Hi, a question and a risk that is not popular in these days. However, this is a natural question if you invest in ETF that are bonds based. What is your favorite technique to protect your portfolio?
are you asking for solution to collect your dividends and interest payments without any risk? imo-there is no such thing. buy maturity specified ETF. http://www.guggenheimfunds.com/etf/fund/bscd
Well if you have bonds you can always hold them until expiration time. I am finding difficulties in understanding how ETF works in this case...
There are inverse etf for bonds... DLBS.... or, short bond futures; If correctly duration hedged, and no spread risk, then you are interest rate sensitivity neutral. The cost is the cost of carry for the short.
there really isn't enough money in bonds right now to be both long and short. If you take the small amount of interest you are receiving and then use that to hedge aganst your very own long position, you will end up losing the little you are making. Keep in mind, if rates go up, yes, you will take a hit on principle, but as those bonds in the fund mature, they will then be reinvested in the new bonds with higher rates. otherwise,as previously stated, the only way to do it is to buy the bonds outright and hold them to maturity. Typically you would ladder them so every year some mature. But that is all the etf is doing anyway so it comes out about the same. But you and me both, and a lot of others have been doing pretty well in bonds over the last decade, but the days of capital appreciation are over. If you are living off the income there is in my opinion no need for a hedge or a change. But if it is money in the safe, the best idea I can think of is to lighten up a bit. But where to go? That is the question. There's no such thing as cash anymore, so you gotta go somewhere.
"But you and me both, and a lot of others have been doing pretty well in bonds over the last decade, but the days of capital appreciation are over. If you are living off the income there is in my opinion no need for a hedge or a change. But if it is money in the safe, the best idea I can think of is to lighten up a bit" . reasoning is not correct. . return is based on current price not the historical price you paid.
whatever, rates have been going down for a long time, we'll just have to see how much lower they go once they hit zero. if you bought a bond fund when rates were high, your return is based on the historical price, that is, your average price, which today seems very low. But yes I will agree, even though I got in early, today I am getting the same return as everybody else. whew!