Yes, but start the first purchase right now. Unless you already have TD accounts set up with funding sources established and are positive you can get the first transactions completed prior to the end of the year.
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i think probably good? I got a lot of student debt, planning to buy a house on a 30 year fixed, a job that should increase in value with an aggressive investment to savings position.
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Team Good. Just took on a ton of debt in the form of a mortgage, not holding that much cash relative to net worth. Most of it is in Vanguard funds.
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I’m holding a boatload of cash that I need to keep liquid, so not great. On the other hand, I’m still working and my company is very aggressive with keeping up with salary trends in our industry, so I won’t lose ground there. And not sure how our investments will go. Equity could crash or could run another 100 percent or more before crashing, but that’s not much different than I feel at any time really. And luckily I started moving our fixed investments aggressively into I-Bonds and TIPS around June/July 2020 after realizing they were going to inject a shitload of cash into the money supply. Got about half of our fixed investments into inflation protected stuff.
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but your interest rates are not in danger of being caught by inflation. not even close.
they don’t have to catch to help right?
like it’s better for me for inflation to be 2% on a 5% loan than 0.5%. Even if it doesn’t catch it all the way.
Isn’t inflation currently smoking most people’s interest rate on their mortgage?
What’s insane to me is that people are still buying bonds and MBS that pay 0-3% while inflation rips at 6%+. I get having some cash because duh, but investing in medium to long term assets returning -3% real? Wat? Also those fixed income assets will get crushed when rates rise, what are these people doing?
What else are you going to do if you are not in a position to be like 90 percent + equities? I guess cash is better than a true negative yield, but most of my bond funds made at least a few percent last year.
They already bought all the assets they are comfortable holding in a “bubble” and short term rates are near zero. So why not just buy short term bonds anyway under the assumption that the Fed will raise rates soon and you can reinvest in a year or whatever at higher rates?
The bet is that the increase in rates will be short-lived as the cycle will go rates increase-> asset bubbles burst-> Fed fears recession-> Fed says just kidding and rates go back down. Could even have negative rates in the medium term as is the norm in Europe now:
Click Max on the below 10 year Treasury chart and you’ll see a clear long term downtrend:
Lol just looked and this is actually wrong for my nominal bond funds, which are down about 3 percent. TIPS funds are up about 6 percent. And then I have I-bonds and a pile of cash. So I’ve probably lost about 3-4 percent against the inflation in blended fixed/cash.
Think of it as starting early.
Paying off debt now is the best thing to do. You need a massive, yet to be known catalyst to cause another leg up in inflation. Gold/silver etfs are bleeding, leveraged companies are under pressure. Inflation is mostly finished. The extra unemployment for low wage + high % of people + the secluded time did quite the job.
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Agree with most of this and have no issue with people holding short term fixed income. Have no idea how anyone is buying medium to long term fixed income at current rates.
It’s just going one level deeper than you are thinking. Sure, the Fed will raise rates in the near term but once that pops the bubble the rates will go just go right back down to zero or even negative. Thus, 1.5% locked in for ten years on treasuries is the right rate compared to taking 0.30% on a one year treasury hoping to reinvest at a higher rate in one year.
I think what’s actually going on is 10+ year treasuries are bought almost exclusively by institutional investors who are liability matching. There is basically no way individual investors (even very rich ones) are doing what you suggest re: treasuries. I do think individuals buy corporate bonds and I think it’s very dumb.
Yes, assuming you don’t have a better use of the money.
I’m just stashing some of my emergency fund in there and there is nothing better I could do with that.
well, the biggest issue for the poor is that inflation is a lagging indicator, in that prices are already higher before people get a wage raise. and after that, poor people credit rates are in fact quite high, credit histories and all, on everything from mortgage rates to credit card debt. so yeah, 2% “additional” inflation is easing some of my 4.5% mortgage, but that help is smaller on an 8% home line of credit.
that’s true, but mortgage term is 10-30 years. sustained inflation above mortgage rates would be crushing potentially.
The view that the value of debt owed by the poor is lowered due to inflation may be objectively accurate, but I doubt most of them are feeling that their debt burden has been significantly eased a result. People buried deep in debt tend to stay buried.
That there’s no stable asset in the world is objectively true. That being said the price of eggs is one of those things that will fluctuate quite a bit usually.
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