Hi all — apologies if this has been discussed recently.
Over the past few years, many of us have kept excess cash in HYSAs or money market funds (e.g., VMFXX) due to elevated interest rates. With rates potentially trending downward over the course of 2026, and expectations that future Fed leadership may be more favorable toward lower rates, I’m wondering whether it might make sense to shift some of that cash into short- or intermediate-term corporate bond funds such as VSCSX or VICSX.
My thinking is that interest rate risk may be relatively limited in the near term (rates seem unlikely to rise meaningfully given current inflation and employment conditions), while credit risk for these funds also appears modest. This could allow for a slightly higher yield than a money market fund, with the added possibility of some price appreciation if rates do decline. I also like the liquidity of bond funds compared to holding individual bonds, especially if I decide to reallocate into equities later.
That said, I’m still learning and would really appreciate perspectives from those more experienced. Are there reasons to prefer staying in money market funds despite declining yields (i.e. taxation, etc)? Would bond laddering be a better approach? Am I underestimating risks here?
Thanks very much for your insights — I’m looking forward to learning from the group.