Displaying items by tag: shortterm bonds

(New York)

The current rate environment has put investors in a pickle. How does one protect short-term income needs while also protecting against interest rate risk? One important factor is to remember is that one can balance short-term losses by holding bonds to maturity, so stringing together groups of short-term bonds can be a solid risk-mitigating, but yield-maximizing strategy. There are a number of funds to look at to make managing the situation easier. These include the Lord Abbott Short Duration Income Fund (LDLFX), Transamerica short-term bond (ITAAX), and the Nuveen Short Duration High Yield Municipal bond (NVHIX).

FINSUM: It is a difficult fixed income environment right now, with corporate bonds broadly in the red for the year. A well-crafted and balanced strategy is a must, and given that short-term bonds currently have strong yields and less interest rate risk, they seem like the best bet.

(New York)

Stock markets are moving sideways, bond yields are shooting higher, and there is a great deal of uncertainty about the direction of the economy. Investors are understandably nervous. With that in mind, Barron’s has published a piece outlining the best places to park your or your clients’ cash. The answer is short-term bond funds, which are almost all yielding over 2% and have significant insulation from losses related to rate rises. For instance, the Vanguard Short term bond fund is yielding 2.76% and has only lost less than 1% this year despite rises in yields. ETFs that track floating rate bonds are also a good idea given the environment. For example, the iShares Floating Rate Bond (FLOT), which yields 2.21%.

FINSUM: Short-term bond yields are finally significantly higher than equity yields, which means there is at last a good, and likely less risky, alternative to stocks.