hello Fools!My DH and I have just started investing wisely (or Foolishly) in 2002. everyone always says to diversify, diversify, diversify.. so here i am trying to make sure that we are diversified enough.Current situation:1. I want to start off with about $2,000 - $3,000.2. My objective is more short to mid-term (from 1 year to 5 years maximum)My questions are:1. What bonds can we get into? - on the short term (1 year) and on the mid term (3-5 year period)2. Is it a good time to get into bonds right now?my questions are kinda vague, because i've just really started researching on bonds right now and have absolutely no idea where to begin. thanks!
teevan...my questions are kinda vague, because i've just really started researching on bonds right now and have absolutely no idea where to begin.I'm not anything close to a bond expert - all I can do is guide you towards a couple of sites that might answer some of your questions:http://www.investinginbonds.com/http://www.nofeeboards.com/docs/bondsfaq.htmhttp://www.fool.com/school/basics/basics05.htmThere are many on this board, however, that can probably give you the guidance you are looking for.Good luck,Bill
First time investor, $2000-3000. I'd have you visit www.treasurydirect.gov. This is the direct to the consumer,treasury bond site. You would be loaning money to the US government. They aren't paying much, but it is money, and it lets you see how the system works. Start with perhaps a one-year treasury bill, or perhaps a 5-year note. The bill is sold at a discount and redeemed at face. If you buy a note, they pay interest directly into your bank account every six months. There is no broker involved and no trading costs. The bond will not default unless the government goes belly up, in which case your other investments wouldn't be worth much,either. You can buy in increments of $1000. Currently interest rates are low, and at some point they will rise. Therefore I would have nothing to do with a bond fund right now. Get a BOND, not a fund, and hold to maturity. Therefore you don't want a long maturity. While it is earning some interest, you can be studying. Later you may want to get some municipal bonds, issued by your state or community--those are in increments of $5000 so you aren't yet in the market for them. Or perhaps a corporate bond. As long as you get a BONDd and hold it to maturity, you will get your money back with some interest. If you get a bond fund, you well may not get your money back as interest rates rise. Best wishes, Chris and welcome to the board!
Hello:While I am not expert either, I know enough to know we need more info. :-)1. Will this be a taxable account?2. 1-5 is a broad range. Do you havwe a specific goal for the money? (is it important to have the principle there at the end).3. If this is for diversity, why the 1-5 year window?Splotto
"Current situation:1. I want to start off with about $2,000 - $3,000.2. My objective is more short to mid-term (from 1 year to 5 years maximum)My questions are:1. What bonds can we get into? - on the short term (1 year) and on the mid term (3-5 year period)2. Is it a good time to get into bonds right now?"You really don't provide enough information to offer much help.A couple of general points:1) You need to think of "fixed-income" investments as a broader category than "bonds"—including CDs, US Savings Bonds, and Money Markets. Tradeable bonds (and the bond funds that hold them), which is what Wall Street means by bonds (since trading is how Wall Street makes money) have some advantages over the other, stable, predictable, fixed-income options much of the time, but probably not when interest rates are low. The advantages are: a) in a falling interest rate environment, you can sell tradeable bonds (or bond fund shares) for a capital gain, for example rebalancing between a stock fund and a bond fund;b) you can get tradeable Treasury bonds for longer maturities that pay higher yields (interest) than shorter maturities and you can buy corporate bonds that pay higher yields than Treasuries, both of which usually get you more interest than CDs or US Savings Bonds or Money Markets.The disadvantages are:a) if you own tradeable bonds (or bond funds) they are worth less if interest rates go up, so your capital loss will offset the interest you are getting from the bond—if you don't sell the bond, you won't lose money on it, but you will be locked into whatever interest rate it is paying until it matures; unfortunately, with a bond fund, fund shares lose value if interest rates go up, whether or not you sell shares.b) corporate bonds may default, so it is dangerous to buy bonds in a small number of companies, which is why bond funds would be a better choice for those with limited amounts of money to invest, except bond funds lose value if interest rates go up.2) With a short time frame, investing in anything with a fluctuating asset value (stocks, stock funds, bonds, bond funds, etc.) is risky. When we talk about diversifying, we're talking about long-term investing, for retirement or other plans at least 10 years out. For shorter term, you need something where you are guaranteed to get your principle back, which means accepting very low returns in exchange for safety. The best choices depend on whether you mean 1 year or 5 years. You could buy a couple of tradeable Treasury bonds or high investment grade corporates for your money, but I don't see the point, since you can get a better yield on an insured CD for the same maturity for a lot less hassle, or if you need more liquidity than a CD, you could use an EE or I-bond, as long as you don't cash in before 1-year and recognize youu will lose 3 months interest if you cash in before 5 years.
As long as you get a BONDd and hold it to maturity, you will get your money back with some interest. At least in nominal terms :-I
Congratulations, SuisseBear. Cyber Antlers don't get celebrated very much on this board, but you sure got 'em. 10000 no less!!Many happy returns. Let the celebrations begin.
10000 no less!!Hey, I wondered whether anybody would actually notice my stealth grub ;-)Seriously though, isn't that a sign. Here we are, almost five years into the Fool's primary board on arguably the most important asset class, and yet a mere 10k of posts only. Nevertheless, we're enjoying the presence of many unassuming quality posters (me not included <gg>) and the absence (by and large) of any hype whatsoever.So, the congratulations are entirely due to you guys!!SB(dangerously close to breaking de-facto board rules by using a second exclamation mark)
Actually, I'm poster no. 8. I originally requested the board, and it took a while to get it established. Now we do have quite a few quality posters, more knowledgeable than I, and that is great.In those days, bonds and fixed incomes were almost taboo in Fooldom. It was the midst of the tech rally and equities were the name of the game. Bonds have become more popular now. They are not just for seniors anymore.
I would leave the money in a savings account until you read up and form some opinions. Then I would think about what my investment objectives were, and start rooting around for investment instruments that best match those objectives. If you still find that CDs are the thing you want, I find that there are plenty of financial institutions offering CDs that pay far more than treasuries or investment grade corporates, while still being FDIC insured.
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