Daniel Straus BMO Short Term Corp Bond E.T.F. ZCS-T COMMENT Jan 13, 2017

Short-term corporate bonds, ZCS-T or CBO-T? They both have very similar holdings. This one weights the bonds in the portfolio related to the size they have in the market, whereas CBO weights them with a traditional laddering strategy, each ladder getting an equal weight. It is really hard to say which is better, because all bond ETF’s are ladders of a sort.

Daniel Straus

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TOP PICK

Short Term Corp Bond ETF. Doesn't think there are risks any more with corporate bonds. This will give you a bit of yield pickup without venturing into preferreds. (Similar to XCB-T, which he owns.)

PAST TOP PICK

(A Top Pick July 12/10. Up 4.33%.) Short Term Corp Bond ETF. You get the benefit of the risk reduction by keeping it 5 years or less.

BUY

We are likely bottoming in the interest rate cycle. He sees interest rates staying much lower for much longer, but thinks they are probably bottoming. If there is a very glacial rise in interest rates as he expects, that is very good for short term interest bonds. This is a good ETF if you want to hold it for that.

HOLD

This will improve, because bonds mature at par, then you re-load at higher interest rates. The ETF is down, but don't sell. This will correct and you will benefit from higher interest rates. Be patiebt.

DON'T BUY

Challenge with corporate bonds is that during a recession, they underperform and bond spreads widen out. If you are looking for a hedge to downturns, government bonds are better. It gives more negative correlation to equities than with corporate bonds.

BUY

Short-duration of 3-4 years corporate bond index. Has held up better than aggregate bonds, but still not great. Short bonds or inflation-protected ones are the right strategy, as they don't carry the same rising interest rate risk. Much of the damage is done for downward movement in bonds, though there might be more to come. Yield is 3-3.2%.

BUY

In a rising rate environment, you might want to stick to a shorter term. ZCS is a short-term, corporate, investment-grade ETF. Had drawdowns, but not as bad as a typical aggregate bond or high-yield ETF.

DON'T BUY

Parking cash, plus safety.

Laddered corporate bonds. Gives you a bit more interest rate risk, but not necessarily much more incremental yield.

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Daniel Straus BMO Short Term Corp Bond E.T.F. ZCS-T COMMENT Jan 13, 2017

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