“Ten (different) corporate bonds are probably
not enough if one turns out to be bad,” says Lee Kranefuss, chief
executive of Barclays’ individual investor group in and interview with Tim Middleton from MSN Money.
Today, even though bond ETFs are diversified, they have provided little protection from the fate of rising interest rates. Middleton explains, "And like all bond portfolios they are
vulnerable to rising interest rates. If rates were to rise half a
percentage point, each of the iShares portfolios would lose some of its
capital value. The Treasurys would go down 0.8% in the short portfolio,
3.1% in the intermediate and 6.5% in the long-term fund."
The ETF issues are pegged to four indices: Lehman 1-3 year Treasury (SHY), Lehman 7-10 year Treasury (IEF), Lehman 20+ year Treasury (TLT) and Goldman Sachs InvesTop Corporate Bond (LQD).
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.