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As a newbie investor, I've been exploring my options for the fixed-income part of my portfolio.

I'm interested in a suggestion from Rob Carrick's latest book:
Claymore 1-5 yr Govt. Bond E.T.F. [CLF - TSX]

I could use some help understanding how this fund works.

?1) I see in various stock quotes that CLF's "yield" is listed at 4.2 in the trailing twelve months.
Since the holdings are bonds, that means that this yield is in the form of interest, regularly distributed?

?2) How much is that yield likely to vary much over changing market conditions? How about the ETF price itself?

?3) At the moment, that yield seems to be a decent return on such a conservative bet as govt. bonds. Am I missing anything? Is an ETF like this really as secure as buying individual Govt. Bonds? If not, why?

?4) I see quoted: Annual Dividend: 0.85 What the heck is that on a bond fund? Is that something that Claymore itself pays out? If so, where do they take it from??

?5) Are there any issues that might prevent me from selling these whenever I see fit?

Thanks!
 

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as a newbie investor, i've been exploring my options for the fixed-income part of my portfolio.

I'm interested in a suggestion from rob carrick's latest book:
Claymore 1-5 yr govt. Bond e.t.f. [clf - tsx]

i could use some help understanding how this fund works.

?1) i see in various stock quotes that clf's "yield" is listed at 4.2 in the trailing twelve months.
Since the holdings are bonds, that means that this yield is in the form of interest, regularly distributed?

Yes

?2) how much is that yield likely to vary much over changing market conditions? How about the etf price itself?

As the yield change so will their mix, lagging the trend.

The etf price is based on the market, loosely associated with the yield

?3) at the moment, that yield seems to be a decent return on such a conservative bet as govt. Bonds. Am i missing anything? Is an etf like this really as secure as buying individual govt. Bonds? If not, why?

Basically yes except that tha market value determines your yield whereas face value determines the yield of a bond itself.

?4) i see quoted: Annual dividend: 0.85 what the heck is that on a bond fund? Is that something that claymore itself pays out? If so, where do they take it from??

They take it the interest they receive on the bonds being held.

?5) are there any issues that might prevent me from selling these whenever i see fit?
No.
Thanks!
Answers in bold above
 

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Watchout: they pay out more than the interest earned. Look at the 'portfolio yield' or whatever it's called: this is closer to 2%. Any difference between this and payout yield is just return of capital. You can expect the ETF to decline by this amount over time.

Another important piece of information is the duration of the portfolio. This is the average length of time before you get money out (ie, between interest payments and the final principle payment). For every percentage point rise in portfolio yield, expect the value of the ETF to decrease by the duration in percentage points. This is why shorter term bonds are recommended right now. With longer duration, changes in yield result in large changes in value.
 

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As an ETF investor, the current bond climate has me completely confused.

After many years of solid gains, it would appear that the glory days of bond fund returns may have come to an end--especially if we have several years of interest rate gains ahead of us as some are predicting.

And yet, older investors are told to gradually increase their allocation of fixed income investments to better reflect their age. Following this advice, a 70 year old would potentially have 70 percent of their portfolio in bonds.

In the last scary stock market crash, the bonds in my portfolio were all that kept me from financial disaster. It would appear that they will not provide the same lifeline in a future stock market crash.

And so, staying with the bond ETF option, what now might be the best choice. Would it be, for example, a short-term bond fund like the iShares XSB. Would one put all of their fixed income eggs in that one basket or is further diversification warranted?

Does a global bond fund make any sense?

What about corporate or high yield bond ETF's going forward?

How do you feel about bpass' choice of the Claymore Laddered Govt Bond ETF at this point in time?

If you consider yourself knowledgeable about bonds, how are YOU investing in them these days?

What does bond expert Hank Cunningham recommend for bond investments these days?

In a rising interest rate environment, both equities and bonds will come under pressure!
 

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I don't consider myself an expert on bonds, but here's my response anyway :cool:

After many years of solid gains, it would appear that the glory days of bond fund returns may have come to an end--especially if we have several years of interest rate gains ahead of us as some are predicting.
Which is why it's probably better to stay with short term bonds at this time.
The fund will be rolling over its inventory as and when the bonds mature so will keep pace with interest rates.
I don't see how a rising (or falling) interest rate environment effects a long term bond investor unless you are speculating on bonds (i.e. trading bonds like stocks).
A short term bond fund will keep pace with interest rate changes (with a lag equal to its average term).
Long term bond funds (i.e. > 15 year) are a different story though.
Since the current yield curve flattens in the long run, this is not a good time to lock in long term bond yields.

And yet, older investors are told to gradually increase their allocation of fixed income investments to better reflect their age. Following this advice, a 70 year old would potentially have 70 percent of their portfolio in bonds.
I personally don't believe in any such "golden rule", but whatever the % may be, I see nothing wrong with it.
I'd expect a bond portfolio to provide a few % points yield over the CPI inflation rate.
Since the market is currently oriented towards a deflationary trend, I'd say the bond yields on the market are still in line with that.
Whether you and I agree with the inflation vs. deflation is another matter.

Bonds provide a steady source of cash flow, are less volatile than stocks, and are safer than the corresponding common stock of a company.
Canadian govt. bonds are about the most safest thing in the world that you can buy these days.
In the last scary stock market crash, the bonds in my portfolio were all that kept me from financial disaster. It would appear that they will not provide the same lifeline in a future stock market crash.
Why not?
Bonds will obviously not help you if the company becomes insolvent and the assets have to be liquidated, but your chances of getting back some of your money is better than the common stock holders.

And so, staying with the bond ETF option, what now might be the best choice. Would it be, for example, a short-term bond fund like the iShares XSB. Would one put all of their fixed income eggs in that one basket or is further diversification warranted?
If ETF is the way you wish to go, I'd say stay with a mix of XSB & XCB.
Or you could go with just XBB.

Does a global bond fund make any sense?
Um...not sure. Each country's bond yield would more or less reflect that country's monetary policy, credit risks, etc.
Converting the yields back into CAD may wipe out most of the benefits.
What about corporate or high yield bond ETF's going forward?
sure, that could form the aggressive portion of your bond portfolio.
What does bond expert Hank Cunningham recommend for bond investments these days?
He has always recommended a laddered bond strategy, and I believe still does.
A passive, laddered portfolio should keep up with interest rate movements over extended periods of time.
 
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