Written by David Fabian, April 18th, 2017
Treasury bonds continue to be a stalwart position among income investors and those who opt for credit quality over yield or other characteristics of fixed-income. Treasuries benefit from the highest credit rating possible and are backed by the full faith of the U.S. Government. They are also the most directly susceptible to interest rate fluctuations and would perform poorly during a secular period of rising rates.
One attractive way to own Treasury bonds is through a diversified exchange-traded fund (ETF). This vehicle creates the flexibility to directly hone in on a certain maturity or index methodology in an extremely low-cost and liquid package.
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Written by David Fabian, February 17th, 2017
Love is in the air this Valentines week and many income investors are smitten with the returns of their high yield investments. The steady march higher in assets like junk bonds, preferred stocks, emerging market debt, and even leveraged closed-end funds has remunerated shareholders for their faith.
The poster child of this strength may well be the iShares iBoxx $ High Yield Corporate Bond ETF (HYG). This well-known fund, which invests in a passive index of high yield U.S. corporate debt, has gained more than 22% over the last year. That jump includes both price gains and income distribution over a 52-week period. It also bests every corner of the U.S. fixed-income sector map by a wide margin. Read more
Written by David Fabian, January 06th, 2017
A reader recently sent me a question asking why you would own a bond fund when interest rates are on the move higher. This type of sentiment is more than likely on the minds of many investors as they prepare for 2017 and evaluate adjustments to their asset allocation.
The short answer is that every diversified portfolio should have bond exposure to balance out the risk of other asset classes – i.e. stocks and commodities. Bonds have historically provided a shock absorber for the equity side of the portfolio and have not shown any signs of relinquishing that trait. Simply letting go of all your bond exposure will unnecessarily tilt your risks and returns towards a single outcome. Read more
Written by David Fabian, December 03rd, 2016
Real estate stocks have taken a beating in recent months as rising interest rates derail the momentum of this beloved income sector. Yet despite the dip in traditional housing and commercial REITs, one high yield segment of the market is still seeing surging prices.
Mortgage REITs (or mREITs) have largely ignored the trend in Treasury bonds and instead focused on the continued strength in overall credit conditions. This has translated into new all-time highs for the small group of exchange-traded funds that track these investments. Read more
Written by David Fabian, November 29th, 2016
The nature of investing is one that we are constantly looking in the rear-view mirror to anticipate what our expectations are for the future. This often leads to considerable hopes that existing trends will extend indefinitely or that we will be able to easily spot any rough spots on the road ahead.
Bond investors have likely felt a sense of building confidence over the years as low volatility and global risk aversion have buoyed fixed-income prices. The relative consistency of capital growth, coupled with the “lower for longer” outlook of interest rates, has created a complacent atmosphere overall.