Break Free of your Bonds
07/19/2010 0 comments
Plain-vanilla investment-grade bond funds mostly have kept out of harm's way and provided a return of roughly 4.4% in the first half of 2010. By comparison, the typical U.S. stock fund dropped 5.3%. But, with rates on two-year Treasuries hitting a record low of 0.582% on June 29, and the 10-year note dropping to a minuscule 2.88% on July 1, just how much lower can they go? And what are an investor's alternatives if rates start to creep higher? The longer-term effects of such a huge increase in government spending and debt, not just in the U.S. but worldwide, are pretty well documented. Eventually inflation—and interest rates—go up, too. Better to hedge your bets now than to get run over by the bond-fund crowd later.
Diversify your holding—in a rising rate environment the longest maturities will be the worst performers—is key.
Investment advisor Claymore Securities last month launched a family of seven investment-grade corporate bond ETFs, Claymore BulletShares 2011 Corporate Bond ETF (BSCB), the Claymore BulletShares 2017 Corporate Bond ETF (BSCH). The annual expense ratio on the funds is just 0.24%. There are even less expensive choices. Vanguard Intermediate Bond ETF (BIV), which was up 7.5% year-to-date through July 8. Other low-cost alternatives providing broad diversification include the Vanguard Total Bond Market Intermediate Bond ETF (BND), the iShares Barclays Aggregate Bond (AGG) and the iShares Barclays 1-3 Year Credit Bond (CSJ). All three posted positive rates of return in 2008.
MyPlanIQ SAA favors a diversified portfolio not just bonds but asset based ETF's all of which have low expense ratios and provide good returns.
labels:investments,IRA,
Or Start FREE 30-day trial now >>
