With such an uncertain market, many investors have turned to bonds and are wondering how to play the bond market and bond exchnage traded funds (ETFs).
The problem that is facing the bond industry is that interest rates are ridicously low on long-term treasuries and the risk with higher yielding bond categories is high.
- Buy bonds with various maturities and as they mature, reinvest into other bonds.
- Keep the majority of fixed-income money in very short-term Treasuries or even a Treasury only money fund.
- The most simple way of all? Using ETFs, which will give good diversification to the market both in length and types of bonds held. A bond ETF would take care of the first step for you, holding a mix of maturities and reinvesting as they mature. This is one of the most cost-effective ways to get broad exposure to bonds.
At the end of the day, the best thing to keep your money spread out so that a move in rates doesn’t leave you high and dry. If still interested in the market, one may consider the following ETFs:
Vanguard Intermediate Bond ETF (BIV): which is up 4.2% over the last month and has a yield of 4.58%; additionally, it has crossed both its 50-day and 200-day moving averages.
Vanguard Total Bond Market ETF (BND): up 3.4% over the last month and has a yield of 4.58%; additionally, it has crossed its 50-day and 200-day moving averages.
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.