For approximately the past four years both stocks and bonds have had positive returns for investors. The Federal Reserve has been printing money at a record pace and it continues to do so. However, that gravy train may finally be coming to an end and some investors are starting to become concerned about what to do with their fixed income holdings. If investors own bonds directly and don’t need the money-which should be the case 100% of the time-they should just hold on. At CLS we are finding several fixed income ETF’s that we believe represent value for investors and are adding them to our portfolios, while shortening duration overall and reducing exposure to the Treasury market-which we believe offers the greatest risk to investors.
Comments provided by guest writer Marc Pfeffer, CLS Sr. Portfolio Manager
This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not a guide to future performance.
An ETF is a type of investment company whose investment objective is to achieve the same return as a particular market index. An ETF is similar to an index fund in that it will primarily invest in the securities of companies that are included in a selected market index. An ETF will invest in either all of the securities or a representative sample of the securities included in the index.
There are risks associated with bonds. These risks include, but are not limited to, the same interest rate, inflation, and credit risks associated with the underlying bonds owned by the portfolio and your return of principal is not guaranteed. High Yield bonds may be subject to greater fluctuations in value and risk of loss of income and principal. U.S. Treasuries are short-term debt securities issued by the U.S. government to fund its operations. T-bills usually mature anywhere from one month to one year after they’re issued. Instead of making periodic interest payments, T-bills are sold at a discount and rise to their face value at maturity.