Emergency fund in Vanguard muni bonds?
Hello Terry,
I have my emergency funds in VWALX, Vanguard Muni fund. I put it there since saving account rates are so low.
Do you think this is a safe place for long term (3-5 years or more)?
Thank you!
Terry Says
Well, that is not in my definition of “chicken money” — money you cannot afford to lose.
The reason: when interest rates rise, bond prices fall. And the longer the maturity of the bond, the bigger the price drop.
Read this column for a complete explanation: https://www.terrysavage.com/beware-of-bonds-2/
Remember the mantra of the Chicken Money investor: I’m not so concerned about the return ON my money as I am about the return OF my money!
