But if I knew how to manage my portfolio safer and smarter than most hedge fund managers, I could realistically grow my wealth.
Must-know: The importance of bonds in your portfolio
Bonds and straight treasuries (TLT) are often considered safe-haven assets in periods of economic turmoil—they offer steady returns and diversification benefits in a portfolio.
One segment I believe investors should consider is international and global dividend funds, rather than funds focused exclusively on U.S. dividends.
Despite recent market swings, volatility is still very low by historic standards. Even at its peak on Thursday, equity market volatility, as measured by the VIX Index (VXX), only reached 15.
For a taxable US investor, both the bond coupon and the inflation adjustment of TIPS are taxed as income. But the majority of the inflation adjustment is paid when TIPS mature.
From TIPS to “phantom income” to varying distributions — Matt Tucker is here to explain what they are and how they are related.
So how can an investor manage duration, beyond investing solely in short duration bonds? An alternative approach is to utilize interest rate hedging.
That being said, some investors are already thinking about how they want to position their portfolios for higher rates. The challenge that many of them have is that they want to adjust the interest rate sensitivity.
As the Fed continues to reduce its Quantitative Easing program, Matt Tucker explores ways to attempt to hedge against rising interest rates in your bond portfolio.
The iShares S&P Global Energy Sector Fund (or IXC) seeks to invest in oil and gas production and distribution companies.
Treasury Inflation Protection Securities (or TIPS) are issued by the U.S. Treasury as an instrument to protect against inflationary pressures.
While we still advocate caution towards Treasury Inflation Protected Securities (TIP), investors looking to hedge against higher rates that result from inflation may want to consider very short duration.
Certain strategies may help fixed income investors better position their portfolios in a rising rate environment.
Rates have risen only modestly until now and are expected to rise gradually even after the Fed’s asset purchase program ends.
Many factors affect the total returns derived from a bond.
As the economy expands creating inflationary pressures, the Fed raises the Fed funds rate to control inflation.
After a promising three month run, the index fell back 1.6 points in June to 95 from the 96.6 index points recorded in May.
The monthly Gallup U.S. Consumer Spending Measure was released on Monday, July 7.
The bottom line for investors is that in a world of few bargains, volatility does appear to be the one relatively cheap asset class.
If you have a bond portfolio that’s heavy with long-term bonds, you can potentially reduce your interest rate risk by rebalancing your portfolio to increase exposure to short-term bond ETFs.
iShares now offers 20 low-cost Core ETFs that are a great starting point to consider as core holdings for your portfolio.