Gyroscopic Investing

I'm holding a lot of cash to potentially buy a house in the near future. Admittedly we've been planning on buying a new house for the past five years and counting.

I'm wondering if it would make sense to put a third of that cash into Intermediate Treasuries....but then I looked at the returns and they are god awful. A 5 year note is not even 1% better than a 52-week note (2.785% vs 1.870%) I guess 1% is nothing to sneeze at but with the interest rates possibly rising, I could see any gains getting slaughted by a slight move...

Am I missing something about ITTs?

2 or 3 year treasuries look to be the best bet to me.

https://www.investing.com/rates-bonds/u ... ment-bonds


VGSH is a cheap way to accomplish if you want a fund instead of buying direct.

https://investor.vanguard.com/etf/profile/VGSH


I have been trying to find a more detailed explanation of Larry Swedroe's 20 basis point reward needed for each year of duration rule. In hindsight I feel like this would have stopped a lot of recent portfolio heartache.


Here is one example of it being mentioned at bogleheads in a little different context.

https://www.bogleheads.org/forum/viewtopic.php?t=120617

I like rules of thumb. This makes sense. Maybe I'll split my Tbill ladder to be half 52-week and half 2-year notes and just let them autoroll from there.

joypog wrote: ↑Sun May 15, 2022 11:03 pm I like rules of thumb. This makes sense. Maybe I'll split my Tbill ladder to be half 52-week and half 2-year notes and just let them autoroll from there.

Are you putting off the house purchase for at least two years? I ask because even 2-year notes (not held to maturity) will go negative if rates continue to rise significantly. Of course where to buy on the yield curve when rates are rising can drive a person nuts.

This morning at Fidelity I am seeing the one-year at 2.08% and the two-year at 2.6%. I would think it's better to stick with shorter maturities if you are still hoping to get the "damn house".

With the Fed signaling every 15 minutes that they plan to keep raising rates, I would definitely stick to buying treasuries with the intent of holding to maturity as opposed to buying a fund. Just have a look at the recent history of VGSH (duration of 1.9 years) or Fidelity's longer term FUAMX (duration of 6.5 years). Here is the link for FUAMX:

https://fundresearch.fidelity.com/mutua ... /31635V257

It's not pretty!

barrett wrote: ↑Mon May 16, 2022 6:55 am

joypog wrote: ↑Sun May 15, 2022 11:03 pm I like rules of thumb. This makes sense. Maybe I'll split my Tbill ladder to be half 52-week and half 2-year notes and just let them autoroll from there.

Are you putting off the house purchase for at least two years? I ask because even 2-year notes (not held to maturity) will go negative if rates continue to rise significantly. Of course where to buy on the yield curve when rates are rising can drive a person nuts.

Its hard to say. We keep talking about wanting to buy a house (which is why we've ended up in a cash heavy position) but finally realized we're gonna have to pull a mortgage given all the housing inflation so need to invest the cash somehow to avoid getting obliterated by the financial inflation.

So maybe we'll buy a new house this summer or next summer....or maybe we won't buy one for another five years!

Your point about getting cute for .6% makes a lot of sense. For one thing it would be a double insult whenever the feds rase the rates - the mortage goes up while our STT is worth less.

Cant time the housing market either. Buy when you decide you'll be there long term

boglerdude wrote: ↑Mon May 16, 2022 4:41 pm Cant time the housing market either. Buy when you decide you'll be there long term

That's the problem. With two architects, it's hard to decide on a "good" house...timing or not!

Let her decide or you'll never hear the end of it =)

boglerdude wrote: ↑Mon May 16, 2022 6:21 pm Let her decide or you'll never hear the end of it =)

Trust me, I've learned the hard way. The first house was heavily influenced by my preferences.

This next one I told her is 100% on her. I'll advise if asked, but if she needs to own the next decision.

I don't want keep living like we'll be moving next year.