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Investments in bonds

By Terry Savage on May 30, 2022 | Investments

I have a large investment portfolio beside my retirement pension and social security. I don’t need to touch the money for several years, if ever for my wife and myself use. It will probably be divided as our inheritance.
My question is, I have a large amount in an ultra short term bond fund but wonder if I should put it in short term inflation protected mutual fund instead. I want to have a fairly large bond component, 40-50%, to my total investments, but am getting almost nothing in the ultra short term fund. I want to stay away from longer term bond funds due to the high inflation risk.

Terry Says

First– be sure you have named beneficiaries for your account if it is an IRA. If not, be sure your estate plan names beneficiaries and PERCENTAGE amounts of your assets, not specific dollar amounts. And with that size estate, you’ll want the non-IRA accounts titled in the name of your Revocable Living Trust — not a will — so they don’t go through a costly and long process of probate (court changing title). And you know that outside an IRA, your heirs will inherit the assets at the value as of the date of death — not based on your cost. This is the current estate tax law.

OK, now that I’ve said all that, I’m not sure what your are talking about when you say a “short term inflation protected mutual fund.” Are you talking about a TIPS fund, which invests in Treasury Inflation Protected Securites (bonds)? If so, you should only buy that fund if the money is inside an IRA because otherwise you will be taxed on the “presumed” increase in the value of the bonds each year, even though you don’t get the interest! Don’t outsmart yourself!



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