Heather Bell for Index Universe sat down with Ron Ryan, CEO and found of Ryan ALM Inc., an asset management firm. Ryan has been developing fixed-income indexes for years.
Ryan says bond ETFs are like having an instant portfolio in a single fund.
Short duration funds have a relationship with short-term rates, and with the Federal Reserve guiding those rates, short-term rates are at very low levels. Today’s yields are around .50 % from the lowest yields in modern history.
In an attempt to measure interest rate risk, there is the Treasury yield curve. This is the best expression of the risk with maturity and duration leading the outcome of risk. If you have a product that is not clear about the risk, then there is a problem. With ETFs, the transparency is great because you can see the risk involved and you know exactly what you are purchasing. Then it is a fair game, as Ryan says.
Ryan also says the average investor overlooks the importance of fixed income. Is it time to think about your retirement? It could be – even if it’s 20 years from now, is your portfolio going to be where you want it to be by then?
One way to do the math is with Yahoo’s retirement calculator. Then see if bonds have a home in your portfolio. They just might.
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.