Interest rates are set to rise, and investors are galloping away from bond funds. Here’s why you shouldn’t follow the herd
Earlier this month, Mackenzie Investments produced this advertisement for the Mackenzie Sentinel Corporate Bond Fund. The banner headline reads “Think high yield means high risk?” The rest of the ad reads, “Think again. High-yield corporate bonds have produced equity-like returns with less risk.” Two graphs then compare the performance of the fund with the S&P/TSX [...]
Q: I just read about the launch of RBC’s family of target-maturity corporate bond ETFs. They seem like they would be an attractive option for the fixed-income portion of my RRSP. How do these products compare with more conventional bond ETFs? How do I compare their yields? And can I use them in a laddered fashion? [...]
Bond index funds have a place in almost all portfolios, even in a low-rate environment. However, it’s important to match the right bond fund to your investment goals. To do that you need to know two important details. You can usually find both of these numbers on the web page or fact card of any [...]
Investors are worrying about a lot of things these days, but the fear of rising interest rates remains near the top of the list. Not only are savings accounts and GICs yielding peanuts, but bond investors are worried that a spike in rates will send the value of their bond funds and ETFs plummeting. The [...]
On Monday, I took issue with the argument that cap-weighted bond indexes are fatally flawed. Rob Arnott, the creator of fundamental indexing, has argued that the classic model is “patently ridiculous.” The Research Affiliates website frames the problem like this: “Traditional bond indices give their greatest weights to the biggest debtors. Should investors buy more [...]
When Rob Arnott, the creator of fundamental indexing, spoke in Toronto last week, his presentation focused exclusively on equities. When he took questions at the end of his presentation, I asked him a question about the lesser-known RAFI fundamental bond indexes. Recall that the goal of fundamental indexing is to address the flaws in capitalization-weighted [...]
The table below shows the tracking error of Canadian bond and commodity ETFs in 2010. To make sure you understand these numbers in their proper context, see my earlier post on tracking errors for Canadian equity ETFs. Fund Index Tracking Broad bond market Ticker return return error iShares DEX Universe Bond XBB 6.4% 6.7% -0.4% [...]
Part four of our “Six Winning Strategies to Build Your Wealth” series:
Like the idea of stocks for the long run, and getting paid to wait? Take a look at dividend investing, and discover the power of high-yield growth.
Looking for an investing strategy that really works? We can help.
Part one of our “Six Winning Strategies to Build Your Wealth” series:
No stomach for stocks? A smart fixed-income strategy can help you achieve your financial goals with a minimum of risk
