May 28, 2022
The theme this week on the Retirement Quick Tips Podcast is: How to earn more on your cash
Yesterday and today, I’ve ventured into the land of needing to tie up your cash for 6 months or more to get a better yield. Yesterday I talked about short-term US treasury bonds (aka T-bills). Today I’m talking about Short-term corporate bonds.
More specifically, these are bonds that will mature sometime within the next 1-2 years.
And because they are corporate bonds, you can earn a higher rate compared to a treasury bond with the same time to maturity.
My favorite way to access bonds that mature in a specific time is by purchasing a bond fund with a specific maturity, say 2023.
There are several different bond funds, usually these are exchange traded funds. All of the bonds in the fund are bonds that mature in that year, and the basket of bonds in the portfolio might include several hundred different bonds. Because of this, the credit risk is minimal if you choose an investment grade bond fund, and the 2023 bond ETF that I use for many of my clients is yielding about 2.6%. It will mature at the end of 2023, so you’re tying up your money for about a year and a half, but you can sell the fund at any time, and the price is relatively stable.
This particular fund is down about 1.3% this year, whereas most bonds across the board are down anywhere from 6-12%.
So if you’re really wanting to earn some more yield, and you’re ok with the potential that it could lose a little bit, I like the 2023 bond ETFs as an option to get more income on your cash.
That’s it for today. Thanks for listening! My name is Ashley Micciche and this is the Retirement Quick Tips podcast.
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Tags: retirement, investing, money, finance, financial planning, retirement planning, saving money, personal finance