Where to Park "Extra" Money

[gfh77665]

Originally Posted By: LT4 Vette
gfh77665,

Which Pimco funds do you have money in ?


PTTRX. 100%.

Since the crash in '08, I have been aggressively invested until recently. I was 25% each FCNTX, DODGX, RERFX, and ARTMX. About 4-5 months ago, the market appeared "fairly valued" (according to the M* metric). At that point, wanting to take gains off the table, I went 100% PTTRX in my 401K. Elsewhere, I bought AMLP primarily for the 6.1% yield.

 

[Mr Nice]

Thanks. I'll look into Pimco funds.

 

[JHZR2]

Originally Posted By: gfh77665
Originally Posted By: doitmyself

I haven't studied the options for "short term" (5-8 years) and low risk. Is it even possible to hit the 2-3% mark with my requirements?


Did you look at the PTTRX? It has returned 10.36% in the last year, 7.75%/yr. over the last 3, and 8.34% during the last 5, and 6.82% over 10 years. Yes is does fluctuate a bit from day to day and week to week, but clearly goes up steadily over time. Look at its chart.

It will blow "2-3%" out of the water over 5-8 years.


That is not the "norm", for the long-term under a rising or stagnant interest rate environment, and will not conitnue in any way based upon my understanding of how valuations of bond funds and bond assets work. They are priced in association with prevailing market rates. When interest rates go down, the value of a "basket" of bonds goes up.

Where are interest rates now? Next to nothing.

When rates go up, the underlying valuation of the assets in the fund will go down, and the returns will not be retained.

This is somewhat different from stocks, whose valuations are based upon growth, earnings, dividend payout, etc.

I wouldnt be putting money into such a fund at this point.

 

[gfh77665]

Its not just a "bond fund". That may the category its listed in, but click on it's M* "Portfolio" tab to see its composition. It holds TIPS, GNMA, International bonds, Corporate bonds, Euro's, pass-Through securities, and it uses derivatives to short cash among other holdings. Gross finds where the safe bargains are, globally.

Its noteworthy that even my Fidelity adviser compliments Bill Grosses management. He told me "For safety with a return, you just can't beat Bill Gross".

Just asking then, where would you put money now?

 

[gnp]

With your requirements of:
1. Low/no risk
2. Somewhat available in case of emergency
3. Want better interest than a savings account

My choice would be to purchase U.S. Savings Bonds Series I.

You can only purchase through the Treasury Department at www.treasurydirect.gov

You cannot buy Savings Bonds at a bank anymore.

Note about Series I Savings Bonds:
1. They have to be held for a minimum of 1 year.
2. If you redeem within the first 5 years there is a 3 month interest penalty.
3. Can be held for up to 30 years.
4. Interest is tax-deferred until you sell the bonds.
5. Maximum amount you can purchase each year is $10,000 per individual.
6. The rate changes every 6 months. The rate is based on a fixed rate plus inflation rate. The current rate at this time was set on November 1st and is 1.76%. The rate changes on May 1st, which could be higher or lower. However, for at least 6 months you will get a guaranteed rate of 1.76%.

Hope this helps.

 

[hattaresguy]

Bonds.

 

[doitmyself]

Thank you all for giving me some ideas to look into.

I need to assess appropriate risk levels for my situation and consider the best options. I certainly don't want to lose the money after 5 -8 years. I will investigate PIMCO as well as the more traditional ideas presented.

I haven't talked with my retirement fund adviser yet (TIAA-CREF) to see if I have anymore options left there.

Lots to think about. Thanks again.

I welcome anymore comments. I have a very odd retirement situation with a few unknowns that I cannot predict. And, my wife's car accident/health/non work debacle has thrown a curve into our plans. Thus, my need to avoid high risk.

Out of curiosity, do you guys keep your emergency funds (several months income in case of job loss) elsewhere than a savings account?

 

[surfstar]

Originally Posted By: doitmyself

Out of curiosity, do you guys keep your emergency funds (several months income in case of job loss) elsewhere than a savings account?


Rewards Checking account: http://www.money-rates.com/rewardschecking.htm

If you can meet all the requirements (I use redneck bank - started at 5% apy a few years ago, but now is only 2%) you can get a good bit interest.

 

[2002 Maxima SE]

TIAA DIRECT (by Tiaa Cref) offers 1.24% on their high yield online savings.

http://tiaadirect.com/banking/bank/savings/index.html

I track these online savings accounts on bankrate.com and move my "safety net" savings every 6 months to a year dependent on better rates.

 

[Drew99GT]

The average maturity of Pimpco Total Return is very short. Bill Gross is more afraid of the supposed bond bubble bursting more then anyone; that's why he stays very short on maturity and holds to maturity.

BUT, QE3/QE4 looks like it's finally pushing rates higher and pretty much all bond/credit funds are taking a licking (the Fed's goal is to force investment money out of bonds). That's the problem with bond funds in general; even if they hold to maturity, the net asset value drops when rates rise.

 

[gfh77665]

Originally Posted By: Drew99GT
The average maturity of Pimpco Total Return is very short. Bill Gross is more afraid of the supposed bond bubble bursting more then anyone; that's why he stays very short on maturity and holds to maturity.


Correct. Gross is keenly aware, and for proof, PTTRX has prospered in all rate environments. Also, here is a snippet from Doubleline's Jeffery Gundlach:

Gundlach predicts that both high-yield bonds and a portfolio of mortgage-backed securities could return about 6 percent in 2013. He forecast only a 3 percent total return for 10-year Treasurys and a 5 percent total return for the S&P 500.