Post by dtconroe on Dec 13, 2023 14:34:53 GMT -5
I am an older investor, 10 years into retirement, so many of my comments are more tied to preservation of assets, instead of accumulation portfolio objectives. Of course I do want reasonable total return, but with lower risk. I am not a trader, so I will not be pushing Bond Oef trading, unless it is with a very low risk fund like RPHIX and similar funds. Here are a few tidbits of investing that may interest a few other investors.
1. I started investing in Brokerage CDs early in 2022 when my bond oefs started tanking with rising interest rate fears. I never owned a Brokerage CD before, so I went through some self learning efforts, but have had several "surprises", with some of those CD investments. Brokerage CDs have issues with the current market value of those CDs, that can start changing immediately, after investing in them. I recall having a lengthy discussion with Schwab Brokerage Reps about the differences between Bank CDs and Brokerage CDs, but they somehow left out information about the varying principal value of Brokerage CDs, after investing in them. One day after investing in several 2-year CDs at Schwab, their "porfolio values" dropped immediately and after 2 years, those portfolio values are still significantly below their original investment value. If you attempt to sell those before maturity, your principal is at risk, so there is very strong motivation to hold them to maturity. I have also had problems with several of those brokerage CDs, paying scheduled interest payments on a timely basis--when they are late, I have to request a brokerage investigation, to determine the cause of the overdue interest payments. They are usually resolved because of issues involving the specific bank holding the CD, and the DTC which actually is an intermediary agency in these settlements. I have also learned with brokerage CDs, that the banks holding the CDs, have no identifying information about the individual investor, and it is next to impossible to directly contact that Bank to gather information about that Banks failure to pay interest on time. So, you are faced with going through Schwab, as the only entity, who actually holds identifying information about you as an investor. For the great majority of CDs, everything goes smoothly with no problems. All this is very messy when something does not go smoothly, even though I always get my interest payments (sometimes past the settlement date on the CD certificate), and I have always got my investment principal on a timely basis at the maturity date. I have, and continue to use brokerage CDs, especially in my tax exempt/tax deferred accounts.
2. Bank CDs are an investment option I used extensively in the early 2000s, but after the market crashes in 2000 and 2008, we started seeing interest rates drop down to zero and the government added stimulus packages that led to a long term bull market for equities, and also led to a boom in bond oefs, especially those in mortgage backed securities and junkier bond assets. I loved Bank CDs when they were popular, great dividends, FDIC protection, and ability to sell them early with minimal penalities. They finally came back into popularity after the 2022 meltdown when interest rates started rising. Bank CDs are again very popular, and I personally have started using them more, as an alternative to Brokerage CDs, in my Schwab taxable account.
3. My personal portfolio objectives have changed as I get older. Before retirement, I was focusing on accumulation and total return objectives. As I got closer to retirement, my portfolio objectives started moving into balanced/allocation funds, with a heavy fixed income component. PIMIX was one of my favorite funds for years--loved those dependable monthly dividends with great total return. For most of my retirement years, I used a wide array of bond oefs, with an emphasis on low risk, dividends, and attractive income streams. I was predominantly a "buy and hold" investor, although I attempted to be more of a trader before the 2022 crash, but I was not a good trader. I maintain numerous watchlists of bond oefs, in a large number of categories. However, as long as I can get CDs, paying 5%+, I will continue to emphasize CDs as a very low risk option. I also will continue to use MMs significantly, especially for liquidity objectives in my various accounts.
1. I started investing in Brokerage CDs early in 2022 when my bond oefs started tanking with rising interest rate fears. I never owned a Brokerage CD before, so I went through some self learning efforts, but have had several "surprises", with some of those CD investments. Brokerage CDs have issues with the current market value of those CDs, that can start changing immediately, after investing in them. I recall having a lengthy discussion with Schwab Brokerage Reps about the differences between Bank CDs and Brokerage CDs, but they somehow left out information about the varying principal value of Brokerage CDs, after investing in them. One day after investing in several 2-year CDs at Schwab, their "porfolio values" dropped immediately and after 2 years, those portfolio values are still significantly below their original investment value. If you attempt to sell those before maturity, your principal is at risk, so there is very strong motivation to hold them to maturity. I have also had problems with several of those brokerage CDs, paying scheduled interest payments on a timely basis--when they are late, I have to request a brokerage investigation, to determine the cause of the overdue interest payments. They are usually resolved because of issues involving the specific bank holding the CD, and the DTC which actually is an intermediary agency in these settlements. I have also learned with brokerage CDs, that the banks holding the CDs, have no identifying information about the individual investor, and it is next to impossible to directly contact that Bank to gather information about that Banks failure to pay interest on time. So, you are faced with going through Schwab, as the only entity, who actually holds identifying information about you as an investor. For the great majority of CDs, everything goes smoothly with no problems. All this is very messy when something does not go smoothly, even though I always get my interest payments (sometimes past the settlement date on the CD certificate), and I have always got my investment principal on a timely basis at the maturity date. I have, and continue to use brokerage CDs, especially in my tax exempt/tax deferred accounts.
2. Bank CDs are an investment option I used extensively in the early 2000s, but after the market crashes in 2000 and 2008, we started seeing interest rates drop down to zero and the government added stimulus packages that led to a long term bull market for equities, and also led to a boom in bond oefs, especially those in mortgage backed securities and junkier bond assets. I loved Bank CDs when they were popular, great dividends, FDIC protection, and ability to sell them early with minimal penalities. They finally came back into popularity after the 2022 meltdown when interest rates started rising. Bank CDs are again very popular, and I personally have started using them more, as an alternative to Brokerage CDs, in my Schwab taxable account.
3. My personal portfolio objectives have changed as I get older. Before retirement, I was focusing on accumulation and total return objectives. As I got closer to retirement, my portfolio objectives started moving into balanced/allocation funds, with a heavy fixed income component. PIMIX was one of my favorite funds for years--loved those dependable monthly dividends with great total return. For most of my retirement years, I used a wide array of bond oefs, with an emphasis on low risk, dividends, and attractive income streams. I was predominantly a "buy and hold" investor, although I attempted to be more of a trader before the 2022 crash, but I was not a good trader. I maintain numerous watchlists of bond oefs, in a large number of categories. However, as long as I can get CDs, paying 5%+, I will continue to emphasize CDs as a very low risk option. I also will continue to use MMs significantly, especially for liquidity objectives in my various accounts.
