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Author: AEnriquez One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76078  
Subject: Treasuries vs Vanguard short & mid T. bond lndex Date: 2/21/2001 10:38 PM
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Fellow Fools
Regarding the retiree porfolio, I have a question, What is the most cost efective way to invest the "Income Cushion",treasuries or short and mid term bonds Vangaurd Index Funds?
If the answer is Treasuries, what is the easies and less expensive way to buy them?
Thanks
A Fool getting ready to change his way a leaving.
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Author: jbking Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28036 of 76078
Subject: Re: Treasuries vs Vanguard short & mid T. bond l Date: 2/22/2001 2:37 AM
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Well, if you plan on having less then $100,000 in Treasuries, then I would suggest Treasury Direct:
http://www.treasurydirect.gov/sec/sectdfee.htm

Bond funds have the issue of not necessary getting into the principal while if you hold a bond ladder of Treasuries it can be easy to let a bond mature and move it into your MMF if your stocks go down. Also, remember that bond funds could dole out capital gains and may not be as stable as holding Treasuries to maturity.

Just my rant on this,
JB

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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: 28041 of 76078
Subject: Re: Treasuries vs Vanguard short & mid T. bond l Date: 2/22/2001 9:06 AM
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What is the most cost efective way to invest the "Income Cushion",treasuries or short and mid term bonds Vangaurd Index Funds?

What do you mean by "cost-effective"? Do you mean "having the potential to earn you the most interest" or "being guaranteed to be there when I need it"?

If the latter, then NEITHER of your choices fit. Selling or redeeming a bond before maturity may possibly give you less than you started out with. And bond mutual funds never mature.

As someone else mentioned, a ladder of treasuries maturing every few months is one way to do it, but then you have to put up with not being able to get all your money out at once if need be.

The only way to have complete control of your money is to put it in a money market at a bank or mutual fund.


[P.S. Most people around here refer to the "income cushion" as the "emergency fund".]

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Author: AEnriquez One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28259 of 76078
Subject: Re: Treasuries vs Vanguard short & mid T. bond l Date: 3/4/2001 8:29 PM
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Thanks, fellow Fools
After I read your answers, I believe some clarifiacation is required.

As far as "Income cushion", I meant the money that we need to live for 5 years, the amount needed for three to five years usually invested in bonds and the money needed for the first three invested in MM.

As far as "cost effective", I meant the benefits of tax free income (treasuries) versus the low costs bond funds (Vanguard).


Back to my original question, for the money that we will need in three to five. What vehicle of investment is more practical (as far as total returns is concern) treasuries or bond funds?


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Author: DHatch Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 28278 of 76078
Subject: Re: Treasuries vs Vanguard short & mid T. bond l Date: 3/5/2001 4:40 PM
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AEnriquez Date: 3/4/01 8:29 PM Number: 28259
------------------------------------------------------

<<<<Fellow Fools
Regarding the retiree porfolio, I have a question, What is the most cost efective way to invest the "Income Cushion",treasuries or short and mid term bonds Vangaurd Index Funds?
If the answer is Treasuries, what is the easies and less expensive way to buy them?
>>>>

Regarding the retiree portfolio, please be advised that The Motley Fool Model Retiree Portfolios were always about the most deceptively dangerous, blindly stupid, and totally inappropriate misapplications of misleading ideas ever to come down the pike and were originally proposed by a most persuasive, however overly enthusiastic, TMFr who has apparently recanted his original ill-thought-out concepts.

<<Thanks, fellow Fools
After I read your answers, I believe some clarifiacation is required.
>>

Indeed so!

<<As far as "Income cushion", I meant the money that we need to live for 5 years, the amount needed for three to five years usually invested in bonds and the money needed for the first three invested in MM.>>

The money that you need to live for five years may be held in a money market account/fund or in a combination of money market accounts/funds and laddered certificates of deposit or laddered treasuries.

Admittedly, one might conceiveably hold some specific individually well-rated bonds with relatively near dates of maturity, however I suspect that the transactional costs involved would not make it very cost effective for the average individual.

In general, the money that you need to live for five years should almost never be held in the form of stock or stock funds, nor in the form of bonds or bond funds.

Many conservative investors in their later years prefer to have relatively readily available money which should last them for more than five years and seven years or ten years are not believed to be unreasonable periods.

In addition, one should maintain some reasonable and readily available relatively liquid emergency fund in cash or near cash at short term interest, so that your total retirement plan need not be thrown completely out of whack at the wrong time by an occasional emergency.

You need to do a bit of study and serious thinking about where to put the rest of your funds and, until you find a better idea, you might give serious consideration to a simple and workable combination of a bit of DIA (Dow 30), SPY (S&P 500), and QQQ (Nasdaq 100), along with quite a bit of cash at short term interest, all rebalanced periodically. If you do not fully grasp the foregoing, LEARN and FIND OUT what is happening.

Remember, the name of the game is SURVIVAL!

Beware not to become overly distracted from basic goals by mere mechanical details.

It's your money, and you are the one who will experience the joy, rapture, and delight of success or the sorrow, degradation, and misery of failure.

Sincerely,

DHatch

P.S. Yes, I have been around a bit longer than you, and I may have seen more brilliant ideas fail, however I am still around and, so far, I have survived.

You might enjoy going to and reading the now somewhat timely post #13944 on the old Foolish Four board.



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