Although bond exchange traded funds (ETFs) may not see the flood of assets that they did at the height of market turmoil, that doesn’t mean that they’ve lost their appeal with investors. With that, it’s good to know just when to buy.
When it comes to bond ETF investing, it can be a challenge to know “which end is up.” Matt Krantz for USA Today says that the bond market gives investors trouble when it comes to purchase timing. Much of the confusion can probably be blamed on the fact that prices and yields move in different directions. [Why It’s Time to Approach Bond ETFs Differently.]
When bond prices move higher, the payout becomes smaller and the yield declines. But when bonds are being dumped by investors, prices fall and the yields rise.
So…when do you buy?
Bond ETFs, Krantz says, are best bought when the prices are low. But as with anything, it’s easier said than done. In doing so, you’ll get in when the yields are higher. Price appreciation is a better possibility this way and you collect a bigger cash payout relative to your investments. [Bond ETFs Are Also Going Into Active Management.]
Overall, bond prices are closely tied to economic trends, including inflation, interest rates and movements by the Fed, so time your entrance and exit points by having a strategy that incorporates a stop loss. [A New Wave of Bond Issues: Should You Jump In?]
For more stories about bond ETFs, visit our bond ETF category.
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.