Which Bond Fund?

[Anonymous]

50yo. I have a portfolio allocation that is 90% in stocks. I just received $100K and want to invest it in a Bond Fund (in either my existing T Rowe or Charles Schwab accounts to keep it simple). Goal is simply to diversify my portfolio since I am getting older.

When speaking with one of the advisors, I mentioned that I was considering a couple of government/municipal bond funds, and he was steering me to look at corporate bond funds. I know to watch the management fees, and he didn't seem to be trying to push one that was materially higher than the funds I was eyeing.

Is there a logic behind that I am missing? Many of the corporate bond funds have lower Morningstar Ratings (like 2 stars). I'm clearly not a finance expert. Just trying to make a more informed decision... and wondering whether I should reconsider what type of bond fund I invest the money in.  

[Anonymous]

None. Buy a dividend stock or Etf or put in savings account.

[Anonymous]

I recommend reading up on tax-efficient placement of bonds: https://www.bogleheads.org/wiki/Tax-efficient_fund_placement#:~:text=Tax%2Defficient%20fund%20placement%20is,(tax%20%22deferred%22).

Bonds should be in tax-deferred accounts (IRAs, 401(k)) and not taxable ones (brokerage).

As the previous poster suggested, if it's a brokerage, stick with VTSAX, VTI, etc. Then reallocate a % of your 401(k) to bonds. DH has 10% in the G fund, and I have 10% split between STIP and SCHP while I'm waiting to set-up a TIPS ladder.

[Anonymous]

Why in a Bond fund? Are you looking to allocate more in “fixed assets”?

Maybe look at MMF, CDs or TBills.

[Anonymous]

Anonymous wrote:Why in a Bond fund? Are you looking to allocate more in “fixed assets”?

Maybe look at MMF, CDs or TBills.

OP here, yes to the fixed assets question. I should have added more detail... the $100K is the proceeds from an old pension that I cashed out - because the company it was with is not one that I trust to be around in 10 years. I also, wanted to have greater control over how it was invested. So now I have to reinvest the $ to avoid triggering a "tax event". Since I already have accounts with T Rowe and Charles Schwab I thought it would be easiest to park the money in a Bond Fund for the time being.

[Anonymous]

Anonymous wrote:None. Buy a dividend stock or Etf or put in savings account.

If you put in a savings account make sure you don't leave it dormant. If you go that route keep an eye on the inflation rate and add money that account accordingly to keep your purchasing power. Right now returns on savings account are still good 3%+. However keep an eye. Sometimes people park money in savings, forget about it, not realizing they are losing purchasing power.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Why in a Bond fund? Are you looking to allocate more in “fixed assets”?

Maybe look at MMF, CDs or TBills.

OP here, yes to the fixed assets question. I should have added more detail... the $100K is the proceeds from an old pension that I cashed out - because the company it was with is not one that I trust to be around in 10 years. I also, wanted to have greater control over how it was invested. So now I have to reinvest the $ to avoid triggering a "tax event". Since I already have accounts with T Rowe and Charles Schwab I thought it would be easiest to park the money in a Bond Fund for the time being.

Assume this is being rolled into an IRA? Otherwise not sure how you will avoid paying taxes on it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why in a Bond fund? Are you looking to allocate more in “fixed assets”?

Maybe look at MMF, CDs or TBills.

OP here, yes to the fixed assets question. I should have added more detail... the $100K is the proceeds from an old pension that I cashed out - because the company it was with is not one that I trust to be around in 10 years. I also, wanted to have greater control over how it was invested. So now I have to reinvest the $ to avoid triggering a "tax event". Since I already have accounts with T Rowe and Charles Schwab I thought it would be easiest to park the money in a Bond Fund for the time being.

Assume this is being rolled into an IRA? Otherwise not sure how you will avoid paying taxes on it.

OP here - yes, that is correct.

[Anonymous]

OP, don't trust your money to advice from posters who don't know the difference between a "bond" and a "bond fund", and the different between a "fixed asset" and a "fixed income assets"

https://www.schwab.com/learn/story/bonds-vs-bond-funds-which-is-right-you

https://blog.sustvest.com/which-type-of-asset-is-investment-asset-and-asset-classes/

[Anonymous]

I think a money market fund right now is lower risk than a bond fund and actually pays more. That could change eventually.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why in a Bond fund? Are you looking to allocate more in “fixed assets”?

Maybe look at MMF, CDs or TBills.

OP here, yes to the fixed assets question. I should have added more detail... the $100K is the proceeds from an old pension that I cashed out - because the company it was with is not one that I trust to be around in 10 years. I also, wanted to have greater control over how it was invested. So now I have to reinvest the $ to avoid triggering a "tax event". Since I already have accounts with T Rowe and Charles Schwab I thought it would be easiest to park the money in a Bond Fund for the time being.

Assume this is being rolled into an IRA? Otherwise not sure how you will avoid paying taxes on it.

OP here - yes, that is correct.

This is the opposite of “cashing out.”

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Why in a Bond fund? Are you looking to allocate more in “fixed assets”?

Maybe look at MMF, CDs or TBills.

OP here, yes to the fixed assets question. I should have added more detail... the $100K is the proceeds from an old pension that I cashed out - because the company it was with is not one that I trust to be around in 10 years. I also, wanted to have greater control over how it was invested. So now I have to reinvest the $ to avoid triggering a "tax event". Since I already have accounts with T Rowe and Charles Schwab I thought it would be easiest to park the money in a Bond Fund for the time being.

Assume this is being rolled into an IRA? Otherwise not sure how you will avoid paying taxes on it.

OP here - yes, that is correct.

This is the opposite of “cashing out.”

PP who asked the question - yes that's why I was confused. To me, using the term "cashing out" means you have a future upcoming usage for the money, like a down payment or a new car or something. So you need access to cash for that purchase.

[Anonymous]

It’s easy to buy individual treasures in a Schwab account. I have been doing this over the past year. You can get about 4.3% for 2-4 yr maturities. I would buy 4 bonds at 25K each and stagger the maturities. The current spread on corporates isn’t worth added risk over treasuries. And treasuries are state tax free.

[Anonymous]

Corporate bonds are too volatile and highly correlate with stocks. I'd look at a total bond fund or shorter duration Treasury fund of under 5yrs.

[Anonymous]

Just do a total bond index fund and be done with it