Is it a good idea to invest in bond funds before a rate cut?

Hello everyone,

I am new to this sub and would like some advice. Right now, my emergency cash is earning roughly 5% interest in a money market find. This is all well and good, but I anticipate a decrease in interest rates given the Fed’s upcoming rate cut next week. Preserving the higher interest rate is what I would prefer to do.

I have a good amount of time until I need to use up all of this emergency savings.

Before the rate cut, are there any bond funds that would be a decent investment to maintain the higher interest rate I currently receive on my emergency fund? What should I watch out for while investing in bond mutual funds?

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There is never a bad time to buy bond funds since timing the bond market effectively is nearly impossible.

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The bond market is renowned for being more difficult to predict than the stock market since, in contrast to stocks, the future promised yields on bonds are known for a range of bond lengths from one day to thirty years, whereas the dividends on equities are completely unpredictable. However, understanding the yield seems to mislead beginners into believing they can time the market and force them to discover the hard way that the market is far ahead of them!

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Do you think it’s possible to make an educated guess based on economic trends and anticipated rate cuts? For instance, we’re about to see the first rate cut in over two years.

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If something is anticipated, it is likely already factored into the market. You can potentially profit by predicting what is not anticipated, but I wouldn’t advise doing this with the portion of your portfolio that is meant to be safe and stable.

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Purchasing zeros or stripped bonds gives you greater leverage, so do it instead.

However, as others have said, you’re running late for the party.

You have to buy them in November of last year. I own stripped bonds that have a 20% gain.

I believe there is still more decline left in long-term bonds because the inverted yield curve will continue to show signs of correction.

When we are inverted, rate reductions have a significantly greater impact on short-term bonds.

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What do “zeros” and stripped mean? I have never heard of those terms.

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I got lucky in the bond market at the end of April when I learned about leveraging. My TMF investment is up around 36-40% since then.