Treasury bonds are usually the best tool for downside protection and volatility reduction in a diversified investment portfolio alongside stocks. Here we’ll look at the best treasury bond ETFs.
// TIMESTAMPS:
00:00 - Intro - Why Treasury Bonds?
01:45 - SGOV
02:14 - CLTL
02:33 - SCHO
02:57 - SCHR
03:15 - IEF
03:37 - GOVT
04:02 - TLH
04:26 - VGLT
04:44 - TLT
05:04 - EDV
05:25 - Outro
// SUMMARY:
The federal government issues bonds to investors to pay for operating costs in running the country. Because they’re guaranteed by the full faith and credit of the U.S. government, treasury bonds are considered to be the “safest” investment, and are thus popular among retirees and risk-averse investors. More importantly, treasury bonds offer the lowest correlation to stocks of any asset class, providing a superior diversification benefit compared to corporate bonds. As a result, treasury bonds should typically be the first diversifier of choice alongside stocks.
Treasury bond behavior differs among different maturity lengths along the yield curve. Ultra-short-term treasury bonds with a maturity of less than 1 year are called “T Bills.” They are considered to be a “cash equivalent” because of their nearly nonexistent exposure to interest rate risk. This safety also comes with the lowest expected returns. On the flip side are “long bonds” with maturities greater than 20 years. In between those are “intermediate term” bonds with maturities of 5 years, 7 years, 10 years, etc. Various funds offer baskets of bonds of specific maturities.
Long-term bonds offer more risk with the potential for more reward, having the most exposure to interest rate risk. Longer-term bonds also tend to be less correlated to stocks than shorter-term bonds. As the names suggest, long-term bonds are more appropriate for investors with a long time horizon, and short-term bonds are more appropriate for retirees with a short-time horizon. I’m of the mind that bond duration should roughly match the investing horizon, especially for those with an aggressive asset allocation that only allocates a small amount of the portfolio to bonds.
Now let’s look at the best treasury bond ETFs:
SGOV
CLTL
SCHO
SCHR
IEF
GOVT
TLH
VGLT
TLT
EDV
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#investing #bonds #treasurybills
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9 июл 2024
