Hey all,
please help me out as I'm a dumb-dumb on bonds. I recently read John Bogle's Book "Common sense on Mutual Funds", and I learned I should be able to expect a ~5% long term gain on bonds if averaged over periods exceeding ~10 years. Kinda like how long term inflation adjusted total market returns will be ~7%.
So, I'm 43 and I want to start moving money from an stock market into bonds. My target allocation is 90/10.
20% of my money is tied up in company ESOP stock.
40% of my money is tied up in company 401k.
The other 40% is at fidelity, in a blend of rollover IRA, roth IRA, brokerage accounts, etc.
Total net work is 1.2 million. So I moved 120,000 into the cheapest bond index fund I could find. I did this in my rollover IRA and I bought FXNAX.
The dividend is $.027755 and I own 10,471.430 shares. Which gave me a dividend this month of: $290. On a $120,000 investment.
I also have $8500 in a money market fund which I use for my checking account.
The 7 day yield is 2.23%. My 8500 threw of interest of ~$75.
If I had put my $120,000 into SPRXX (money market), I would guess that would have thrown off interest this month of: $1125. ish.
So, why the hell would I put money into a bond fund? $1125 a month = $12k a year.
That's 25% of my annual spend rate. I could put $400,000 into a money market and make ~48k a year?