Re-balance Cycle Reminder All MyPlanIQ’s newsletters are archived here.

For regular SAA and TAA portfolios, the next re-balance will be on Monday, March 28, 2016. You can also find the re-balance calendar for 2015 on ‘Dashboard‘ page once you log in.

As a reminder to expert users: advanced portfolios are still re-balanced based on their original re-balance schedules and they are not the same as those used in Strategic and Tactical Asset Allocation (SAA and TAA) portfolios of a plan.

Please note that we now list the next re-balance date on every portfolio page.

Defined Maturity Bond Fund Analysis

When it comes to bond fund investing, it is a common concern for many fixed income investors: most bond funds have no fixed or defined maturity. Many investors have a predictable or preset time to invest a chunk of money. For example, they might want to invest this money for five years and then take it out for junior’s college or purchase a house. A normal bond fund, however, invests continuously in a collection of individual bonds. These holdings will be sold or closed (if they are mature) and the proceeds are used to purchase other bonds. Thus, a bond fund never matures and investing in bond funds can subject investors to price volatility or even loss. Suze Orman, for example, disavowed bond funds and suggested her audience to purchase individual bonds instead. 

However, investing individual bonds requires large amount of capital: an individual bond might require at least $1000 and normally $5000 or so to purchase. To achieve reasonable diversification, you might need $10,000 or $50,000 at least. What’s more, it’s hard to do due diligence to select individual bonds.

Defined maturity (also called target maturity) bond funds such as Guggenheim Bullet Shares ETFs can help to alleviate the two problems mentioned above. These funds usually have a definite maturity. For example, BSJF (Guggenheim BulletShrs2015 HY CorpBd ETF) is an ETF that matured in 2015 (last year). It invests in high yield corporate bonds that matured by the end of 2015. 

We first covered these ETFs in October 14, 2013: Manage Cash Investments Smartly. In this newsletter, we will review how Guggenheim Bullet Shares 2015 ETFs have fared. 

Bullet Shares 2015 Corporate Bond ETFs Performance

Let’s first look at the two corporate bond ETFs, compared with other traditional normal bond ETFs: 

The Bullet Shares defined maturity ETFs have 0.42% expense ratio. This is way too high, considering its low maintenance and short term maturity. This actually can materially hurt returns dramatically, especially in the current low rate environment (more on this later).  With 0.1% expense ratio, VCSH (Vanguard Short-Term Corporate Bond ETF), again, sets a good example and yard stick in terms of low and meaningful expenses. 

The two defined maturity ETFs normally invest in about 30 to 70 securities. However, as time goes, they each have to rebalance due to callable events and the actual maturities. 

Notice that for BSCF, it invests in investment grade corporate bonds only. The following shows its credit quality breakdown as of 9/30/2015 (see here): 

We believe that the reason some of bond holdings were rated as BBB levels is due to their rating downgrade. A bond might start to be of investment grade quality and at some point, degraded to a lower quality or even a junk bond status. It will only be rebalanced out at the beginning of a year.  

Now, let’s take a look at the returns: 

Ticker/Portfolio Name

From Inception to 12/31/2015*



1Yr AR

3Yr AR

5Yr AR

BSJF (Guggenheim BulletShrs2015 HY CorpBd ETF)







SJNK (SPDR® Barclays Short Term Hi Yld Bd ETF)







SHYG (iShares 0-5 Year High Yield Corp Bond)







HYS (PIMCO 0-5 Year High Yield Corp Bd ETF)







JNK (SPDR Barclays High Yield Bond ETF)







BSCF (Guggenheim BulletShrs2015 Corp Bd ETF)







SLQD (iShares 0-5 Year Investment Grade Corp Bond)

N/A (inception 10/17/13)






VCSH (Vanguard Short-Term Corporate Bond ETF)







 *Annualized returns. BSJF Inception:  1/26/2011. BSCF Inception: 6/8/2010. The high yield bond funds are compared with BSJF while corporate bond funds are compared with BSCF using their inception dates respectively. 

For high yield bonds, BSJF’s annualized 4.7% since 1/26/2011 has bested all other comparable high yield bond ETFs in the table. What is more, though not that significant for investors who hold the bond fund till its maturity, it didn’t lose money in 2014 and 2015. In 2015, all other high yield bonds lost more than 5%.  Its overall annualized return is 1.6% better than the second best fund HYS’s 3.1%. 

For corporate bonds, BSCF’s 2.9% annual return is not that much better than VCSH’s 2.8%. Notice that in the current low yield environment, the 0.42% expense ratio made a big difference. In our opinion, such a high expense ratio makes investing in defined maturity ETFs less compelling. 


Currently, interest rates are extremely low. If the Federal Reserve decides to continue its planned interest raise this year, bond prices can decline. It thus makes sense to look at some of these defined maturity ETFs. However, we are concerned with the high expense ratio of these ETFs, especially for investment grade corporate bonds (as they pay much lower interests than high yield bonds). On the other hand, high yield bonds have been hit hard recently (though they have recovered and had a positive return year to date now). Investors who have such definite maturity need can wait for a good price entry point to consider some of these ETFs.

In addition to Guggenheim Bullet Shares ETFs, iShares and Fidelity also offer defined maturity ETFs and mutual funds. The Guggenheim Bullet Shares ETFs are commission free in Charles Schwab. 

Market Overview

Last week, investors had a relief because of better expected employment data and ISM data: ISM Manufacturing PMI for February 2016 was 49.5 percent, still in the contraction mode but 1.3% better than January’s 48.2 percent while the service index was 53.4, at an expansion mode. Global stocks have recovered significantly. Furthermore, high yield bonds, one of the yard sticks to measure credit risk, has recovered and now had a positive year to date return, Stocks are now back to a very overvalued level. In fact, even though S&P 500 index is still lower year to date, S&P 500 companies’ PE ratio is actually higher than at the beginning of the year as earnings have declined. As we stated previously, we believe the fundamentals will further dictate the price action in the next several months. We are not completely out of wood yet. The best action is to stay on course. 

For more detailed asset trend scores, please refer to 360° Market Overview

We would like to remind our readers that markets are more precarious now than other times in the last 6 years. Since the financial crisis in 2008-2009, we have not seen meaningful or substantial structural change in the U.S., European and emerging market economies. Even though U.S. stocks have had a recent correction, their valuation is still at a historical high level.  It is thus a good time and imperative to adjust to a risk level you are comfortable with right now. 

We again would like to stress for any new investor and new money, the best way to step into this kind of markets is through dollar cost average (DCA), i.e. invest and/or follow a model portfolio in several phases (such as 2 or 3 months) instead of the whole sum at one shot. 

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