Reducing Risk With Bond ETFs By Paying Attention To Duration
By Niklashausen:Year to date stocks have been hot, bonds not. On a total return basis (as of 2/3/12 ) SPY is up 7.17 and TLT down -3.85. Should bondholders be nervous? For months now, pundits have been warning that interest rates can't go much lower, that inflation will eventually kick in, leading the bond bubble to burst, and that all those investors who piled into bond ETFs since 2008 will get burned. What to do? Some investors are already trading in their bonds for dividend growth stocks. Yet it may be too early to bail out of bonds. The Fed has pledged to hold interest rates down for another year or two, and with some careful portfolio management, investors might be able to find more yield while lowering their interest-rate risk by paying attention to the duration of their bond holdings. Duration is a measure of the sensitivity of bond pricesComplete Story »
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