October 27, 2008 at 1:00 am by Tom Lydon
The Wall Street breakdown has given long-term corporate bond exchange traded funds (ETFs) a chance to surface, revealing benefits that can give value.
The long-term investment perks of bonds are safer than one may think and have potential for plenty of gains in the future. Michael Kahn for Barron’s explains that the corporate bond is a debt obligation of a corporation and their prices reflect the interest rate levels and the credit worthiness of each issuer, case by case.
Investors are no doubt concerned about the health of corporate America, so the corporate bond may not sound appealing to all. But can crisis give way to opportunity? Kahn believes there are signs to imply the chaos is over and better things are to come.
For one, positive technicals are showing, meaning sustainable gains are near. Waning downside momentum has taken away the urgency to sell, one of the first signs of a shift. The trading volume is spread evenly, once again pointing to the loss of urgency to sell.
Depending on your investment objective and risk tolerance, a corporate bond ETF could be worthy of consideration once it crosses its long-term trend line.
iShares iBoxx $ Investment Grade Corporate Bond (LQD) is down 16.2% year-to-date and has a yield of 6.21%, an average maturity of 10.96 years and an average S&P rating of A+.
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