30/2006 6:50 PM
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Bonds mature. Most bond funds do not.
Corporate and treasury bonds are usually issued in denominations of $1000. Municiple bonds are issued in denominations of $5000.
If you don't have enough money for a bond,I'd stick with the money market. When beginning a bond portfolio, start with excellent quality.
I'm prejudiced and opinionated, but I'd consider a bond fund only if I wanted to add to my portfolio some bonds I couldn't buy individually. Examples might be foreign bonds, or junk bonds. If you have $5000 in bonds and one defaults, that is a major blow to your portfolio. If you have $500,000 in bonds and one defaults it is probably not that big a deal. A treasury bond fund? Why? Buy the individual treasury assuming you have at least $1000 to invest, and get it at auction through Treasury Direct.
If you have a fund, there will be annual expenses and an annual 1099. If you have a bond, there will be an annual 1099, but no expenses. You own it until it matures.
Best wishes, Chris

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18071 of 35344
Subject: Re: bond vs bond fund vs mmf Date: 8/30/2006 8:48 PM
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One of the big advantages of Traditional IRAs over 401 ks and the like is you have pretty much a free hand when it comes to options. You may need to use different institutions as your custodians to optimize the options (which means making sure you choose brokerages and banks that don't charge to dump them), but as long as you can come up with capital in units of $1000 (sometimes $500 for CDs), you should be able to build a good ladder of bonds and CDs that will get you all the liquidity you will need without the interest rate risk worries of bond funds. Without enough capital, commissions of bonds bought not at auction can make them too expensive, but CDs and Treasuries at auction are easy and cheap, and the only time the added yield from corporates makes sense through a fund, if you can't do it yourself, is when interest rates are sky high, which they aren't and there is no sign they will get there in the near future.

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Author: alwayspl Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18152 of 35344
Subject: Re: bond vs bond fund vs mmf Date: 9/5/2006 2:17 PM
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I am approximately 5 years from retirement. I will start withdrawing income only at that time from my Ira. I plan to put 30% of my rollover ira in bonds or mmf. The dollar amount would be appx 18,000 for bonds or mmf. Intermediate cash flow will stay in the Ira tax deferred. My brokers mmf pays 4.45% and I believe I must use that fund. Thanks for your quick reply and your questions. Any further insight would be greatly appreciated.

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Author: jackcrow Big gold star, 5000 posts Feste Award Nominee! Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18153 of 35344
Subject: Re: bond vs bond fund vs mmf Date: 9/5/2006 2:36 PM
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Once you roll over you have a great deal more freedom all tho they make using other MMF's a pain in the arse and most brokers are competitive or people move thier money.

Find out if you broker charges for buying treasuries. Many of us are rolling over under 6 month treasuries and doing better than most mmf. Staying this short also gives us the flexibility to move into other vehicles if they look more promising. Others are doing the math and figuring out if certain CD's are returning more. There are lots of possibilities.

jack

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Author: Lokicious Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 18155 of 35344
Subject: Re: bond vs bond fund vs mmf Date: 9/5/2006 3:24 PM
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I am approximately 5 years from retirement. I will start withdrawing income only at that time from my Ira. I plan to put 30% of my rollover ira in bonds or mmf. The dollar amount would be appx 18,000 for bonds or mmf. Intermediate cash flow will stay in the Ira tax deferred. My brokers mmf pays 4.45% and I believe I must use that fund. Thanks for your quick reply and your questions. Any further insight would be greatly appreciated.

I'm not clear when you are rolling over money into your IRA.

At any rate, the big advantage of IRAs over 401(k)s and the like is the broker is your choice, and you can have parts of your total IRA with different "custodians" (banks, credit unions, brokerages). This means, for your bonds/fixed-income allocation, you can use one or more custodians that will let you build a ladder or bonds and/or CDs—it doesn't need to be your current broker, if they don't have the right options (such as free Treasury auction bidding or high yield CDs). For example, you could open an IRA with the Pentagon Federal Credit Union and start your ladder with 3,4,5 year CDs earning 6% APY, at the moment. If you like your current broker for some other reason (e.g., cheap stock trades), you can use it for that and still have your fixed-income allocation elsewhere. It does make rebalancing across stocks and bonds harder.

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