Q: I enjoyed your podcast talk on Ken Roberts’ Bulls and Bears Report.In it you mentioned how you take your yearly distribution in early January and park your money in a short-term bond fund and pickup 1-2% over the long term. I do the same in regards to taking my yearly distribution in early January, but I park the money in a high-interest savings account (.5%) and draw the money down as I need it. Can you explain how that is different from putting the money in a short-term bond fund? As you say, “Always look for ways to tweak.” I couldn’t find anything about this on your website and I also looked in your free ebook, 101 Investment Decisions.
A: I use the Vanguard Short Term Investment Grade Bond Fund. It is presently paying 1.6% based on the standard 30-day S.E.C. yield. But it’s not without a small amount of risk. Its 15-year return has been 4.3% and the last year 1.8%. The worst and best calendar returns in the last 10 years were a loss of 4.7% in 2008 and a gain of 14% in 2009.