Let's say I have 150k in the bank, with 50 of that in laddered CDs (which of course aren't paying much), leaving 100k in cash.   I'd like to leave 50k in straight cash for bills and emergencies, but looking to park the other 50 into something or a mix of things for maybe 5-10 years, but liquifiable in case of emergency.  

Right now I'm looking at short-term bond funds.  FATRX has a 5yr return (minus whatever fees) at 6.78%, a one year at 5.88%.  There are others out there.  Does anyone here use these types of funds for the purpose of parking money for a while (5yrs or more)?  What are the negatives to these funds?

I could go into other details on our investments, but suffice to say we run a small surplus each month, our car interest rates are low enough that we are not going to pay them off - they will be paid over time with federal reserve notes that are worth less and less.  A house and a rental property at 3.5% each. 401k funded at 10% and max out my and my wife's Roth every year.

Thanks in advance!

I've used the Vanguard ETFs BND (intermediate bond market index) and BSV (short term bond market index). I like them because of the low overhead and they trade like a stock. No need to wait until COB like a mutual fund. The only drawback is no auto dividend reinvestment.

the downside of bond funds, and bonds in general, is that in a rising interest rate environment you can get hammered.  the yield will drift slowly down over time, but the price of the bond can decrease very rapidly.  example: why would i want to purchase your held bond yielding 5% at $10 when i can go to the next guy and purchase his new bond yielding 4.75% for $8?

lots of money was made in bond funds during QEx, which is one reason you see a fairly high 5 yr return on bond funds (your FATRX example above).  right now we are in a "slack tide" environment (neither falling nor rising rates), although the fed has been making noises recently.  where you get screwed up with bonds is when the credit environment is tightened.  yield and price go in opposite directions.  bond funds can mitigate some of the risk by staggering terms and maturities (just like your CD ladder).    most of the time, short term bond funds will have less volatility in a rising interest rate credit market than long term bonds.  

http://www.bankrate.com/brm/news/sav/20021216a.asp

as for the rest of your post, there are some missing items (horizon to retirement, etc) but in general the one text that you will want to read is Ferri's "All About Asset Allocation".  this is the definitive book for devising a long term strategy for where and when to deploy your investment money.  asset allocation is the single biggest factor in investment success: maximizing returns while minimizing risk.

ar-jedi

Yield decline due to rising interest rates is a function of bond duration. Short duration = less price adjustment in response to rate changes. Short duration is a good place to be in a rising rate environment. Intermediate and long term not so much.

VMLUX