why people are investing in Treasuries, CDs

[johnsmith]

I've noticed a lot of people buying CDs, treasury bills lately.

Why are people (as in yourself not investing in stocks, (non treasury) bonds etc?

[Mustang]

I imagine there are a lot of different reasons but the most likely reason is that CD and treasury bills are paying more and are safer investments.  The S&P 500 PE ratio has an inverse relationship with the yield on safer investments.  Interest rates near zero push the market higher as investors seek better returns.  Interest rates are no longer zero.  As the return to a more historical norm so will the PE ratio.  It is currently 21.3.  The mean is 16. 

There is a lot of uncertainty in our economy right now and many believe the worst is still to come.  Only optimists believe inflation is under control.  The Fed may pause a little to get our economy accustom to the reality of higher interest rates but a pause doesn't necessarily mean a reduction in rates is next.  Our government, including the Fed in it bank bailout, is still pumping stimulus money into our economy.

[uncleharley]

They are. Trading volume for the S&P 500 was approximately 3 billion shares yesterday.

[johnsmith]

Are you (plural - youall personally buying stocks?

[steadyeddy]

Mar 28, 2023 12:51:15 GMT johnsmith said:

Are you (plural - youall personally buying stocks?

Yes I am.. not individual stocks but stock funds.

[Mustang]

Mar 28, 2023 12:51:15 GMT johnsmith said:

Are you (plural - youall personally buying stocks?

Yes.  I have no idea which of the conflicting opinions is correct so I'm doing what I have always done - dollar cost average.  I'm buying a little each month.  But I'm also a buy and hold investor.  I don't expect to sell for several years.  If things get worse I'll take advantage of the low prices and just ride it out.

[win1177]

Mar 28, 2023 12:51:15 GMT johnsmith said:

Are you (plural - youall personally buying stocks?

Not since a recent addition to my USB position on banking weakness. Adding (slowly) to bond mutual funds from our cash position, mainly muni funds in taxable accounts. Doing this for “safety” of muni funds, as well as yields.

Win

[Chahta]

I look at CDs and Treasuries as bond investments. As such they may be the place for a portion of a bond AA. I do own non-Treasury bonds too.

Can't speak for anyone else, but I am and have been fully invested in stock funds. If they fall too much I will adjust my AA. I really have no new money to invest since I am retired.

[dave]

A year ago, I took money that I had in the credit union making next to nothing and started buying 2 and 3 month Treasury Bills. As the year progressed, I bought 3, 6 and 1 year bills.

My equity part (mutual funds, ETFs) went down due to market forces. I did tax loss selling but I reinvested. Those losses allowed me to sell some long held mutual funds with big gains. That money went to ETFs.

My smallish IRA is all Treasury Bills. The money was in the Vanguard GMNA fund until a year ago.

[uncleharley]

I am fully invested with a normal for me asset allocation

[Fearchar]

Prices are not especially compelling right now for equity. That is the equity premium is currently small compared to what it can be.

3 years ago, during the height of the panic, I was all in and the premiums were sweet.

[oldskeet]

Old_Skeet is fully invested within his asset allocation of 20% cash, 40% income and 40% equity. Generally, I reinvest cash residuals left over from quarterly distributions somewhere within my portfolio. With this, I am an asset buyer of my types of securities and not just stocks and bonds although the are my main asset classes.

[yakers]

Nothing wrong with CDs & treasuries as all or part of the fixed income part of ones AA. And there are a variety of treasury types including ibonds, short, intermediate and long bonds & TIPS, so one could have all their AA both tax deferrred and taxable in federal something if they wanted.

[steelpony10]

johnsmith ,

       Once again being old school I understood one didn’t invest any money whose value you didn’t want to risk. So on average probably about 30%+ of our liquid investable assets are held in positions yielding less then 3% or so with no chance of any capital gains. So held in reserve if/or ever needed.

        I have no idea if this means “fully invested”. I’ll just say I never even give a thought to that and am not a Cramerista seeking bull markets all my waking hours. I think I have enough for now.
 
        Specific to your question we’ve never held CD’s or treasuries seeing them as too labor intensive where a simple auto invest of excess income or reinvestment does the job for us. If others use CD’s or treasuries in lieu of cash to slow down erosion of purchasing power a little more great. Anything that slows spend down in retirement even a little (besides skinflint mode, lol) is good.

         If any poster is pre retirement these markets are remarkable sales maybe even long lasting, 5-10 years. We kept the pedal to the floor all through the early 00’s which long term led to great but delayed rewards.

[mozart522]

No stocks or funds currently. 100% T-bill and cash. Currently letting T-bills mature and building cash. See no reason to take any equity risk when I can get 4.7 in cash and more in T-bills and I have less than a 2% withdrawal rate needed. I will get back into equities to some extent in the future I'm sure. No FOMO right now. The market is fighting the FED. Good timers will be OK. Buy and holders will eventually be OK. And I'll be OK.

[FD1000]

Mar 28, 2023 12:02:22 GMT johnsmith said:

I've noticed a lot of people buying CDs, treasury bills lately.

Why are people (as in yourself not investing in stocks, (non treasury) bonds etc?

I never invested in CD or treasury bills. Until early 2022, the longest I have been out of the markets was 3-4 weeks.
But in early 2022, I was convinced that staying out for months in MM is the right choice, especially for a retiree like me who has enough. In 11/2022, I changed my mind to more favorable, but I haven't changed my mind to be in longer than just several weeks each time.  I can be wrong, but I don't care.

So why I don't own CD and treasury bills even if they pay a bit more than MM? 
Because trading in/out of the above is more complicated than MM which pays over 4.5% until the next trade.
The chart below says is all.

Attachments:

[mozart522]

Mar 29, 2023 4:09:23 GMT FD1000 said:

Mar 28, 2023 12:02:22 GMT johnsmith said:

I've noticed a lot of people buying CDs, treasury bills lately.

Why are people (as in yourself not investing in stocks, (non treasury) bonds etc?

I never invested in CD or treasury bills. Until early 2022, the longest I have been out of the markets was 3-4 weeks.
But in early 2022, I was convinced that staying out for months in MM is the right choice, especially for a retiree like me who has enough. In 11/2022, I changed my mind to more favorable, but I haven't changed my mind to be in longer than just several weeks each time.  I can be wrong, but I don't care.

So why I don't own CD and treasury bills even if they pay a bit more than MM? 
Because trading in/out of the above is more complicated than MM which pays over 4.5% until the next trade.
The chart below says is all.

4.73% on MM at Vanguard now 

[retiredat48]

Into Treasuries...to make more than Money Market Funds.  And secondly, to lock in excellent retiree yields longer term, as part of fixed income allocations.

Into some GDX recently as a speculative, fun trade.

Hold considerable stock funds and fixed income per my allocation range. Currently at low stock allocation level, which I have never taken below 50%. Cash and short term bond funds at all time percentage high, due to complete exit from standard issue bond funds about 1.5 years ago.

R48

[FD1000]

Schwab MM SNAXX pays 4.79% but I invest in safer MM. Changed from SUTXX TO SCOXX that pays 4.63%.

[johnsmith]

Mar 29, 2023 16:55:06 GMT retiredat48 said:

Into Treasuries...to make more than Money Market Funds.  And secondly, to lock in excellent retiree yields longer term, as part of fixed income allocations.

Into some GDX recently as a speculative, fun trade.

Hold considerable stock funds and fixed income per my allocation range. Currently at low stock allocation level, which I have never taken below 50%. Cash and short term bond funds at all time percentage high, due to complete exit from standard issue bond funds about 1.5 years ago.

R48

What treasuries pay more than Money Market funds?

[catdog]

Sold all my bonds/funds about two years ago.  Sold all my stocks/funds November 9th.  I am now 40% money market and 60% CD's.  I am 68 and for the first time in my investing life I was getting nervous about holding stocks.  I am very happy with current yields.  I also did a stupid thing when I jumped on 12 month and 18 month CD's early in the rate raising cycle.  I am now waiting  till October and  November for 2% CD's to mature.

AND ANOTHER THING

I have often wondered why the government does not sponsor a stable value fund for people, let's say, 65 and older.  There are a lot of older people that will not invest their money and have $50000 or $100000 in the bank.  It had been a long dry spell for people living on CD's up until last year.

catdog

[retiredat48]

Mar 29, 2023 19:48:00 GMT johnsmith said:

Mar 29, 2023 16:55:06 GMT retiredat48 said:

Into Treasuries...to make more than Money Market Funds.  And secondly, to lock in excellent retiree yields longer term, as part of fixed income allocations.

Into some GDX recently as a speculative, fun trade.

Hold considerable stock funds and fixed income per my allocation range. Currently at low stock allocation level, which I have never taken below 50%. Cash and short term bond funds at all time percentage high, due to complete exit from standard issue bond funds about 1.5 years ago.

R48

What treasuries pay more than Money Market funds?

Reminds me of the same question I got from my retired mother , who took my guidance and bought some high yield bond funds, and money market funds, during the end of the 1970's time period.  MM was at a yield of about 17%, and LT Treasury Bonds Funds at 15%.

Soon, she changed much of her holding to MM fund then , claiming a higher yield.  BUT I COULD NOT CONVINCE HER OF WHAT DURATION, OR MATURITIES, MEANT.  I wanted her to lock in 15% for 10-20 years.  She would not change.

Then her MM fund rate starting falling out of bed.  She was pis_ed!  To her credit, she did start switching  more to long duration high yield.  She eventually loved VWEHX!! ...for the next decade+.

I simply predict that my 5 year, 4+% ,  Treasury Bond Fund will outperform your MM Funds...over these five years.  And too late to switch now, as the five year is way below 4%.  I'm locked in!

R48