It's true that interest rates are near historical lows: as of early May, 10 - year Government of Canada bonds are yielding just over 1.5 %, and a broad -
based bond index fund like the ones I recommend in my model portfolios yield a little less than 2 %.
By comparison, traditional broad -
based bond index funds include hundreds of holdings, but remember, there just aren't that many discount bonds available in the marketplace.
That's why I recommend a plain old broad -
based bond index fund for most investors, particularly those who are still growing their portfolios.
If all rates went up by 100 basis points annually, it would be reasonable to expect a broad -
based bond index fund (with a duration of about seven years) to lose about 3 % over one year and about 5 % over three years.
Formerly the Lehman Brothers Aggregate Bond Index, the Barclays Capital Aggregate Bond Index (sometimes abbreviated as «Barcap») is a broad -
based bond index composed of a total of more than 6,000 individual bonds.
And there is no «unique context» where dividend stocks could possibly be considered less risky than a broad -
based bond index fund, let alone a short - term bond fund or a ladder of GICs.
So why would you use a barbell rather than simply holding a broad -
based bond index fund?
The broadest U.S. dollar
based bond index is known as the Universal.
The Barclays U.S. Credit Index is the credit component of the Barclays Capital U.S. Aggregate Bond Index, which is a broad -
based bond index comprised of government, corporate, mortgage and asset - backed issues, rated investment grade or higher, and having at least one year to maturity.
Their reasoning is that, «bonds are debt instruments, so market value -
based bond indexes skew toward issuers with larger debt sizes; therefore, bond indexes are riskier.»
Not exact matches
In a rising interest rate environment, the risk that investors have in owning all
bond mutual funds and / or
bond ETFs for their
bond allocation is that both vehicles are managed on a relative return
basis versus a benchmark
index.
iShares S&P ® / TSX ® 60
Index Fund («XIU»), iShares S&P / TSX Capped Composite
Index Fund («XIC»), iShares S&P / TSX Completion
Index Fund («XMD»), iShares S&P / TSX SmallCap
Index Fund («XCS»), iShares S&P / TSX Capped Energy
Index Fund («XEG»), iShares S&P / TSX Capped Financials
Index Fund («XFN»), iShares S&P / TSX Global Gold
Index Fund («XGD»), iShares S&P / TSX Capped Information Technology
Index Fund («XIT»), iShares S&P / TSX Capped REIT
Index Fund («XRE»), iShares S&P / TSX Capped Materials
Index Fund («XMA»), iShares Diversified Monthly Income Fund («XTR»), iShares S&P 500
Index Fund (CAD - Hedged)(«XSP»), iShares Jantzi Social
Index Fund («XEN»), iShares Dow Jones Select Dividend
Index Fund («XDV»), iShares Dow Jones Canada Select Growth
Index Fund («XCG»), iShares Dow Jones Canada Select Value
Index Fund («XCV»), iShares DEX Universe
Bond Index Fund («XBB»), iShares DEX Short Term
Bond Index Fund («XSB»), iShares DEX Real Return
Bond Index Fund («XRB»), iShares DEX Long Term
Bond Index Fund («XLB»), iShares DEX All Government
Bond Index Fund («XGB»), and iShares DEX All Corporate
Bond Index Fund («XCB»), iShares MSCI EAFE ®
Index Fund (CAD - Hedged)(«XIN»), iShares Russell 2000 ®
Index Fund (CAD - Hedged)(«XSU»), iShares Conservative Core Portfolio Builder Fund («XCR»), iShares Growth Core Portfolio Builder Fund («XGR»), iShares Global Completion Portfolio Builder Fund («XGC»), iShares Alternatives Completion Portfolio Builder Fund («XAL»), iShares MSCI Emerging Markets
Index Fund («XEM») and iShares MSCI World
Index Fund («XWD»), iShares MSCI Brazil
Index Fund («XBZ»), iShares China
Index Fund («XCH»), iShares S&P CNX Nifty India
Index Fund («XID»), iShares S&P Latin America 40
Index Fund («XLA»), iShares U.S. High Yield
Bond Index Fund (CAD - Hedged)(«XHY»), iShares U.S. IG Corporate
Bond Index Fund (CAD - Hedged)(«XIG»), iShares DEX HYBrid
Bond Index Fund («XHB»), iShares S&P / TSX North American Preferred Stock
Index Fund (CAD - Hedged)(«XPF»), iShares S&P / TSX Equity Income
Index Fund («XEI»), iShares S&P / TSX Capped Consumer Staples
Index Fund («XST»), iShares Capped Utilities
Index Fund («XUT»), iShares S&P / TSX Global
Base Metals
Index Fund («XBM»), iShares S&P Global Healthcare
Index Fund (CAD - Hedged)(«XHC»), iShares NASDAQ 100
Index Fund (CAD - Hedged)(«XQQ») and iShares J.P. Morgan USD Emerging Markets
Bond Index Fund (CAD - Hedged)(«XEB»)(collectively, the «Funds») may or may not be suitable for all investors.
Represents the corporate and government - related sectors of Bloomberg Barclays Global Aggregate
Bond Index (which provides a broad -
based measure of the global investment - grade, fixed - rate debt markets) and is considered representative of global investment - grade debt.
More than just tempering Gross's anti-equity remarks, the longtime advocate of buying and holding equity -
based index funds and ETFs went so far as to say that «equities today are more attractive relative to
bonds than at any other time in history.»
For example, income has driven about 90 % of annual
bond returns over the past 10 years, based on the Bloomberg Barclays U.S. Aggregate Bond In
bond returns over the past 10 years,
based on the Bloomberg Barclays U.S. Aggregate
Bond In
Bond Index.
Barclays U.S. Aggregate
Bond Index is a broad - based, market - value - weighted benchmark that measures the performance of the U.S.dollar - denominated, investment - grade, fixed - rate, taxable bond mar
Bond Index is a broad -
based, market - value - weighted benchmark that measures the performance of the U.S.dollar - denominated, investment - grade, fixed - rate, taxable
bond mar
bond market.
In addition, large, broad -
based indexes such as the Barclays Aggregate
Bond Index have become less diversified over time, and now are dominated by U.S. government and agency debt.
The fund adjusts its allocations daily
based upon equity and
bond market volatility, correlation between the
bond and equity
indexes, and the yield - to - maturity of the
bond index.
The BofA Merrill Lynch high - yield
index is trading at roughly 600
basis points versus government
bonds, but if energy, metals and mining is excluded, it's about 80
basis points less in terms of spread.
BarCap Aggregate
Bond Index - A broad - based benchmark that measures the investment grade, U.S. dollar - donminated, fixed - rate taxable bond market, including Treasuries, government - rated and corporate securities, MBS (agency fixed - rate and hybrid ARM pass - throughs), ABS, and C
Bond Index - A broad -
based benchmark that measures the investment grade, U.S. dollar - donminated, fixed - rate taxable
bond market, including Treasuries, government - rated and corporate securities, MBS (agency fixed - rate and hybrid ARM pass - throughs), ABS, and C
bond market, including Treasuries, government - rated and corporate securities, MBS (agency fixed - rate and hybrid ARM pass - throughs), ABS, and CMBS.
By contrast, an investor who put $ 100,000 into a portfolio comprised of 60 % stocks and 40 %
bonds and left it alone would now have $ 214,080,
based on the total returns of the S&P 500 and the Barclays
bond index, over the same period.
After having risen 19
basis points the first week of July, the yield on the S&P / BGCantor Current 10 Year U.S. Treasury
Bond Index dropped 20
basis points from the July 3rd 2.72 % to its current 2.52 %, offsetting the initial increase.
If an investor had moved $ 100,000 into
bonds that day, it would be worth $ 124,033,
based on the total return of the Barclays U.S. Aggregate
Bond Index through Thursday, according to investment researcher Morningstar.
While this only goes back to 1999, it would still be insightful to compare these two
indexes on a year by year and aggregate
basis for total return and volatility to get a true sense of the difference that treasury
bond duration makes.
An FIA uses a unique formula to calculate annual interest
based on the performance of a stock,
bond or commodity
index.
For example,
based on our analysis using J.P. Morgan
index data, the EMBIG
index's 7.25 percent performance in 2014 is owed to a -0.35 percent spread return combined with a 7.6 percent Treasury return, as U.S. rates dropped significantly (remember that when interest rates fall,
bond prices rise, and vice versa).
After touching a low of 2.7 per cent in June, yields on 10 - year
indexed bonds now stand at around 3.3 per cent, 15
basis points higher than their level in early May.
Annual interest is calculated using a unique formula
based on changes in the performance of stocks (S&P, Dow Jones, NASDAQ),
bonds (Capital Markets
Bond Index), or commodities (CBUE).
For example, the Bloomberg Barclays Green
Bond Index, which was launched in 2014, has lagged the broad - based Barclays Global Aggregate slightly over the last three years — but keep in mind that overall returns don't account for the boom in green bond issuance over that per
Bond Index, which was launched in 2014, has lagged the broad -
based Barclays Global Aggregate slightly over the last three years — but keep in mind that overall returns don't account for the boom in green
bond issuance over that per
bond issuance over that period.
Interest rate sensitivity, also known as duration, is
based on the Barclays U.S. Credit
Bond Index (all maturities), and short - term bonds represented by the subset of bonds within the index with maturities of 1 - 5 years (Barclays 1 - 5 Year U.S. Credit Bond In
Index (all maturities), and short - term
bonds represented by the subset of
bonds within the
index with maturities of 1 - 5 years (Barclays 1 - 5 Year U.S. Credit Bond In
index with maturities of 1 - 5 years (Barclays 1 - 5 Year U.S. Credit
Bond IndexIndex).
Frequency of reinvestment
based on the percentage of
bonds maturing within 3 years — 22.5 % for the overall
bond market (represented by Barclays U.S. Credit Bond Index) and 55.2 % for short - term bonds (represented by Barclays 1 - 5 Year Credit Bond Ind
bond market (represented by Barclays U.S. Credit
Bond Index) and 55.2 % for short - term bonds (represented by Barclays 1 - 5 Year Credit Bond Ind
Bond Index) and 55.2 % for short - term
bonds (represented by Barclays 1 - 5 Year Credit
Bond Ind
Bond Index).
In their December 2016 paper entitled «Cross-Asset Signals and Time Series Momentum», Aleksi Pitkajarvi, Matti Suominen and Lauri Vaittinen examine a strategy that times each of country stock and government
bond (constant 5 - year maturity)
indexes based on past returns for both.
ProShares
based on the BNP Paribas Diversified USD Covered
Bond Index are not sponsored, endorsed, distributed or advised by BNP Paribas or its affiliates, and they make no representation regarding the advisability of investing in ProShares.
The current trend for most individuals is to choose a mix of equity and
bond indexes, normally
based on the best past performance, with little to no research involved, and continue to purchase those holdings regardless of the valuations.
The level of the
index (and these funds) will fluctuate
based on changes in the price of the underlying
bonds, not their yields.
The Bloomberg Barclays US Corporate High - Yield
Bond Index is an unmanaged broad - based market - value - weighted index that tracks the total return performance of non-investment grade, fixed - rate, publicly placed, dollar denominated and nonconvertible debt registered with the Securities and Exchange Commis
Index is an unmanaged broad -
based market - value - weighted
index that tracks the total return performance of non-investment grade, fixed - rate, publicly placed, dollar denominated and nonconvertible debt registered with the Securities and Exchange Commis
index that tracks the total return performance of non-investment grade, fixed - rate, publicly placed, dollar denominated and nonconvertible debt registered with the Securities and Exchange Commission.
Investment grade
bonds as measured by the S&P U.S. Issued Investment Grade Corporate
Bond Index turned it up a notch as the index's yield tightened by 9 basis points on the week to a 2.
Index turned it up a notch as the
index's yield tightened by 9 basis points on the week to a 2.
index's yield tightened by 9
basis points on the week to a 2.76 %.
Clearing members holding open positions in E-Mini Standard and Poor's MidCap 400 Stock Price
Index futures contracts at the time of termination of trading in that contract shall make payment to or receive payment from the Clearing House in accordance with normal variation performance
bond procedures
based on a settlement price equal to the final settlement price.
You use an
index, and adjust the ratio of stocks /
bond based upon whether a simple calculation estimates that the market is overpriced or underpriced.
In essence, a holder of the ETN has bought a senior unsecured zero coupon
bond from Barclays, with an ultimate payoff
based off of the return on the commodities
index less 0.75 % / year.
First Asset, which has one
bond ETF that uses a forward agreement, has already issued an opinion on this matter: «Based on its review to date, First Asset believes that these changes will not affect First Asset Morningstar Emerging Markets Composite Bond Index ETF... or the tax treatment of its distributions, until the expiration of the Fund's forward agreement in September 2015.&ra
bond ETF that uses a forward agreement, has already issued an opinion on this matter: «
Based on its review to date, First Asset believes that these changes will not affect First Asset Morningstar Emerging Markets Composite
Bond Index ETF... or the tax treatment of its distributions, until the expiration of the Fund's forward agreement in September 2015.&ra
Bond Index ETF... or the tax treatment of its distributions, until the expiration of the Fund's forward agreement in September 2015.»
The
bond also did not qualify for inclusion in the S&P China Composite Select Bond Index which is a rules - based index designed to be replicable by passive invest
bond also did not qualify for inclusion in the S&P China Composite Select
Bond Index which is a rules - based index designed to be replicable by passive invest
Bond Index which is a rules - based index designed to be replicable by passive inves
Index which is a rules -
based index designed to be replicable by passive inves
index designed to be replicable by passive investors.
Given such aggressive conversation by highly placed individuals, the market took heed as the yield on the S&P / BGCantor 7 - 10 Year U.S. Treasury
Bond Index moved 45
basis points wider, from a recent low of 1.35 % on May 1st to its current level of 1.80 %.
The duration matched spread to Treasuries or the OAS (Option Adjusted Spread) for both the S&P U.S. Issued Investment Grade Corporate
Bond Index and the S&P U.S. Issued High Yield Corporate
Bond Index are tighter by 16 and 33
basis points respectively.
As tracked by the S&P Japan
Bond Index, a broad
base benchmark that measures the performance of the government and corporate local currency
bonds in Japan, the total outstanding par amount have reached over 1,070 trillion Yen this August.
The Barclays US Aggregate
Bond Index is a broad - based flagship benchmark that measures the investment grade, US dollar - denominated, fixed - rate taxable bond mar
Bond Index is a broad -
based flagship benchmark that measures the investment grade, US dollar - denominated, fixed - rate taxable
bond mar
bond market.
Backing away Balance of payments Balance of trade Balance sheet BAN Bankers» acceptances
Basis Basis book
Basis points Bearer Bear market Bear Spreads Best - efforts underwriting Beta Bid price Blanket fidelity
bond Block trade Blue Chip Stocks Blue List Blue List Total Blue Skying Blue Sky Laws Board Broker Bond Bond Anticipation Note Bond Buyer Bond Index Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy
bond Block trade Blue Chip Stocks Blue List Blue List Total Blue Skying Blue Sky Laws Board Broker
Bond Bond Anticipation Note Bond Buyer Bond Index Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy
Bond Bond Anticipation Note Bond Buyer Bond Index Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy
Bond Anticipation Note
Bond Buyer Bond Index Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy
Bond Buyer
Bond Index Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy
Bond Index Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy
Bond Swap Book entry Book value BP option Branch office Breadth of the Market Breakeven Point Breakpoint Breakpoint sale Broker Broker / Dealer Broker's broker Bull market Bull spread Bunching Business cycle Buyer's option Buying power Buy stop
On that
basis, I'd bought XSB (a short - term
bond index, average duration of about 2.9 years).
U.S. Treasury
Bonds: Treasury notes and
bond as measured by the S&P / BGCantor US Treasury Bond Index started the year in negative territory, finally getting their head above water on a consistent basis around the beginning of Ap
bond as measured by the S&P / BGCantor US Treasury
Bond Index started the year in negative territory, finally getting their head above water on a consistent basis around the beginning of Ap
Bond Index started the year in negative territory, finally getting their head above water on a consistent
basis around the beginning of April.
The broad -
based iShares DEX Universe
Bond Index Fund (XBB) earned well over 6.4 %, its best showing since 2004.