Fixed Income - where to park money

[bandito]

I was wondering where others park their money that they just want to collect interest on.

[Seppia]

Which interest?
I'm only half joking, I'm in Europe, so really bonds are a big No No for any semi rational investor.
The church of 60-40 will disagree, but why should I buy something that has a guaranteed negative return when I can just keep cash in the bank?

[dividendman]

I think they are two separate questions.

For "fixed income" I use BND (Vanguard's total bond market ETF).

For "parking your money" it depends upon duration.

I separate the two because BND could tank by a significant amount whereas a savings account or CD is guaranteed not to lose money.

[MustacheAndaHalf]

For money you might need next week or next month, an online savings account seems like the best fit.  I favor Ally Bank where an online savings earns 1.0%.  If you like to optimize, you might look into Synchrony Bank which advertises 1.05% right now.

[bandito]

Thanks for all the replies.  I was actually looking into bond mutual funds but based on historical charts it looks like May is the best time to buy and now is the best time to sell. I looked at BND and it seams to move in the opposite direction which is very interesting. 

It was using bank account but it seems not much happens at 1%. Looking for something more.  I like posting financial questions here. I always get very useful info.

[Heckler]

Thanks for all the replies.  I was actually looking into bond mutual funds but based on historical charts it looks like May is the best time to buy and now is the best time to sell.

How do you figure that?  Heres VSB and VAB - Canadian short and long term funds from Vanguard. 

[Heckler]

I use VSB short term bonds for my big emergency fund ($21k in my TFSA I dont plan to sell unless I really, really need to).  It kicks out ~$20 - 40 per month and with DRIP has stayed fairly steady at $21k with some cash outflow that gets reinvested to equities.  I expect after holding for three years it should also start growing after YTM date.

Then I hold 30% - $21k in long term bonds VAB to hold forever. It has dampened market fluctuations nice enough I haven't sweated once while pretty much looking at total balance daily.

[Heckler]

My little emergency fund is cash in the bank.

[bandito]

Thanks for all the replies.  I was actually looking into bond mutual funds but based on historical charts it looks like May is the best time to buy and now is the best time to sell.

How do you figure that?  Heres VSB and VAB - Canadian short and long term funds from Vanguard.

To be quite honest I was only looking at TD bond funds as I deal with TD.  Perhaps I should look else where also.

[Heckler]

I would be careful about any higher fee bond funds. VAB has a 0.13 MER and a 1.6 distribution yield.  What would a 0.5 MER do to that yield?

https://www.vanguardcanada.ca/individual/mvc/detail/etf/overview?portId=9552##overview

Canadian Couch Potato has some excellent reading on bonds you should do to not panic when interest rates start rising

[Heckler]

http://canadiancouchpotato.com/category/bonds/

And in particular:

http://canadiancouchpotato.com/2015/11/09/the-trouble-with-bashing-bond-indexes/

And

http://canadiancouchpotato.com/2015/05/18/how-changing-interest-rates-affect-fixed-income/

[Car Jack]

Redneck Bank Megamoney account at 1.25% APR.  (yes, it's a real bank).

[mgarf]

Thanks for all the replies.  I was actually looking into bond mutual funds but based on historical charts it looks like May is the best time to buy and now is the best time to sell.

How do you figure that?  Heres VSB and VAB - Canadian short and long term funds from Vanguard.

To be quite honest I was only looking at TD bond funds as I deal with TD.  Perhaps I should look else where also.

I'd be careful of the TD bond funds... the short term and the total bond fund they offer both have MERs of >1%!!!! Crazy! If you want something short term I favour savings account for slightly reduced risk over short term bond funds. If you want to take a bit of risk though... you can go for a short term, low MER corporate bond fund ETF like VSC (corp doesn't really give you much more risk than government, and you get a slightly higher yield). I would stay clear of non-short term maturity bond funds like BND, because of their long-maturity components you can really lose out if interest rates change.