Bonds

[crimsonghost747]

Is anyone using bonds as a part of their portfolio? They might not fall into the DGI category but if picking up ones with a good yield (5%+) then simply compounding that income (either into new bonds or stocks) will provide increased income overtime.

When the overall valuations are high, my mind is starting to look at bonds as a place to store cash which I will need in the next 2-3 years. Ofc with maturity dates in that 2-3 year period so I don't need to sell the bonds in the secondary market.

[Roadmap2Retire]

Ive owned bonds in the past, but have liquidated in the last year or two. I own a very small position (~1%) as part of an income focused ETF - which includes equities and bonds.
However, the combined strategy in portfolios between my wife and I is: I invest in individual stocks, while she sticks to index funds via ETFs. As part of her portfolio - she owns bond ETFs - which includes (Canadian) federal, provincial and corporate bonds. We are looking into adding more types of bonds, but think there are more risks than we'd like to take on right now.

Details here if you are interested in reading more:
Building an ETF Portfolio
Emerging Market Bonds

I think bonds are great in most portfolios. They provide the inertia that stocks cannot provide and is a good place to park cash for short durations

[rayray]

I don't own any individual bonds. However, in my kplan I own Pimco Total Return, Pimco Real Return and assorted bonds through various low cost funds that are offered through the plan--just to keep diversified the best I can with what they offer. I'm unable to invest in individual stocks or bonds within the kplan, which I believe to be a horrible constriction. In my ROTH the only bonds I own are through the Wellington Fund and zero bonds in my brokerage account.

One day I might consider tax free muni's but I don't know enough about them, just yet.

[crimsonghost747]

A bond fund has never even crossed my mind. Few were recommended to me but seeing as I have access to a good selection of corporate bonds at low commissions, I will never go with a fund. Most funds trade bonds actively, though I know that there are some which buy and hold until maturity. I think with bonds the buy & hold really works as it doesn't matter what is happening with the market: you know that you will get the % on your original investment at certain intervals and the capital back at a certain date... no matter what situation the market is going through.

Already own one bond (maturity in 2021) but definitely looking to add a bit more with maturity in 2018 or so, since that is the time when I might need some of this cash back.

[rayray]

(05-17-2015, 01:32 PM)crimsonghost747 Wrote: A bond fund has never even crossed my mind. Few were recommended to me but seeing as I have access to a good selection of corporate bonds at low commissions, I will never go with a fund. Most funds trade bonds actively, though I know that there are some which buy and hold until maturity. I think with bonds the buy & hold really works as it doesn't matter what is happening with the market: you know that you will get the % on your original investment at certain intervals and the capital back at a certain date... no matter what situation the market is going through.

Already own one bond (maturity in 2021) but definitely looking to add a bit more with maturity in 2018 or so, since that is the time when I might need some of this cash back.

Have you ever thought of Preferreds?

[crimsonghost747]

(05-17-2015, 09:07 PM)rayray Wrote: Have you ever thought of Preferreds?

It has crossed my mind but I do not have enough knowledge of them to even think of buying right now. Guess I should educate myself a bit more on them.

But if I understand correctly, I'm going to have to sell them on the secondary market when I need back the capital... and the price always fluctuates of course. So seeing as the timeframe we are looking at is definitely less than 5 years then that would definitely present a risk of losing some of the original capital, right? Also how is the liquidity?

I'm thinking of bonds as an alternative to a cash account since I know I'll be getting the capital back on maturity date. (unless the company defaults)