How To Deal With A Bond ETF Fallout
If you are into ETF investing, how do you protect yourself from things like market volatility, turmoil and uncertainty? How do you prepare for an ETF bubble burst?
Here are some key things to keep in mind:
- Try easing up on fixed-rate investments for now and think about diversifying your holdings. Invest into bonds with shorter-term maturities lasting three to five years so you can watch the volatility go by. This way you won't be as hard-hit by increasing rates as long-term bonds.
- Think about Treasury bonds. They were the top-performing asset class of the first quarter, with a yield of 13.2%. Now what? There is really no reason to be afraid of equities.
- The U.S. bond market has been good so far but U.S. equities market yielded great loss during the last six months. Broad-based foreign market indexes fell behind the U.S. equity markets and many foreign bond markets gave in to pressure due to the Greek debt issue. Those who invested conservatively were rewarded, but this trend won't last long.
At present, 116 fixed-income ETFs are on the market today. They come in all types of maturities and yields. Look at the trend lines and be alert when interest rates rise. It may not be a big threat, but be sure you know about it.
Photo source ETF fallout
July 29th, 2010 in
ETF Facts, ETF Investing Tips