💎Get our popular bond course bundle & save $80: www.diamondnestegg.com/home#_paa2isucf 💎Bond Beginners (our foundational-level bond course): www.diamondnestegg.com/bond-beginners 💎Bond Masters (our intermediate-level bond course): www.diamondnestegg.com/bond-masters 💎And join our super-supersaver membership for regular market updates & monthly live member Q&As ua-cam.com/channels/nexoc6tvesvcCEzZhmI-Ag.htmljoin >>>>>>>>>> WATCH NEXT >> Our Bond Courses vs UA-cam Membership | Which Is Right For You: ua-cam.com/video/H5h4Eyh0hjo/v-deo.html >> Bond Beginners Course Sneak Peak | I-Bonds vs TIPS: ua-cam.com/video/uXPzbje1g2E/v-deo.html >> Bond Masters Course Sneak Peak | How To Build A Bond Ladder: ua-cam.com/video/p90IDmXn19s/v-deo.html >>>>>>>>>> SOURCES FOR TODAY'S VIDEO: www.federalreserve.gov/monetarypolicy/fomc.htm fred.stlouisfed.org/ fiscaldata.treasury.gov/americas-finance-guide/national-debt/ >>>>>>>>>> Here is the overview for Bond Beginners: 1. Bond Basics What A Bond Is & How A Bond Works Why Invest In Bonds New Issue vs Secondary Market Bonds Interest Rates & Bond Prices Current Yield & Yield To Maturity Always Remember This! Buying At Par, Above Par & Below Par Different Types Of Bonds Wrap-Up 2. The Risks Of Bond Investing Seven Key Bond Risks Credit Risk Interest Rate Risk Reinvestment Risk/Call Risk Inflation Risk Liquidity Risk Currency Risk & Country Risk Bond Risk Mitigation Strategies Wrap-Up 3. US Treasuries Overview What Are US Treasuries Why Invest In Treasuries Where Can You Buy Treasuries How Are Treasuries Taxed Wrap-Up 4. Treasury Bills What Are Treasury Bills (T-Bills) When Do T-Bill Auctions Happen Where Should You Buy At Auction Auto-Roll When Buying At Auction Where To Find Recent Auction Results High Rate vs Investment Rate Reopening Auctions Cash Management Bills (CMBs) Buying & Selling On Secondary Market Wrap-Up 5. Treasury Notes & Bonds What Are Treasury Notes & Bonds When Do Auctions Happen Buying Treasury Notes & Bonds Auction High Yield vs Interest Rate Floating Rate Notes (FRNs) Treasury Zeros (STRIPS) Wrap-Up 6. TIPS (Inflation-Protected) What Are TIPS When Do TIPS Auctions Happen Nominal vs Real Yields Negative Yields How Do You Adjust TIPS For Inflation Taxes On Phantom Income Secondary Market Liquidity Wrap-Up 7. I-Bonds (Inflation-Protected) What Are I-Bonds How Does I-Bond Interest Work I-Bonds vs TIPS The Annual I-Bond Limit Wrap-Up 8. Agency Bonds The Universe Of Bonds What Are Agency Bonds How Are Agency Bonds Taxed Treasuries vs Agencies Who Might Want To Consider Agencies Yield-To-Call & Yield-To-Worst Where Can You Buy Agency Bonds Wrap-Up 9. Municipal Bonds Our Bond Universe Gets More Complex What Are Municipal Bonds How Safe Are Munis How Are Munis Taxed The De Minimis Rule Social Security & Medicare Premiums Treasuries, Agencies & Munis Who Might Want To Consider Munis Wrap-Up 10. Corporate Bonds Our Bond Universe Is Complete What Are Corporate Bonds How Safe Are Corporates Corporate Bond Hierarchies Five Key Features Of Corporate Bonds How Are Corporates Taxed Treasuries vs Corporates, Etc. Who Might Want To Buy Corporates Wrap-Up >>>>>>>>>> Here is the overview for Bond Masters: 1. Stocks vs Bonds Historical Performance Are Bonds Really Less Volatile Why Invest In Bonds Accumulation vs Decumulation Allocation of Stocks vs Bonds Wrap-Up 2. Which Bonds Might Be Right For You Treasuries & Other Types of Bonds Nominal vs Real Yields Inflation vs Non-Inflation-Protected Taxable vs Tax-Advantaged Accounts Wrap-Up 3. Bond Ladders & Other Bond Strategies Normal vs Inverted Yield Curve What Is A Bond Ladder 5 Important Bond Laddering Questions Laddering When Rates Are Rising Laddering When Rates Are Falling Laddering When Rates Are Uncertain What Is A Bullet What Is A Barbell Wrap-Up 4. Holding to Maturity vs Selling Early Why Hold to Maturity When To Sell Early Before Maturity Tax Implications Of Selling Early Wrap-Up 5. Individual Bonds, Bond Funds, Etc. Why Buy Individual Bonds Why Buy Bond Funds Bond Fund Considerations Key Bond Fund Concepts CDs vs Treasuries Other High-Yield Investments Wrap-Up 6. Our B.E.S.T. Model Portfolios By Age Our B.E.S.T Model Portfolios By Age Model Portfolios In The Industry B.E.S.T Model Portfolio Difference How Much Do You Need To Retire? How I Use The Rules of 100, 110, & 120 B.E.S.T Model Portfolios (20s) B.E.S.T Model Portfolios (30s & 40s) B.E.S.T Model Portfolios (50s & 60s) B.E.S.T Model Portfolios (70s+) Wrap-Up 7. The Decumulation Phase What Is The Decumulation Phase? Bear Markets & Recessions What Can You Do In Bad/Bear Markets Decumulation Tax Considerations The 4% Rule The Bucket Strategy The Flooring Approach Jen’s Bucket Strategy With A Twist Wrap-Up >>>>>>>>>> Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that: 1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances 2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY
The yield curve has not "uninverted" yet and is actually rebounding, so we still have time. Short term T-Bills are heavily being used by the banks instead of the overnight repo and it seems the Fed likes it that way, so there is seemingly some incentive to keep short term rates elevated for the foreseeable future for the banks.
I love your videos. They are always so informative. Im from a high tax state just like you, California. So I have only been investing in things that are state tax free - treasuries and municipal bonds. So I don't invest in CD's for this reason. I would love to see a video on options for high income state tax states since regular taxed strategies are not beneficial. Thanks for all you help Jen.
Great strategy! So many people miss the additional yield pick-up (without much increased default risk) in municipal bonds, especially folks living in high-tax states and buying state tax exempt bonds. I always enjoy seeing that total interest earned on my tax return, and knowing the Federal government and state aren't able to touch it. 🙂
Rates may be headed towards zero, which is what happens when you count backwards from 5%. However, I do not expect the Fed to drop rates below about 2.5%. The biggest mistake the Fed made was having many rounds of quantitative easing and reducing rates to zero.
It’s interesting and once again a great video. Especially since many (perhaps most) choose to buy ETFs/ Mutual funds on 10year plus Bond funds. The fly in the ointment however is that these Bond funds have future drops in rates built in before the rate cut! e.g. instead of going up after this latest cut - they went down in some cases more than 1.5%!! And the 10 year Bond went up about 2.0% in the past few days as well from 3.67 five days ago to 3.74 yesterday. So while the long bond should go down.....
So true. The further you go out the curve, the less impact the Feds interest rate setting has on the yield, allowing the future cuts to be built into the price/yield. Probably why it feels like the longer end (10-years and out) feels really over bought.
Great video. No need to go off crazy because rates are coming down. Still laddering my Treasuries but at a longer duration i.e. 3 to 6 months. At some point municipals and corporates or even CDs will become attractive but there are tax advantages still to Treasuries i.e no state or local taxes.
I like how you explain it for people. My guess is if fed can continue to unwind their balance sheet and cut rates you’ll just see the yield curve to continue to normalize. Maybe mortgage rates improve a little in 6-12 months from where they are currently, but I think they’ve been able to do a great job of working out of a tough trade.
I liked your analysis of the Fed funds rate over the last 70 years. It would be interesting to see the Fed funds rate compare against inflation each period. The negative real rates of the last 20 years aren’t the norm, but there were other times like the 1950s when the Fed suppressed rates that also had negative real rates.
Thanks for the info, especially the easy to understand description of the FOMC. I feel a little more comfortable now with my plan to keep diversifying as I ride the 4 week bills down. I took some maturing T bills into a couple Goldilocks in-state munis a few weeks ago, and into a few corporates before that. My Agencies keep getting called - but that's OK because I need to be liquid to buy into a HECM when I move when I retire, date TBD. My choices now (I only buy new issue) seem to be between 4 wk T bills (yesterday's High Rate: 4.700%. Investment Rate*: 4.783%); 42 day CMBs, with the chance that the next yield my be slightly higher than the next 4 week T-bill yield; and the 52 week auction in October , which although lower would lock in a known yield versus the inevitable 4 week and 42 day yields going even lower. The choices are starting to feel like throwing a dart at the phone book.
You removed the low outliers (0% interest rate years)in the bottom row of the table at 12:12. I wonder what the average interest rates would look like if the high outliers (e.g. 10%+ rate years from the 1970s and 80s) were also removed?
It was interesting to listen to Chairman Powell giving the reasons for cutting rates. “… the economy is still strong, the unemployment #’s are in a good range, core inflation ticked up . . . so we are going to cut rates. . . . So much for getting inflation back to the 2% goal. 🙄
Yeah, begs the question, "What are they seeing that everyone else isn't?" The market will not react well if there's a spike in inflation and they have to take back some of these cuts.
Jen, you and your team never cease to impress when it comes to providing value. I learned so much in this video, something that I would not research myself, but it was really interesting and great to learn! Bravo 👏
This is a great video because it explains how all these loans work. I agree with you that interest rates are not going to zero. My guess is that if you calculate the standard deviation it would be equal to the average at least.
@@gmv0553 Guess where the money on the exploding interest on the national debt will have to come from. Hint, it won't be from taxes but it will put more money into circulation.
Some banks need to borrow cash at the end of the day in order to meet reserve requirements. Other banks banks that have excess cash are happy to lend it out overnight (to creditworthy banks) in order to earn interest.
Thank you. Good presentation. Could you go through the process of the Fed redeeming a bond it holds when it reaches maturity? Is the "money" destroyed or disappeared? How can the Fed actually decrease the money supply(its tool for fighting inflation) when faced with a Treasury that must issue a new bond in order to pay its bills and fund entitlements?
Question for later: There seem to be many corporate bonds with coupons between 5 and all the up to 7.5 percent. What's the catch, is it primarily credit risk, which can be manged by due diligence on the companies and watching duration?
I think a mindset shift to longer term fixed instruments is going to happen along with rotation to equity especially ETF products marketed as value blend.
I would stay with 4 to 8 week t-bills...if FED lower again .50 at the next meeting.....I would lock in 6-12 month T-bills or CD at 4% and hope the rates don't keep crashing. Stupid FED just want savers to suffer or gamble in the casino/stock market.
@@HumbleTrader001aw come on now, let’s not be silly. There are plenty of indicators that suggest now is the right time to change rates. Can we avoid making everything political.
@@davenirschl6522 biggest rate change shortly before a national election in almost a century, yea politics had nothing to do with it. .25 would been fine, or wait till November then no politics at all
Jen, I would love to see your explanation of repo markets. 👍 Repo markets, as I understand them, are our unsung heroes enables a lot of liquidity behind the scenes that we take for granted. Not every nation has a repo market like the US.
This is a bit off topic but I still wonder why the value of the dollar falls against other currencies when the interest rates go down, snd why it doesn't rise with other central banks lower their rates. I am looking at a purchase in euros and the rate has gone from 1.07 to 1.11 in the last few months
The Federal Reserve's 50 basis point rate cut sparked a mixed market reaction, with initial gains giving way to caution, as investors weighed the boost to economic growth against concerns the Fed may be "behind the curve" in addressing weakening labor markets and potential recession.
Nice video. I completely agree that the long end of the curve has been front running the Fed. They really feel like they're way out ahead. I'm not buying much out long because I'm expecting some weakness out there, as demand levels off and the supply continues to rise.
Can you explain this to me? I'm not buying much out long because I'm expecting some weakness out there, as demand levels off and the supply continues to rise. I want to buy longer term but you think it's not a good idea?
@@Leslie_Carol There are a lot of people who agree with you, that the long end of the market might be out in front of the Fed rate cuts. Here's another way to describe that, a lot of economists think the Fed is going to continue to lower rates until they get the rate down to around 4%, barring a recession. That being said, if the yield curve is normalizing (no longer be inverted), that means the 10, 20 and 30-year Treasuries will need to be at some rate higher than the Fed rate and if it's 4%, then the current rates on those bonds needs to move back up. I'm going to wait to buy anything long. I did some buying when rates were higher. I'd like to buy more but I'm not loving where the rates are right now.
This comment based on watching all her videos and her overall knowledge. She could run circles around most of the past Sec of the Treasurers and Fed Chairs. It's a shame USA has so much hidden talent that would never get appointed to Fed Chair nor Sec of Treasury!
Which is why keeping anything over $2-3K in a checking acct is ill advised. I keep most of my cash funds at CFG Bank (a Maryland based bank)...it still pays over 5% and moving the funds back & forth to my local low rate bank is pretty easy. I do expect that rate to drop to 4.5-4.6%, unfortunately, thanks to Powell.
What about these new Global X Short-Term Treasury Ladder ETF SLDR, mid term MLDR and long term LLDR ETFS. they are doing bond latters. Would this be better since they are professionals instead of us trying to do ladders?
Agreed...some of those higher yielding, lower investment-grade credits (Baa1/BBB+ and lower) could soon find themselves in junk territory if we end up in a recession.
True. The bummer is, so many were drawn to the higher rates (5+%) on T-Bills, that they missed locking in longer rates, especially the 20-year Treasury at 4.50%+, high grade munis at 4+% and high-grade taxable muni and corporates at 5.+%.
My main use of tbills has been to stash extra money that I could use to pay off a home equity loan that’s at 3.5%. Once rates go below that I’ll start just paying down the loan faster. Most of my retirement is in stocks as I have a while to go before retirement
Thanks! I had not considered that option with my 3.37% mortgage. Of course it won't be a one to one comparison because I deduct the tiny bit of interest I pay during the year.
@@e79422 can you explain your comment? you paid off your 2.75 mortgage... what do you wish you had done? I have a 2.6% and I'm wondering whether I should make extra payments
@@DavidLitman-ph9lu I'm not keeping up with all the information. What is DVY, SPYD? and an alternative to fixed rate securities? Can you help me understand this?
Agreed. So much of the discussion now is that the Fed is going to stop the cuts at a much higher rate. I'm hopeful that will be the case; that's especially needed for retirees living off of the interest earned on their investments. They a had really tough decade with the Fed holding rates so low for so long.
I’ve moved to Dividend aristocrats & utilities for the fixed portion of my investment portfolio. I still have a 9 month treasury ladder that is earning >5%. But expect it to run out over the next year.
i have had spdr bloomberg 1-3 month t-bill etf for some time now recieving 5 + % historically it dont move down much at all, is there a chance it will if interest go down to 0 ?
you deposit money in your IRA .. traditional IRA and there is a drop down menu that lets you transfer this money to a Roth .. If you have other IRAs you need to take into consideration tax consequences because the government looks at all your IRAs as one even though you may have several different ones.. if you dont have a trad IRA at all you can convert to Roth pretty much in a few days by drop down menu
Talk to your tax preparer first! I didn't do that and didn't know the rules changed. I deposited 7k and paid 6k in taxes because tax is based on your total ira account. Backdoor roth is great for those who don't have other traditional ira funds. Each person's situation is different.
@@bberdan6603Bravo! You are one of the only people who ever mentions that. Maybe few people have IRAs so this rarely comes up. But for me it would have been a huge error to do this. I warn people every time I read back door IRA posts but most don’t understand or care what I say.
I'm 75 years old and I have gladly locked in about one million dollars of US Treasuries with maturities between 2 and 10 years at an interest rate of about 4 percent. As a 4-decade investor I can say I have never seen a more dangerous stock market. The market capitalization of the stock market compared to GDP is about 200 percent. In other words, the value of the stock is twice the value of the whole US economy. Even scarier is the lack of diversification. One stock (NVIDIAP comprises 16 percent of the value of the entire S&P 500. Three stocks (NVIDIA, Apple, and Microsoft) comprise one-third the value of the S&P 500. We have had the longest inverted yield curve in the history of the United States. Price to earnings and price to sales have never been higher. I rode the roller coasters of year 2000 and 2008 and not this time. Investors Beware.
The more I think about a "recent flurry" of corporate bond offerings at those rates, the more likely it seems they are hurrying to lock in a lower rate before LT rates fluctuate up. Still, we can't predict with certainty nor can they. But it seems unlikely that would be their move if they thought the rates would continue to go down in the near term.
Agreed. So much of the discussion now is that the Fed is going to stop the cuts at a much higher rate than a lot are expecting. What's your prediction? Barring a recession, my guess is 3.75%.
I really looked hard at putting some money in 10’year bonds last year when they were around 4.8. But at the time we thought T bills could go higher so I decided to just keep doing 3 month T bills and see. Oh well. I am about 50% stocks and 50% 3 month T bills. If rates keep going down I will keep adding to stocks.
Me too! But as they say: A bird in the hand...And don’t cry over spilt milk. An example from me! I cashed out from a financial planner in early January, 2022 - a Bond/Stock portfolio. About 200k (one of my portfolios) and went into Cash type instruments. The return has been about 17%. The old portfolio (mirrored on Yahoo finance) is up about $345 Total, or about .19% (not 19 but Point 19) If you’re making money even if not S&P returns which is about 25% during this period, a measly 17% return ain’t so bad. Besides, Who has 100% in just the S&P? That would be very risky and the difference is not worth the risk. Cheers.
Interesting. I know some folks that locked in 20-year Treasuries at auction with 4.50% coupons at a nice discount and now they're around 105. So many people got drawn into the 5-handles on T-Bills...they were just so exciting.
@@The_Bond_Guy what does this mean? got drawn into the 5-handles on T-Bills...they were just so exciting. Are you saying it's 'bad' that they bought 20 year treasures 4.50% coupon at discount?
@@Leslie_Carol Sorry for the bond trader jargon..."5-handles on T-Bills" means they bought them when the interest rate was at 5% or higher, like 5.25%. It's been a long time since we've seen interest rates on any Treasury securities above 5%, so people really loading up while they could. I'm not saying it's bad at all for people who bought those longer Treasuries, because they're going to get a 4.50% or higher coupon payment when the market rate is closer to 4%. It's just unfortunate for the folks who were really drawn into the higher rates on the T-Bills because now those rates are coming down and rates on the longer end have come down a lot too.
Helps bond market, but will probably cause inflation to return and if bondholders believe that, they might not be ready to buy bonds yet. If clearly a recession coming, I would be more excited about buying bonds.
some experts say, from an article I read: "The risk remains that the Fed waited too long to act. Inflation has been near the central bank’s target for almost a year, and the economy, while still far from recession territory, has begun to show clear signs of slowing. The number of job openings has fallen, the unemployment rate has risen, and more people are behind on their credit-card bills and car payments. None of this would be particularly worrying if the Fed could simply press a button and provide an immediate boost to the economy, but it can’t. In fact, economists generally believe that rate changes take a while to filter through the economy. How long, exactly? No one knows. As the monetary-policy experts Christina Romer and David Romer wrote at the beginning of 2023, “If policymakers keep tightening until inflation falls as much as they want, they will likely have gone too far-because the effects of tight policy will continue for many months after they stop raising rates.” Many other prominent economists have made similar warnings. If they’re right, then the recession that America miraculously avoided may turn out to be merely delayed. Then again, experts made a lot of dire predictions about the economy over the past three years that have turned out to be wrong. Hopefully they have one more in them.
This cut is likely political motivated. The next time on November would predictable job number better due to seasonal hiring. Then FED will come back to grab the rate higher for longer. Anyway the home buyer has no any move because the price is too high and mortgage has been price for rate cut 1% or more for months meanwhile inventories dramatic increase increase then sticky inflation will down.
💎Get our popular bond course bundle & save $80: www.diamondnestegg.com/home#_paa2isucf
💎Bond Beginners (our foundational-level bond course): www.diamondnestegg.com/bond-beginners
💎Bond Masters (our intermediate-level bond course): www.diamondnestegg.com/bond-masters
💎And join our super-supersaver membership for regular market updates & monthly live member Q&As ua-cam.com/channels/nexoc6tvesvcCEzZhmI-Ag.htmljoin
>>>>>>>>>>
WATCH NEXT
>> Our Bond Courses vs UA-cam Membership | Which Is Right For You: ua-cam.com/video/H5h4Eyh0hjo/v-deo.html
>> Bond Beginners Course Sneak Peak | I-Bonds vs TIPS: ua-cam.com/video/uXPzbje1g2E/v-deo.html
>> Bond Masters Course Sneak Peak | How To Build A Bond Ladder: ua-cam.com/video/p90IDmXn19s/v-deo.html
>>>>>>>>>>
SOURCES FOR TODAY'S VIDEO:
www.federalreserve.gov/monetarypolicy/fomc.htm
fred.stlouisfed.org/
fiscaldata.treasury.gov/americas-finance-guide/national-debt/
>>>>>>>>>>
Here is the overview for Bond Beginners:
1. Bond Basics
What A Bond Is & How A Bond Works
Why Invest In Bonds
New Issue vs Secondary Market Bonds
Interest Rates & Bond Prices
Current Yield & Yield To Maturity
Always Remember This!
Buying At Par, Above Par & Below Par
Different Types Of Bonds
Wrap-Up
2. The Risks Of Bond Investing
Seven Key Bond Risks
Credit Risk
Interest Rate Risk
Reinvestment Risk/Call Risk
Inflation Risk
Liquidity Risk
Currency Risk & Country Risk
Bond Risk Mitigation Strategies
Wrap-Up
3. US Treasuries Overview
What Are US Treasuries
Why Invest In Treasuries
Where Can You Buy Treasuries
How Are Treasuries Taxed
Wrap-Up
4. Treasury Bills
What Are Treasury Bills (T-Bills)
When Do T-Bill Auctions Happen
Where Should You Buy At Auction
Auto-Roll When Buying At Auction
Where To Find Recent Auction Results
High Rate vs Investment Rate
Reopening Auctions
Cash Management Bills (CMBs)
Buying & Selling On Secondary Market
Wrap-Up
5. Treasury Notes & Bonds
What Are Treasury Notes & Bonds
When Do Auctions Happen
Buying Treasury Notes & Bonds
Auction High Yield vs Interest Rate
Floating Rate Notes (FRNs)
Treasury Zeros (STRIPS)
Wrap-Up
6. TIPS (Inflation-Protected)
What Are TIPS
When Do TIPS Auctions Happen
Nominal vs Real Yields
Negative Yields
How Do You Adjust TIPS For Inflation
Taxes On Phantom Income
Secondary Market Liquidity
Wrap-Up
7. I-Bonds (Inflation-Protected)
What Are I-Bonds
How Does I-Bond Interest Work
I-Bonds vs TIPS
The Annual I-Bond Limit
Wrap-Up
8. Agency Bonds
The Universe Of Bonds
What Are Agency Bonds
How Are Agency Bonds Taxed
Treasuries vs Agencies
Who Might Want To Consider Agencies
Yield-To-Call & Yield-To-Worst
Where Can You Buy Agency Bonds
Wrap-Up
9. Municipal Bonds
Our Bond Universe Gets More Complex
What Are Municipal Bonds
How Safe Are Munis
How Are Munis Taxed
The De Minimis Rule
Social Security & Medicare Premiums
Treasuries, Agencies & Munis
Who Might Want To Consider Munis
Wrap-Up
10. Corporate Bonds
Our Bond Universe Is Complete
What Are Corporate Bonds
How Safe Are Corporates
Corporate Bond Hierarchies
Five Key Features Of Corporate Bonds
How Are Corporates Taxed
Treasuries vs Corporates, Etc.
Who Might Want To Buy Corporates
Wrap-Up
>>>>>>>>>>
Here is the overview for Bond Masters:
1. Stocks vs Bonds
Historical Performance
Are Bonds Really Less Volatile
Why Invest In Bonds
Accumulation vs Decumulation
Allocation of Stocks vs Bonds
Wrap-Up
2. Which Bonds Might Be Right For You
Treasuries & Other Types of Bonds
Nominal vs Real Yields
Inflation vs Non-Inflation-Protected
Taxable vs Tax-Advantaged Accounts
Wrap-Up
3. Bond Ladders & Other Bond Strategies
Normal vs Inverted Yield Curve
What Is A Bond Ladder
5 Important Bond Laddering Questions
Laddering When Rates Are Rising
Laddering When Rates Are Falling
Laddering When Rates Are Uncertain
What Is A Bullet
What Is A Barbell
Wrap-Up
4. Holding to Maturity vs Selling Early
Why Hold to Maturity
When To Sell Early Before Maturity
Tax Implications Of Selling Early
Wrap-Up
5. Individual Bonds, Bond Funds, Etc.
Why Buy Individual Bonds
Why Buy Bond Funds
Bond Fund Considerations
Key Bond Fund Concepts
CDs vs Treasuries
Other High-Yield Investments
Wrap-Up
6. Our B.E.S.T. Model Portfolios By Age
Our B.E.S.T Model Portfolios By Age
Model Portfolios In The Industry
B.E.S.T Model Portfolio Difference
How Much Do You Need To Retire?
How I Use The Rules of 100, 110, & 120
B.E.S.T Model Portfolios (20s)
B.E.S.T Model Portfolios (30s & 40s)
B.E.S.T Model Portfolios (50s & 60s)
B.E.S.T Model Portfolios (70s+)
Wrap-Up
7. The Decumulation Phase
What Is The Decumulation Phase?
Bear Markets & Recessions
What Can You Do In Bad/Bear Markets
Decumulation Tax Considerations
The 4% Rule
The Bucket Strategy
The Flooring Approach
Jen’s Bucket Strategy With A Twist
Wrap-Up
>>>>>>>>>>
Thanks for visiting our personal finance channel! We hope this content will help fast-track your financial journey! Everyone's financial journey is different. Please note that:
1) there are questions/ comments which I will not be able to answer without fully understanding your financial, personal & other circumstances
2) we will not ask you to call us or send us money in the comments on this channel or any of our other social media accounts, so if you see comment(s) along those lines, it is most likely spam - PLEASE DO NOT ENGAGE WITH SPAMMERS OR GIVE OUT YOUR PERSONAL INFORMATION FOR YOUR OWN SAFETY
The yield curve has not "uninverted" yet and is actually rebounding, so we still have time. Short term T-Bills are heavily being used by the banks instead of the overnight repo and it seems the Fed likes it that way, so there is seemingly some incentive to keep short term rates elevated for the foreseeable future for the banks.
Going back to zero would be a disaster for anyone over 50 years old and risk adverse.
unless they locked in 4+% for 20 years while interest was high.
If they're still looking for a investment by that time
Let’s not panic, geez. It’s NOT going to go to zero
Buy some of those bonds that aren’t high grade, there are many with well over 5%.
lock in those 30 year rates now!
I love your videos. They are always so informative. Im from a high tax state just like you, California. So I have only been investing in things that are state tax free - treasuries and municipal bonds. So I don't invest in CD's for this reason. I would love to see a video on options for high income state tax states since regular taxed strategies are not beneficial. Thanks for all you help Jen.
Great strategy! So many people miss the additional yield pick-up (without much increased default risk) in municipal bonds, especially folks living in high-tax states and buying state tax exempt bonds. I always enjoy seeing that total interest earned on my tax return, and knowing the Federal government and state aren't able to touch it. 🙂
Wow, what a great video, Jen. I learned so much. Thank you!!
Rates may be headed towards zero, which is what happens when you count backwards from 5%. However, I do not expect the Fed to drop rates below about 2.5%. The biggest mistake the Fed made was having many rounds of quantitative easing and reducing rates to zero.
Agree!
Completely agree. Those super low rates certainly contributed to the inflation we suffered through.
Yes, please do a presentation breaking down reverse repos! Love your channel! Thank you so much!
Ditto!
Jennifer, I'd love to see a session on repurchase agreements. Thanks.
Ohhh ! I would like to understand the Reverse Repo Rate agreements. My head hurts when I try and wrap it around this topic
It’s interesting and once again a great video.
Especially since many (perhaps most) choose to buy ETFs/ Mutual funds on 10year plus Bond funds.
The fly in the ointment however is that these Bond funds have future drops in rates built in before the rate cut!
e.g. instead of going up after this latest cut - they went down in some cases more than 1.5%!!
And the 10 year Bond went up about 2.0% in the past few days as well from 3.67 five days ago to 3.74 yesterday.
So while the long bond should go down.....
Stay tuned for the next video...
So true. The further you go out the curve, the less impact the Feds interest rate setting has on the yield, allowing the future cuts to be built into the price/yield. Probably why it feels like the longer end (10-years and out) feels really over bought.
Great video. No need to go off crazy because rates are coming down. Still laddering my Treasuries but at a longer duration i.e. 3 to 6 months. At some point municipals and corporates or even CDs will become attractive but there are tax advantages still to Treasuries i.e no state or local taxes.
I like how you explain it for people. My guess is if fed can continue to unwind their balance sheet and cut rates you’ll just see the yield curve to continue to normalize. Maybe mortgage rates improve a little in 6-12 months from where they are currently, but I think they’ve been able to do a great job of working out of a tough trade.
Thanks for sharing
5:15 saving as reference for later. Great video and awesome way of simplifying these concepts!
I would appreciate a video on both repos and reverse repos. Why do banks use these
Your every topic is of intrest becausev your explainations are clear!
I liked your analysis of the Fed funds rate over the last 70 years. It would be interesting to see the Fed funds rate compare against inflation each period. The negative real rates of the last 20 years aren’t the norm, but there were other times like the 1950s when the Fed suppressed rates that also had negative real rates.
I have added this onto Jennifer's list! Best - Caitlin
Thanks for the info, especially the easy to understand description of the FOMC. I feel a little more comfortable now with my plan to keep diversifying as I ride the 4 week bills down. I took some maturing T bills into a couple Goldilocks in-state munis a few weeks ago, and into a few corporates before that. My Agencies keep getting called - but that's OK because I need to be liquid to buy into a HECM when I move when I retire, date TBD. My choices now (I only buy new issue) seem to be between 4 wk T bills (yesterday's High Rate: 4.700%. Investment Rate*: 4.783%); 42 day CMBs, with the chance that the next yield my be slightly higher than the next 4 week T-bill yield; and the 52 week auction in October , which although lower would lock in a known yield versus the inevitable 4 week and 42 day yields going even lower. The choices are starting to feel like throwing a dart at the phone book.
Hi Anne. I think Eva put your 4 week vs the 6 week in this Sunday's Q&A. I'll cover that for sure. Jen
You removed the low outliers (0% interest rate years)in the bottom row of the table at 12:12. I wonder what the average interest rates would look like if the high outliers (e.g. 10%+ rate years from the 1970s and 80s) were also removed?
It was interesting to listen to Chairman Powell giving the reasons for cutting rates. “… the economy is still strong, the unemployment #’s are in a good range, core inflation ticked up . . . so we are going to cut rates. . . .
So much for getting inflation back to the 2% goal. 🙄
Yeah, begs the question, "What are they seeing that everyone else isn't?" The market will not react well if there's a spike in inflation and they have to take back some of these cuts.
I love your analysis and commentary; always direct and very informative. Thank you!
Jen, you and your team never cease to impress when it comes to providing value. I learned so much in this video, something that I would not research myself, but it was really interesting and great to learn! Bravo 👏
This is a great video because it explains how all these loans work. I agree with you that interest rates are not going to zero. My guess is that if you calculate the standard deviation it would be equal to the average at least.
Already my online high yield has dropped 1/4 point and T bill rates have dropped considerably.
This rate cut will only fuel inflation
Bingo! 💯
It will help stabilize the economy and keep it strong!
@@gmv0553 It's already strong and overheated.
@@gmv0553 it isnt strong to begin with so how can they "keep it strong"
@@gmv0553 Guess where the money on the exploding interest on the national debt will have to come from. Hint, it won't be from taxes but it will put more money into circulation.
One thing I don't understand is why the banks are borrowing and lending money overnight. Thanks so much for all of the straight forward info.
Some banks need to borrow cash at the end of the day in order to meet reserve requirements. Other banks banks that have excess cash are happy to lend it out overnight (to creditworthy banks) in order to earn interest.
@@tpausa54 Thanks!
A lesson on what reverse repo is would be great! Thanks
Jen.......***please do some videos explaining "reverse repo's"***.......thank you......
Thank you. Good presentation. Could you go through the process of the Fed redeeming a bond it holds when it reaches maturity? Is the "money" destroyed or disappeared? How can the Fed actually decrease the money supply(its tool for fighting inflation) when faced with a Treasury that must issue a new bond in order to pay its bills and fund entitlements?
Question for later: There seem to be many corporate bonds with coupons between 5 and all the up to 7.5 percent. What's the catch, is it primarily credit risk, which can be manged by due diligence on the companies and watching duration?
Hi Paul - I have added this onto Jennifer's list. Best - Eva
what is the risk with reverse repos? I get nervous whenever there's news of problems...and the money markets are faced with breaking the buck....thx
I think a mindset shift to longer term fixed instruments is going to happen along with rotation to equity especially ETF products marketed as value blend.
I would stay with 4 to 8 week t-bills...if FED lower again .50 at the next meeting.....I would lock in 6-12 month T-bills or CD at 4% and hope the rates don't keep crashing. Stupid FED just want savers to suffer or gamble in the casino/stock market.
I agree. It’s pretty stupid to cut rates with the stock market at ATH. They may be trying to help Comrade Kamala get elected.
Yup@@HumbleTrader001
@@HumbleTrader001aw come on now, let’s not be silly. There are plenty of indicators that suggest now is the right time to change rates. Can we avoid making everything political.
@@davenirschl6522 But why an aggressive 50 basis point cut with the stock market already at all time highs?
@@davenirschl6522 biggest rate change shortly before a national election in almost a century, yea politics had nothing to do with it.
.25 would been fine, or wait till November then no politics at all
Jen, I would love to see your explanation of repo markets. 👍 Repo markets, as I understand them, are our unsung heroes enables a lot of liquidity behind the scenes that we take for granted. Not every nation has a repo market like the US.
Noted!
This is a bit off topic but I still wonder why the value of the dollar falls against other currencies when the interest rates go down, snd why it doesn't rise with other central banks lower their rates. I am looking at a purchase in euros and the rate has gone from 1.07 to 1.11 in the last few months
The Federal Reserve's 50 basis point rate cut sparked a mixed market reaction, with initial gains giving way to caution, as investors weighed the boost to economic growth against concerns the Fed may be "behind the curve" in addressing weakening labor markets and potential recession.
Nice video. I completely agree that the long end of the curve has been front running the Fed. They really feel like they're way out ahead. I'm not buying much out long because I'm expecting some weakness out there, as demand levels off and the supply continues to rise.
Can you explain this to me? I'm not buying much out long because I'm expecting some weakness out there, as demand levels off and the supply continues to rise.
I want to buy longer term but you think it's not a good idea?
@@Leslie_Carol There are a lot of people who agree with you, that the long end of the market might be out in front of the Fed rate cuts. Here's another way to describe that, a lot of economists think the Fed is going to continue to lower rates until they get the rate down to around 4%, barring a recession. That being said, if the yield curve is normalizing (no longer be inverted), that means the 10, 20 and 30-year Treasuries will need to be at some rate higher than the Fed rate and if it's 4%, then the current rates on those bonds needs to move back up. I'm going to wait to buy anything long. I did some buying when rates were higher. I'd like to buy more but I'm not loving where the rates are right now.
This comment based on watching all her videos and her overall knowledge.
She could run circles around most of the past Sec of the Treasurers and Fed Chairs.
It's a shame USA has so much hidden talent that would never get appointed to Fed Chair nor Sec of Treasury!
Rates on your checking account will be approaching zero.
they never left
@@kelfeind It really is insane the billions kept in zero interest bank accounts
Which is why keeping anything over $2-3K in a checking acct is ill advised. I keep most of my cash funds at CFG Bank (a Maryland based bank)...it still pays over 5% and moving the funds back & forth to my local low rate bank is pretty easy. I do expect that rate to drop to 4.5-4.6%, unfortunately, thanks to Powell.
I only keep enough for immediate checking needs. Foolish not to put in money market funds over 5%. I've never had a savings account in my life.
Today’s 4 week T-bills sold for a 4.7% rate. Huge drop.
I'll be watching to see if there is a point to move further out on the curve, say 13 weeks.
@@HODIUSDUDE I'll definitely keep an eye in that too.
I'm very interested in reverse repos. I have an idea how they work. But I might be wrong.
What about these new Global X Short-Term Treasury Ladder ETF SLDR, mid term MLDR and long term LLDR ETFS. they are doing bond latters. Would this be better since they are professionals instead of us trying to do ladders?
Credit spread risk is going to become a growing concern if the economy slows down, as spreads are at their historical tightest levels.
Agreed...some of those higher yielding, lower investment-grade credits (Baa1/BBB+ and lower) could soon find themselves in junk territory if we end up in a recession.
Retiree's that were enjoying the interest rates on cd's, T-bills, Money Markets are soon to be poorer.
well if they were smart they would have bought some bonds that pay yearly at that rate. For the people thinking it would go higher oh well.
The market will always ebb and flow. That's the only constant.
No, they just won’t be making as much. There’s a difference.
@@davenirschl6522Exactly!
True. The bummer is, so many were drawn to the higher rates (5+%) on T-Bills, that they missed locking in longer rates, especially the 20-year Treasury at 4.50%+, high grade munis at 4+% and high-grade taxable muni and corporates at 5.+%.
My main use of tbills has been to stash extra money that I could use to pay off a home equity loan that’s at 3.5%. Once rates go below that I’ll start just paying down the loan faster. Most of my retirement is in stocks as I have a while to go before retirement
I wish I would have done that with my 2.75 loan! Paid it off just a couple of years before they went past that.
Thanks! I had not considered that option with my 3.37% mortgage. Of course it won't be a one to one comparison because I deduct the tiny bit of interest I pay during the year.
@@e79422 can you explain your comment? you paid off your 2.75 mortgage... what do you wish you had done? I have a 2.6% and I'm wondering whether I should make extra payments
You little “carry trader”
Well Done!
Very Well done.
Great strategy! I'm hearing there is a lot of this sort of thing going on...globally!
Jen.....please do some videos talking about how to make money with "hard money lending"........
I've used DVY as an alternative to Fixed Rate securities when interest rates get below my tolerance level.
I've picked up some SPYD, which has a similar YTD return as DVY but has a higher current yield (4.20% vs 3.49%, per Copilot AI).
@@DavidLitman-ph9lu I'm not keeping up with all the information. What is DVY, SPYD? and an alternative to fixed rate securities? Can you help me understand this?
what is your tolerance level? I used to have a high risk tolerance but now, looking at retirement soon I don't have the stomach anymore
Excited to see where rates are in 1 year. Hopefully around 3%
Stay tuned for the next video! Best - Caitlin
1MO T-Bill chart is reminiscent of 2008 indicating zero in 2025. Love this channel!
Nice observation! Add to that the fact that yield curve normalization has never been wrong in predicting a recession.
How will this effect SGOV thankyou
I love your videos. Very helpful. Thank You!
I just can't see rates going back to zero, as foreign investment is needed.
Agreed. So much of the discussion now is that the Fed is going to stop the cuts at a much higher rate. I'm hopeful that will be the case; that's especially needed for retirees living off of the interest earned on their investments. They a had really tough decade with the Fed holding rates so low for so long.
I don’t fully understand reverse repros and would love to learn more 🧐
I’ve moved to Dividend aristocrats & utilities for the fixed portion of my investment portfolio. I still have a 9 month treasury ladder that is earning >5%. But expect it to run out over the next year.
could you share what utilities funds you are in? Is this a Fidelity mutual fund? Or?
Jenn, does the interest on reserve balances rate impact treasuries much?
I’d love a video! Please share more insightful info!
i have had spdr bloomberg 1-3 month t-bill etf for some time now recieving 5 + % historically it dont move down much at all, is there a chance it will if interest go down to 0 ?
Well done show. Thanks.
What is your thought on MYGA annuity? thanks!
I think they can be the right fit depending on your financial situation. We will have more annuity videos in the coming weeks.
You can also email jennifer@diamondnestegg.com if you want an introduction to our annuities colleague. Best - Caitlin
what does MYGA stand for?
@@Leslie_Carol Multi-Year Guaranteed Annuity - I'll be talking more about annuities on Sunday's member live.
Can you do a video on how to open a Backdoor Roth IRA with Fidelity?
you deposit money in your IRA .. traditional IRA and there is a drop down menu that lets you transfer this money to a Roth .. If you have other IRAs you need to take into consideration tax consequences because the government looks at all your IRAs as one even though you may have several different ones.. if you dont have a trad IRA at all you can convert to Roth pretty much in a few days by drop down menu
Talk to your tax preparer first! I didn't do that and didn't know the rules changed. I deposited 7k and paid 6k in taxes because tax is based on your total ira account. Backdoor roth is great for those who don't have other traditional ira funds. Each person's situation is different.
@@bberdan6603Bravo! You are one of the only people who ever mentions that. Maybe few people have IRAs so this rarely comes up. But for me it would have been a huge error to do this. I warn people every time I read back door IRA posts but most don’t understand or care what I say.
I expected it to have a big impact on the stock market, it seemed to not phase it much.
I wonder why EDV, long-term treasury strips, went down?
I'm 75 years old and I have gladly locked in about one million dollars of US Treasuries with maturities between 2 and 10 years at an interest rate of about 4 percent. As a 4-decade investor I can say I have never seen a more dangerous stock market. The market capitalization of the stock market compared to GDP is about 200 percent. In other words, the value of the stock is twice the value of the whole US economy. Even scarier is the lack of diversification. One stock (NVIDIAP comprises 16 percent of the value of the entire S&P 500. Three stocks (NVIDIA, Apple, and Microsoft) comprise one-third the value of the S&P 500. We have had the longest inverted yield curve in the history of the United States. Price to earnings and price to sales have never been higher.
I rode the roller coasters of year 2000 and 2008 and not this time. Investors Beware.
The more I think about a "recent flurry" of corporate bond offerings at those rates, the more likely it seems they are hurrying to lock in a lower rate before LT rates fluctuate up. Still, we can't predict with certainty nor can they. But it seems unlikely that would be their move if they thought the rates would continue to go down in the near term.
Hi Rick - Jennifer says she will discuss the corporate bond offerings she's posted about further on Sunday's live. Best - Caitlin
The rate will not be going back to zero!
Agreed. So much of the discussion now is that the Fed is going to stop the cuts at a much higher rate than a lot are expecting. What's your prediction? Barring a recession, my guess is 3.75%.
Our high yield savings account with Empower went from 4.70 to 4.20 effective today. Yikes!
Yikes! We all knew it was coming. It was fun while it lasted.
very interested in repo market. please do a show
Is TLT a buy now?
Look at bil etf ?
Wow! Thanx!
A quick video on new rules for inherited Roth IRAs, please.
TMF could go up 200% in the next 18 months with the rate cuts.
How is everyone feeling about TLT and TMF?
In the details it says their goal is to keep reducing 2.9% in 2026
I really looked hard at putting some money in 10’year bonds last year when they were around 4.8. But at the time we thought T bills could go higher so I decided to just keep doing 3 month T bills and see. Oh well. I am about 50% stocks and 50% 3 month T bills. If rates keep going down I will keep adding to stocks.
Me too!
But as they say: A bird in the hand...And don’t cry over spilt milk.
An example from me!
I cashed out from a financial planner in early January, 2022 - a Bond/Stock portfolio. About 200k (one of my portfolios) and went into Cash type instruments. The return has been about 17%. The old portfolio (mirrored on Yahoo finance) is up about $345 Total, or about .19% (not 19 but Point 19)
If you’re making money even if not S&P returns which is about 25% during this period, a measly 17% return ain’t so bad.
Besides, Who has 100% in just the S&P?
That would be very risky and the difference is not worth the risk.
Cheers.
Thanks for sharing
Interesting. I know some folks that locked in 20-year Treasuries at auction with 4.50% coupons at a nice discount and now they're around 105. So many people got drawn into the 5-handles on T-Bills...they were just so exciting.
@@The_Bond_Guy what does this mean? got drawn into the 5-handles on T-Bills...they were just so exciting. Are you saying it's 'bad' that they bought 20 year treasures 4.50% coupon at discount?
@@Leslie_Carol Sorry for the bond trader jargon..."5-handles on T-Bills" means they bought them when the interest rate was at 5% or higher, like 5.25%. It's been a long time since we've seen interest rates on any Treasury securities above 5%, so people really loading up while they could. I'm not saying it's bad at all for people who bought those longer Treasuries, because they're going to get a 4.50% or higher coupon payment when the market rate is closer to 4%. It's just unfortunate for the folks who were really drawn into the higher rates on the T-Bills because now those rates are coming down and rates on the longer end have come down a lot too.
Not going back to zero ever, I hope.
Won't lowering rates spike inflation= hurting bonds??
Helps bond market, but will probably cause inflation to return and if bondholders believe that, they might not be ready to buy bonds yet. If clearly a recession coming, I would be more excited about buying bonds.
When the rates went up I told everyone to load into bonds and wait for them to go back to 0 and reap a tremendous short term gain.
Just curious...why do you think they're going back to zero? Where do you think they'll land if employment levels off and we don't go into a recession?
We are in the mist of the end of globalization. Cost of capital will be going up. Definitely, a blip.
If the economy is doing “so well”…. Why such a big cut? Hmmmm
We talk about this in today's video: ua-cam.com/video/cckNpVQtzVg/v-deo.html
I am not biased to any party but this seems like election time move
I’m interested in the topics not covered today.
The cut is premature. If they really cared for our purchasing power raes would have stayed until at least mid 2025
some experts say, from an article I read: "The risk remains that the Fed waited too long to act. Inflation has been near the central bank’s target for almost a year, and the economy, while still far from recession territory, has begun to show clear signs of slowing. The number of job openings has fallen, the unemployment rate has risen, and more people are behind on their credit-card bills and car payments. None of this would be particularly worrying if the Fed could simply press a button and provide an immediate boost to the economy, but it can’t. In fact, economists generally believe that rate changes take a while to filter through the economy. How long, exactly? No one knows. As the monetary-policy experts Christina Romer and David Romer wrote at the beginning of 2023, “If policymakers keep tightening until inflation falls as much as they want, they will likely have gone too far-because the effects of tight policy will continue for many months after they stop raising rates.”
Many other prominent economists have made similar warnings. If they’re right, then the recession that America miraculously avoided may turn out to be merely delayed. Then again, experts made a lot of dire predictions about the economy over the past three years that have turned out to be wrong. Hopefully they have one more in them.
This cut is likely political motivated. The next time on November would predictable job number better due to seasonal hiring. Then FED will come back to grab the rate higher for longer. Anyway the home buyer has no any move because the price is too high and mortgage has been price for rate cut 1% or more for months meanwhile inventories dramatic increase increase then sticky inflation will down.
A nice 🍎 for my Favorite Teacher🙂