Do you own bonds in your portfolio?

Many don’t.

They’re boring, they don’t really grow, and they pay... almost nothing.

Let’s go through a few types of bonds — AND why I currently hold hold them (*disclaimer - not investment advice for YOU)
1️⃣ WHY?

Current savings account interest rates are low. Like REALLY low (Ally just lowered to 0.60% down from 2.25% two years ago or so).

Inflation is pegged around 2%. That means your bank is actually losing money over time.

It’s like having a hole in your wallet...

👇🏻
This is where bonds and bond like funds come in, for me.

After talking with @andyisom100K and @javyandrade , I started tinkering with a portfolio of several types of these funds to park some of my savings (not all!) — to allow it to grow.

Let’s go through them to learn.

👇🏻
First, let’s get this out of the way — WHAT is a bond?

A bond is a way for a company or government (like the US government) to raise capital, by issuing a bond to a buyer agreeing to borrow money from them and pay it back by a select date, as well as pay interest at set times.
Bonds are often susceptible to interest rates, just like banks (and your savings rates in them).

Due to this, some also pay very low interest amounts.

Like all loans, essentially, there is risk of default with a bond. So be weary.
Now that we know what a bond is — let’s go through types of bonds.

I’ve selected 5 bonds or similar for my portfolio:

✅ US Treasury Bonds
✅ Municipal Bonds
✅ High Yield Bonds
✅ Preferred Stock
✅ Large stable Dividend paying company stock

Ready to learn?

👇🏻
First, the standard US government treasury bond — T bond for short!

Safe, reliable, slow returns. Like very slow returns.

Often labeled as boring.

These average about a 1% return. Some are pegged for inflation boosts.

But almost guaranteed.

Needed for stability.

👇🏻
Second,

Municipal bonds (called Muni Bonds) — state and local government bonds to raise capital. These pay at somewhat similar rates as T bonds, BUT with a fun catch.

Many of them are federal TAX FREE.

So your little, safe growth is also a little bigger being tax free.
Third,

High Yield Bonds — with riskier companies where the chance of default is higher.

While these would be terrible for ALL your money, they can be a good way to increase your overall income from bonds.

And thats my plan, right? So I mix some of these in to earn more.
Fourth, we can look for things that ALMOST act like bonds, but pay more.

That leads us to PREFERRED STOCK. Companies issue preferred stock to raise capital with investors (like a bond), but it pays out dividends at regular intervals similar to bond interest payments.

👇🏻
These are more risky, like stocks, but also tend to be less volatile than common stock.

Like high yield bonds, not ideal for your whole portfolio. But as a piece of my overall pie, these increase my income while still having lower risk than common stock.

👇🏻
Lastly, there are stable long time dividend paying stocks.

Companies like Verizon or Johnson and Johnson. Companies that have performed reasonably well through uncertain economic times, and still paid a dividend throughout.

Again, higher risk — but higher reward.
My thoughts are that with the right mix, a portfolio of the above could lead to a much better yield than a high yield savings account (much higher than 0.60%)

AND would likely still be liquid and relatively low risk compared to a normal ETF or common stock.

👇🏻
My current mix is paying close to 4% — but likely has more risk than is ideal.

It’ll probably take some adjusting over time.

But it’s a fun experiment with money I can risk.
There likely is no perfect solution here.

But bonds and bond like funds can be a great tool for money you don’t want to expose to too much risk.

Should a crisis come, your money wouldn’t likely be down 30% for months WHEN you need it. And it would pay income when you don’t.
In sum, my bond ‘fund’ currently contains:

▫️ T Bonds - for stable income
▫️ Muni Bonds - for tax free stable income
▫️ High Yield Bonds - for larger but risky income
▫️ Preferred Stock - higher income but risky
▫️ Safer Dividend Stocks - risky but high income

👇🏻
I’m placing about 20% of my emergency fund in this mix to allow it growth, and see how it performs. I may adjust that amount depending on what I see.

I hope you learned a thing or two — if so, SMASH that RT button so others can too!

Until next time, stay hip 😎

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More from @finance_hipster

21 Feb
Here are a few REITs (Real Estate Investment Trusts) that I own shares of:

$O - Div/Yield 4.6%
$STAG - Div/Yield 4.53%
$CUBE - Div/ Yield 3.7%
$NHI - Div/Yield 6.45%
$MAIN - Div/Yield 7.13%
$LAND - Div/Yield 2.89%

Each pay a nice dividend yield, with several paying monthly.
As a renter, I love REITs because they provide me real estate exposure that I otherwise wouldn’t have the capital to invest in 🏡

You buy shares,

get paid dividends and capital appreciation,

and someone else has to fix the roof and toilets and collect the rent.
If researching and picking out one individual REIT company scares you due to risk,

you can also invest in multiple through an ETF.

Two REIT ETFs that I own:

🔘 $VNQ (vanguard US Fund, low cost) 3.89% div/yield
🔘 $SRET (riskier, global, higher yield/cost) 8.74% div/ yield
Read 5 tweets
23 Nov 20
We discuss a lot of books on here with money knowledge —

But films 🎥 are more rare.

That doesn’t mean you can’t learn anything though.

On today’s reel, Wall Street (1987).

Get in the car —

Gordon Geeko is teaching class today.

//*thread*//
This film is full of fast money and stock market pump and dumps 📈 📉

Classic insider trader moves and back restaurant deals.

But buried in there are actual real money and trading gems 💎

I’ve pulled a few out just for you (because I like you, that’s why)

👇🏻
“I look at 100 deals a day, I chose one.”

When you first start investing, every deal looks good 🤑

You want to jump on every opportunity because to you everything looks like money.

It isn’t.

Learn to sift through the junk, and find the one.

This has saved me money.

👇🏻
Read 12 tweets
21 Nov 20
My current yearly allocation:

▪️401k (4% company match)
▪️Roth IRA max ($6000)
▪️HSA max ($3500)
▪️Gold 5%
▪️Bitcoin 3%
▪️Remaining goes to after-tax brokerage where I split 50/50 ETFs/Individual Companies

Savings rate: 50-60% (this gives me a lot of options)

👇🏻
A few other stats:

▪️I do not use DRIP (automatic dividend reinvestment)
▪️My 401k/ROTH are set up with about a 60/40 split US/International total stock funds
▪️ETFs — I favor the lowest expense ratio option when available
▪️Favorite ETFs: $VTI, $VOO, $VXUS, $ICLN, $VGT
Saw similar summaries from @thewealthdad and @DecadeInvestor and figured I’d share my own!
Read 4 tweets
21 Nov 20
Spend as much of your money as you can on:

1️⃣ Things that pay you money
2️⃣ Things that will be worth more money in the future than what you paid for them.

I prefer the first option because it guarantees 💵 coming to you.

👇🏻
The second option is good for for diversity and potential gains.

Both are asset classes,

BUT

One gives you guaranteed income and the other makes you wait in hopes someone will be willing to pay more for it at a later date.

Some examples of each:

👇🏻
1️⃣ Things that pay you money:

✔️ Dividend paying stocks
✔️ Interest paying accounts (bonds, notes/loans, high yield accounts, etc.)
✔️ Rental properties or vehicles
✔️ Business ownership

👇🏻
Read 6 tweets
10 Oct 20
Money lessons are as old as the Bible —

Written as far back as 1200 B.C. to the first century A.D.

With an estimated 5 billion copies sold.

And yet, as you’ll see, all these lessons are STILL ignored.

So what does the Good Book say about money?

👇🏻
“For the love of money is a root of all kinds of evil.”

Timothy 6:10

This one is BIG. But often misunderstood.

It’s not a danger to be good with money or to master it.

Merely, falling in love with it is the trouble.

We’ve all seen the evil rich guy. Don’t be him.

👇🏻
“Dishonest money dwindles away, but whoever gathers money little by little makes it grow.”

Proverbs 13:11

Quick to rich and quicker to broke.

Don’t chase after one big win with all your money. Instead aim for consistent gain with discipline.

👇🏻
Read 11 tweets
3 Oct 20
Investment Hack 🔍 🤫

Unlock the power of an ETF (Exchange Traded Fund)

For early investors, it can be hard to figure out WHAT to buy.

You know you like a few companies, but you don’t know if together they’re a good idea.

That’s where studying ETFs come in 👇🏻
Firstly, what’s an ETF:

Like index funds, ETFs are a fund of multiple stocks. Some have 100 holdings, some less or more. But they give you good diversity matching an index or sector.

Even for experienced investors they can be a great catch-all to passively invest.

👇🏻
There are 2 main types:

Passively managed (cheaper fees) — like $DGRO

Actively managed (more expense because they are closely managed with more buying/selling activity to try to increase the fund earnings) — like $ARKK
Read 13 tweets

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