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Fixed income investment

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  1. #11

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    Quote Originally Posted by TechGuy:
    3-4%. I am fine with lower return as I am thinking of going for longer maturity bond funds. My gut feeling is that unlikely further rate hikes, rates may stay same for a year or so, it has to come down, then longer maturity bond funds should give more appreciation.
    That's not how it works. Longer maturity bonds' / treasuries values move more or less inversely to the interest rate, they also have the possibility of interest rate drops somewhat priced in which is why the current yield tends to be lower. Funds holding longer dates funds are a bit harder to predict though since their underlying assets are of different vintages and therefore have a variety of interest rates locked in. They also have different mechanics for dealing with that issue.
    traineeinvestor likes this.

  2. #12

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    Quote Originally Posted by aw451:
    That's not how it works. Longer maturity bonds' / treasuries values move more or less inversely to the interest rate, they also have the possibility of interest rate drops somewhat priced in which is why the current yield tends to be lower. Funds holding longer dates funds are a bit harder to predict though since their underlying assets are of different vintages and therefore have a variety of interest rates locked in. They also have different mechanics for dealing with that issue.
    Longer maturity bonds' / treasuries values move more or less inversely to the interest rate,

    I mentioned the same.

    Funds holding longer dates funds are a bit harder to predict

    Thats why I want to invest on longer dated maturities. Otherwise I could have gone with SGOV.


  3. #13

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    I think the point @aw451 is making is that once you buy a bond fund, it doesn't really look like a "fixed income investment" even though that is all it owns.

    Take LQD ETF that invests in investment grade USD corporate bonds (you can find reputable longer dated versions too). Because it rolls bonds at maturity, even though it pays a coupon every quarter, the overall price of the fund tends to reflect interest rate movements.

    So you could buy and hold for a period, and still lose money if rates have risen (or credit risk, or other market vagueries) in between.

    Nevertheless I would still recommend such an ETF over buying specific bonds or other products if fixed income is what you want - just be sure you are happy to hold for longer than the average maturity of the bonds the fund is buying, and long term it will look like fixed income.


  4. #14

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    Quote Originally Posted by TechGuy:
    3-4%. I am fine with lower return as I am thinking of going for longer maturity bond funds. My gut feeling is that unlikely further rate hikes, rates may stay same for a year or so, it has to come down, then longer maturity bond funds should give more appreciation.
    Second question you may want to consider is how much volatility you could accept!!

    For 3-4% return with or without bet on capital/NAV appreciation, plenty of options out there again depending on your volatility tolerance

    1) Plain vanilla HK Govt green bonds in secondary market (There is a thread on it)
    2) USD short/medium/long term treasuries like you mentioned (TLT/TLH etc)
    3) Corporate bond funds (LQD/LQDE etc)
    And like Shri mentioned
    4) Tax-free Municipal bond funds/ETFs
    5) Study this and other similar documents
    https://www.ishares.com/us/literatur...final-2023.pdf

  5. #15

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    Quote Originally Posted by GentleGeorge:
    So you could buy and hold for a period, and still lose money if rates have risen (or credit risk, or other market vagueries) in between.

    Nevertheless I would still recommend such an ETF over buying specific bonds or other products if fixed income is what you want - just be sure you are happy to hold for longer than the average maturity of the bonds the fund is buying, and long term it will look like fixed income.
    Or buy term dates ETFs.. the OP can look up iShares term date ends... E.g.

    The options are endless and can get as exotic as you want in the fixed income world... Just like equities or whatever else we do in life.

    Not suggesting or recommending this specific etf.. just the first result for iShares term dates treasuries etf.

    https://www.ishares.com/us/products/...m-treasury-etf

  6. #16

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    Thank you all for your comments. I learned a lot.


  7. #17

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    Alternatively, if you are not sure which way rate would go, dont want to bet either way and keep riding in short term till you figure our final long term option..

    https://www.ishares.com/us/products/...-rate-bond-etf


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