No. of Recommendations: 1
But it is true as soon as the first one matures, then you are stuck with the IR of the day when you re-purchase, whereas the fund can rearrange anytime. I think that is what was meant.

The arithmetic is simple. Yes, when you have to roll over a CD at a lower rate than before, you will have a lower yield than the bond fund may have at the later date. But the total return on the bond fund will be lower. Bond funds may work if you never need to sell the shares. If you do, you are subject to interest rate risk, which is a technical term relating to value of shares relative to changes in interest rates. Reinvestment risk is something else.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.