Rising yields and rates are making it difficult for bonds to prosper. However, investors’ portfolios shouldn’t be completely devoid of bonds.
Despite bond market tightening causing a decline in bond prices, there are still positives. After overcoming the effects of the ongoing pandemic, credit quality in the United States is now stronger.
“You may have read that bonds have performed poorly as the Federal Reserve tightens monetary policy,” a MarketWatch article says. “Thats only half the story. Strong defaults in the U.S. credit quality are rare. Nearly all bond issuers are making interest payments on time.”
The following options are available to limit rate risk and get bond exposure in today’s market.Vanguard Short Term Treasury ETF (VGSH).. VGSH provides exposure to short-term government securities with a focus on Treasury bonds that mature in one or three years.
Overall, VGSH:
- The goal is to provide current income with minimal price fluctuations.
- Invests primarily on high-quality (investment grade) U.S. Treasury bonds.
- Maintains a dollar weighted average maturity of one-three years.
A Total Bond Solution
An aggregate option is a good option for investors who don’t know where to start to get exposure to bond ETFs. Vanguard has the Vanguard Total Bond Market Index Fund Shares ETF Shares (BND)..
BND seeks performance from the Bloomberg U.S. Aggregate Float Adjusted Index represents a wide range of public and investment-grade, taxable and fixed income securities in America, including corporate bonds and government bonds.
Bond investors can use BND to hedge against the volatility in the equities markets. Because of its dynamic ability to quickly be bought or sold in the open markets, the ETF can also be used by short-term traders.
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