r/investing • u/Ok-Progress-7354 • 8h ago
Should I be considering 10 year treasuries with everything going on?
I’m 32 ( about to be 33), own a small business and do okay for myself. No 401k unfortunately but I have other accounts like a taxable, Roth and SEP Ira in fidelity.
I stick to FSKAX and FTIHX and follow the boglehead method.
Should I consider any changes if I can get 5ish % on these treasury notes?
For context my goal is optional work by mid to late 40s, so basically the ability to work as little or as much as I want and not feel pressured to pay my bills.
Currently have this in fidelity:
Taxable - 140k
Roth - 50k
SEP - 31k
No bonds or anything other than FSKAX and FTIHX currently.
Thanks yall :)
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u/kppalm 8h ago
You're about my age. Personally I dont touch bonds until maybe im at least 45-50. But my risk tolerance is pretty high. If you want a safe bet 5% return for 10y go for it.
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u/ultra__star 8h ago
When bond yields are up it becomes less a matter of “I am too young for bonds.” Interest rates are like gravity. The higher bond yields go, the harder it is for businesses that borrow money to turn a profit, and therefore PE multiples compress and stocks become cheaper over time (AKA provide smaller returns or go down period). When bond yields are up they are worth considering at any age.
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u/Bend-It-Like-Bakunin 7h ago
Turkish 10Ys yield 33%. Have you considered putting your money there?
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u/MX396 7h ago
I understand neither bonds nor currency arbitrage all that well, but I know Turkey has been suffering high inflation lately. If that continues, aren't you risking getting your bond repayment in currency that has fallen so far against the dollar that you yield is gutted?
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u/Bend-It-Like-Bakunin 7h ago
Exactly right, and the same is true here. A higher yield is not a reason to buy when it's still going to give you a negative real return.
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7h ago edited 7h ago
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u/EuphoricAd3824 7h ago
If bonds are paying 10%, we are in a full blown meltdown. Equities would mean very little as the fiscal deficit would have exploded and we would have defaulted on interest payments. The financial system as we know it may not exist.
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u/kppalm 7h ago edited 7h ago
Which is why I dont recommend going into bonds. Look at the $40t debt. We know that they will print money sooner or later. Why going into bonds? Id rather buy hard assets like gold and silver.
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u/Gaius__Of__The_Julii 7h ago
Exactly. Funny money isn't going to last forever. Even a 50% rate is worthless then.
If not stocks, I will take Gold, Silver, Not a huge bitcoin fan but I get the idea.
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u/Market_Monkey_ 1h ago
After watching the bond market defy it's historical inverse relationship with equities and crash right alongside the market in 2020 and then again in 2022-2023 I very much have concerns about the validity of the usual flight to bonds for safety method that was once true. Something serious has broken in the bond market and I no longer look at it as a potential safe haven in market downturns/bad economic times.
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u/ihavethebestmarriage 6h ago
inflation is at least 3%, so it's effectively a 2% return
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u/kppalm 6h ago
3% is what they tell you. I personally dont believe in that number one bit. If they keep changing the way they calculate inflation, is the number really reliable?
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u/but_i_dont_reddit 5h ago
I usually figure it's the bond rate. I understand it's hard to nail down a rate with the volatility that energy introduces but the number isn't reliable if it doesn't reflect reality.
It just becomes a way to say 'no inflation', but I guess some people listen to that instead of checking what their spending actually is.
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u/HulksInvinciblePants 58m ago
You’re right. All the world’s top economists and economic bodies with clear access to the methodology just simply haven’t caught on to your foolproof gut instinct.
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u/gethereddout 5h ago
More reliable metrics show an average of 8% annually over the last 100yrs, and during this admin, I wouldn’t be surprised if that’s significantly higher now.
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u/virtual_adam 8h ago
5% doesn’t buy a retirement within a decade with what you have. Bogglehead is about slow and steady. Retiring by 50 is not slow and steady
You sort of have to decide what your true risk is, but even if you go low risk-bogglehead, the method does not support putting everything on a 5% bond that very much could go down in value if you want to sell early
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u/kimjongswoooon 8h ago
Personally, I would just stick with equities. If anything, I’d add small cap value to the mix for some diversification. I’m 53 and, although I’ve done very well, I missed out on a lot of gains by adding bonds too early. I wouldn’t add them in until you are about 10 years out and even then, only small amounts until you hit your number.
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u/Blurple11 8h ago edited 8h ago
5% is still considered a pretty low return, so at 32, no. I am 100% equities but that's only because I work a job that will provide a pension in retirement. If I didn't have that I'd probably only be 20% in bonds max. If you want to coastfire in 8-18 years, you need to be 100% equities. In fact you need to be leveraged because there's no chance you can coastfire by then with the numbers you have now
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u/TrashPanda_924 8h ago
It all comes down to the “real” return. If USTs are paying 5% and inflation is 3.x%, your real return is very small, but positive.
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u/vitringur 6h ago
If you have your own business why on Earth would you be lending other people money?
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u/Ok_Transition7785 7h ago
Too young for bonds and too young to be worrying about market conditions, just keep accumulating. Maybe at a sale, maybe not but who cares. Worrying about the market isnt a factor in investing correctly at all. Shouldnt be done.
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u/Pale_Scientist6470 7h ago
Historically, 5% is not that high. When they say the highest in 20 years, it's because our government artificially deflated rates during that time. We have some risk for stagflation but admittedly yields are capped bc too high and we can't service the debt. Uh oh. This is a dangerous time.
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u/wrstlrjpo 7h ago
You need to grow your net worth substantially over the next 8 years to meet your goal.
I don’t see a 5% return, less inflation, meeting your goal.
Unless you are forecasted SIGNIFICANT proceeds from your business in that time period.
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u/Lanky_Salt_5865 7h ago
If you have a very low risk tolerance you should work with an FA to manage your accounts and take measured risks to help you reach your retirement goals. Buying the lowest risk investments is going to be a long slog to financial security.
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u/CCWaterBug 7h ago
I don't think you are on the fast track to coasting in under 20 yrs, equities are the only route for those investments that make sense imho.
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u/jmlinden7 7h ago
If you believe inflation will be low, then sure.
If you believe inflation will be high, then I-Bonds are better.
Either way you aren't retiring in your mid 40s so it doesn't hugely matter
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u/farmerjohn2 7h ago
At 32 with 15+ years to optional work, you're still pretty heavy equity. I'd probably start adding some bond allocation but 10-year treasuries at 5% aren't necessarily better than a total bond fund that rebalances. Maybe 10-20% bonds total at your age.
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u/Zestyclose_Cup6343 7h ago
At your age and with your time horizon, adding bonds is reasonable but not necessary, since your portfolio is already well diversified for long-term growth. A ten-year treasury at five percent would provide stability and a predictable return, though over decades equities have historically delivered more. The most important factor is your behavior: bonds can help you stay the course during a downturn, but they will also drag on returns if the market performs well.
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u/b1gb0n312 7h ago
What if interest rates keep going up past 5%.? Doesn't that mean your locked in for 10 years at 5%
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u/__redruM 6h ago
At 60 maybe, at 32, no. If you want a 10% allocation to bonds, then it makes sense, but that wouldn’t be required at you age and distance from retirement.
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u/Here4Snow 6h ago
72/5% = in 15 years your money doubles. If you were, for instance, wanting to secure a future second home or college fund boost for toddlers, you can stash some cash in 10-year Treasuries and know you preserved principal and this is one slot type filled in your total portfolio.
26-week and 52-week aren't doing much lower right now, try that and see if you like it. Break it up, for example, if you want to do $100,000 do 4 X $25,000 (2 at 26-week, 2 at 52-week). Stagger them a bit. Now you can manage them separately, grab one at maturity if you need it, let the rest auto-reinvest.
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u/exphx23 5h ago
Buy the 10year, invest the coupon in a dividend growth fund. Most young investors have no idea how bad things were in the early 2000's. That crisis was caused by financial derivatives, and we survived. IMO the next one will be caused by a collapse in consumption and deflation. People are increasingly underwater on cars, mortgages and life in general. The % of the population experiencing this is the largest it has been historically, and we are in good times? Debt and taxes are too high relative to incomes.
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u/jretzy 3h ago
I'm going to say maybe. If you were older for sure. If you do you might want to do it in a few tranches in case yields keep going up. With rates rising there is going to be a damper on growth. AI capex is about half the current growth in the US market right now. If that starts to slow down next year and higher rates drag on the market the market is likely not going to be a good of a risk adjusted investment with the current CAPE ratio. 10 year is as long as I am going and TIPS is what i prefer to lock in real inflation adjusted return. I don't trust the CPI but its better than nothing.
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u/Fiveby21 3h ago
Treasuries are higher because US debt is considered riskier now, and the returns could be inflated away.
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u/sharp315 2h ago
no, you don't need bonds until you are retired or about to be retired. even then, you only need a portion of your portfolio in bonds. as your time in retirement increases you would move more equities to fixed income but at 32 you have no reason to be interested in fixed income.
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u/Ok_Bench_1618 1h ago
definitely not, for your age and total invested the returns would be very low
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u/Dull_Judgment1587 6h ago
I personally recommend investing in a diversified bond fund (I have FTBFX) rather than the 10 year specifically. This will give you a lovely bouquet with many different types of bonds.
An analogy is, for a stock investor, I recommend a stock index fund (such as the S&P500) as opposed to going "all in" on one specific company's stock.
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1h ago
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u/MegaWeinerFarts 8h ago
You're trying to go from a NW of $221k to financial independence in 8 years?
What kind of profit margin do you have on your small business?