iShares 1-5 yr Ladder Corp Bond ETF

A laddered bond portfolio. He likes it. Each ETF provider’s version has had bad performance over the last few months because short term yields are seen as rising. The risk is if the BOC is more aggressively tightening. You want to wait until after the next announcement when there may be another pull back and then perhaps get in.

This is a short term laddered bond portfolio up to 5 years. The bonds are trading at a premium, generally. Long term you get a decline in the price. The yield to maturity is closer to 2%. The real return is positive even though the valuation goes down over time. Generally it is a very safe instrument.

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

A Blackrock bond fund for an 81-year-old? He doesn’t know this corporate ETF, but ETF’s are a good idea because they are very low cost. He would recommend going into a government bond ETF, and put it out across the entire curve, 2 to 30 years. Then you could look at another ETF, that would perhaps have some corporate bonds in order to give you a little bit more yield.

The problem with this is, where is the yield coming from? Quite often when you are looking at yields, there are premium priced bonds in there. This one is quoted as paying 4%. What you need to look at is the yield to maturity. This can be found on the website.

Relatively good and safe investment? For conservative investors right now, short-term corporate bonds are the way to play the fixed income market.

Everything he said about iShares 1-5 yr Government Bond ETF (CLF-T) are equally true for this, only you are going further out on the yield curve. Corporate bonds are riskier than government bonds with the added risk of this one’s underlying basket of securities being more volatile. This is a sort of thing that is going to grind down the NAV. It is fine as a cash-park, but if it were him he would literally use cash instead.

He would recommend this as a core holding in the bond portion of a balanced portfolio. He thinks this is the area of the market that people should concentrate their fixed income holding on a 1-5 year term to protect capital . He is a laddered advocate and this is a good quality laddered index and has around 60 bonds in it. He likes it.

If you own, the first thing you should look at is, what you think your yield is. Then look at what it actually is. You do this by going on to their website and looking at the “yield to maturity”. Then make a decision from there. He likes the idea of the laddered corporate bond index, but we know that if they are doing better than the 10 year government rate, there has to be a reason. If so, he would suspect there are some premium bonds that will mature at par.

Quoted as having a 4%+ yield, but the website shows a yield to maturity of about 1%. How come? Even with really good ETF’s like this, you have to ask Why. They are not expanding the risk nor the duration of the bond portfolio, so how do they get those yields? They are paying $105 for a bond that has a higher yield. The trouble is, when those bonds mature, you are only getting $100 for them, so there is a built-in capital loss. It is very important to go to the website and take a look at the yield to maturity and the duration of the portfolio.

Likes the 1-5 year corporate laddered ETF. It is a nice, safe ETF and you will get the kind of returns that he has shown in Past Picks. This is better than cash and is very safe.

iShares 1-5 yr Ladder Corp Bond ETF (CBO-T) or iShares 1-5 yr Government Bond ETF (CLF-T)? He prefers this one because the risk is very low and it is a very well diversified short-term portfolio and will give you extra yield over time over the government one. If safety of capital is paramount, then he would suggest half-and-half.

More short term and corporate exposure. A good fit for a conservative investor especially in a tax sheltered account.

A laddered bond fund can reduce your exposure using shorter durations. The average is about 2.5 years. It reduces your return, but reduces your exposure to rising interest rates. A lot of funds use preferred shares instead of bonds.

Conservative corporate bond strategy, only out 5 years which is where you want to be. Losses over the next couple of years should be cushioned.

The problem is, how do you deal with these premium bonds. Very limiting in terms of what you can do to manage that portfolio. He would be more inclined to go towards something that has a broader and much more diversified bond portfolio. He would look at the iShares Cdn Short Term Bond (XSB-T).

Writing naked puts to keep a fair bit of US/Cdn cash on hand. Concerned about rising interest rates. What about high yield bond funds? He would not put it in a high-yield bond fund because, in effect, what you are doing is cash securing a put option that you’ve sold. CBO is a good place and there’s nothing wrong with this. An interesting product only because the portfolio tends to be holding longer-term bonds issued by banks and credit worthy customers, but they are callable bonds within 5 years. CBD-T is another product you could use.

Likes this as a concept idea, but there is no single income product out there that he genuinely likes. This has been pretty much flat now for 6 months. In the rate cycle, he is struggling and using equity linked GICs in his own practice.

Stock vs. Stock: XTR or CBO. Laddered fixed income. The yield is lower and the cost is higher than XTR.

Based on Bank of Canada statements, we are probably not going to see an interest rate hike in the next 12 months, but it is also about how the US handles the next year. Once the Fed really pulls back on QE, the economy will falter and interest rates won’t go up there either. This one is a fine holding. Don’t worry about the underlying volume, as long as it trades with a penny or two spread.

iShares DEX Universe Bond (XBB-T) or iShares 1-5yr Laddered Corp Bond Fund (CBO-T) for the best long-term hold? These are 2 very different things. The XBB would have lost you money. It is two thirds government and one third corporate. Has about 750 names and would’ve lost about 1.5% last year with a yield of about 3%. The CBO is short in duration with a yield of around 4% and the duration of about 3 with about 45 names in it. It is laddered 1 to 5 years and this is his preference if you must be in bonds.

Basically a 1-5 year laddered corporate bond portfolio, so you are buying corporate bonds. In theory they have short-terms to maturity. If looking at fixed income instruments throughout next year and probably the next couple of years, you want to keep your duration short. This fund yields more than you would expect given the short 1-5 year terms. This is because the manager of the fund is buying longer-term bonds, where the Call dates are 1 to 5 years. Most of those particular bonds, high-quality, are virtually all called within the 5 years. Good fund.

This is a major holding of his. Surprisingly, for all the interest-rate rise we have been worried about all summer, it hasn’t been that bad. This is in the corporate sector, rather than the government. He is starting to look for alternative managers in the corporate bond space and you may want to look at some active managers rather than an ETF. If you are willing to put up with a little volatility in the near-term, it is a great little play.

BMO Canadian Dividend ETF (ZDV-T) or iShares 1-5 Yr Ladder Corp Bond ETF (CBO-T) for income, not so much increase, but also for a big downturn? He would go half and half. This one is a laddered 1-5 years corporate bond. What is interesting is that the yield is higher than one would expect on a 1 to 5 year laddered corporate bond portfolio. They are effectively buying longer-term bonds, but they are looking at and tracking the duration to the Call date of the bonds.

What will rising interest rates do to this ETF’s dividends? Doesn’t matter what it is, this is an environment that is going to hurt bonds. Likes this one and has used it in the past until about 1.5 years ago but he can no longer justify using any kind of a bond ETF in his portfolio if he can help it.

Very heavily weighted in banks. The one problem with this is that there are relatively few bonds in it. His issue would be the price paid for some of the bonds. You have to look at the quoted yield relative to the yield to maturity. If there is a big discrepancy, you might want to look at easing up on this a bit. He wouldn’t have this in his portfolio because he likes banks through the Covered Calls.

What happens to the value of this, assuming that interest rates stay in a tight range for the next 5 years? If yields stay in the general range, the 1 to 5 years ladder will perpetually drop off the shortest bond and replace it with bonds maturing in the 4-5 year bucket. The performance of this one will change marginally on the steepness of the 1-5 year part of the curve. The steeper the curve, you will be picking up more yield as you drop off the old bond.

Laddered corporate bond exposure. CBO-T 1-five-year ladder or CBH-T 1-10 year ladder? He prefers the 1-10 year ladder because for one thing, the yield spread between 5 and 10 year bonds has averaged over 1% for the last 25 years so if you stop at 5 years, you are giving up a lot of extra yield. Also, you can diversify more by credit. Five-year is really too short.

Is iShares S&P/TSX Preferred Fund (CPD-T) or iShares 1-5 Yr Laddered Corp Bond Fund (CBO-T) better for safety for a retiree? This is not apples to apples. He likes CPD better. Feels there is a fair amount of risk in bonds. If there is a situation where there is corporate province not being as good, then CPD could go down more quickly than bonds. Both of them have been pretty much flat over the last year or 2.

One of the reasons he hasn’t talked about bonds or recommended them is that because some day rates will go up and this will hurt all bond products including laddered products. A lot of what you are doing on the bond side is playing defence. What you have to do is stay on the short end of the curve, 5 years or less.

Laddered, short term bond portfolio. Not a lot of risk short time. You could look at real return bonds if you are concerned about inflation next year, which he is not. XSB-T (is the one he owns) is similar to CBO-T and XRB-T is real return bonds.

Income stuff and a good choice. No problem at all. 1-5 year laddered. Always take a look on the web site for the yield to maturity. You get a return somewhere between the quoted yield and the yield to maturity.

(A Top Pick Oct 21. Up 4.19%.) Laddered bonds.

This is a short-term, 1 to 5 year corporate bond ETF. Relatively diversified. Sensitivity to interest rates remains high. Good investment.

This is a good strategy, especially right now. This only holds corporate long term bonds. Some of the value of the ETF will shrink as bonds mature, but a good holding in your portfolio.

This is relatively stable but he would caution that it is awfully tough to make money in bonds in this environment. In fact, you are playing defence and you might be better off just keeping the money in cash.

Is that yield safe for the next 3-5 years? This is a laddered bond ETF. He prefers 1-10 year ladders instead as yield pickup has been very large 5-10 years in the last 20 years and will probably continue to do so. In his opinion, it is better to be in individual bonds as you know exactly when your money is going to be returned to you.