from my point of view, it does not make sense to mix XSB and XBB, since XBB bonds holding contain 40% of relatively short term (1-5 years) bonds.i agree, very good article, thank you
so the answer is to hold one or more funds with a duration that matches your need or needs for the money ..
like XSB with half and XBB with the other half as an example ...
if you hold for the full duration of the fund you are getting the "equivalent" of buying individual bonds ...
as far as GIC's go, the very best 1-year rate is 2.50 from maxa credit union in manitoba .. you get a provincial rather than a federal guarantee though .. (if that means anything)
not really worth locking in at 2.5% when you can get a cdic insured hisa at 2% though
@larry81 - that's what I keep coming back to, if I already own XBB, with 40% short bonds, then am I really gaining much by holding XSB also given my 20-year time horizon. I'm not convinced. I think I'm going to keep my XBB and in another 15-20 years, just start creating a bond ladder as I get closer to retirement.from my point of view, it does not make sense to mix XSB and XBB, since XBB bonds holding contain 40% of relatively short term (1-5 years) bonds.
Would be better to mix XSB and XRB, maybe some junks bond too.
Or someone could just say, i am going trust the wise folks who manage PHN110
Your thinking is correct.@larry81 - that's what I keep coming back to, if I already own XBB, with 40% short bonds, then am I really gaining much by holding XSB also given my 20-year time horizon. I'm not convinced. I think I'm going to keep my XBB and in another 15-20 years, just start creating a bond ladder as I get closer to retirement.
As I get close to retirement, age 50, I plan on having a 50/50 equity/bond split in my registered holdings; a bunch of XBB or similar and at least 10% in
CLF or CBO.
The lads at PH&N do have a good bond product, although MER is twice as much as XBB and 80% of their holdings are long issues which I'm not a fan of.
Right now that is the best yield with the lowest risk. If I didn't need liquidity I'd go with 100% GIC ladder for bond component. It's sensible to keep some cash for rebalancing in the event of an equity correction.Even if your time horizon is 20 years?
Agreed. I see no sense in purchasing this type of ETF for capital appreciation. If you can get some, ok ... but it should not be your main goal with this type of security.^Nope. That is the coupon yield. It will be reduced by capital loss as the bonds mature. Yield to maturity is the way to look at these bond funds.
The difference is that this is a high yield fund, and so more credit risk. It has a yield to maturity of about 5.3% and a duration of 6.35 years. That's pretty long duration if interest rates rise.With the discussion on bond ETFs here, I did not see reference to XHB, iShares recently insituted Hybrid bond product, I think it was available as of October 2010 or so. In our non-registered portfolio, I hold XBB (66%) and some XHB (33%) of the 40% total bond holdings.
Yield = 5.3%
Mer = .45%
HST - .05%
I bought our holdings shortly after the New Year, and so far am pleased with the results. Presently sitting at +.47% since January. Any other comments or opinions on XHB? (perhaps I should have started a new thread?)
What does your age or time horizon have to do with it? If one's asset allocation includes a fixed income component, then in today’s interest rate environment a ladder is a reasonable candidate for at least a portion of that component, regardless of one's age. I don’t see why anyone would intentionally opt for lower returns coupled with higher risk. Sure a young person has more time to recover from the lower returns, but if they didn't go down that road in the first place, there'd be no lower returns to recover from.Financial Cents said:I don't believe in a GIC ladder, yet, because I'm still in my 30's.
[GIC ladder] Even if your time horizon is 20 years?
The best laddered “product” isn’t a product at all, but a selection of separate and discrete GICs of staggered maturities that you assemble yourself. Or bonds if you wish to sacrifice some return in exchange for liquidity. There are some ETFs (ie. CLF) that use a regimented laddered structure, but their disadvantages outweigh their advantages, and they’re not recommended. That may change in the future, or it might not.Financial Cents said:what is the best GIC laddered product out there right now?
No ... it would be about 3.38% minus nothing ... they are measuring what was actually distributed to unitholders, not the gross amount that was received by the fund ... 3.38% is net of MER.dogleg said:Yahoo Fin. would have you believe ... etc. etc. ... Right now it would be about 3.38 % minus the MER of 0.25% or about 3.13 %
No ... the current yield is only one part of the overall return with a bond fund, so is rather meaningless on its own ... people get drawn into bad decisions by the current yield all the time (ie search this forum for any mention of CLF) ... it would perhaps make more sense if Yahoo didn’t report the yield on bond funds at all ... the distribution history is readily available from the fund sponsors directly, along with various more meaningful and relevant metrics.dogleg said:In some ways I suppose it makes more sense to use the Yahoo (etc. ) method .
Actually, its the current yield ... the coupon yield is even higher.andrewf said:^Nope. That is the coupon yield.
Dubmac ... if you wait until GIC rates have gone up, then your bond fund will most likely have gone down ... its difficult to say whether the increased return on the GIC would make up for the smaller amount of capital you’re earning interest on ... if you plan to shift some money from bond fund to GIC, then you should either just go ahead and do it now, or sell the bond fund now and sit on the money in a HISA for a while ... the problem with the latter approach, of course, is knowing how long do you wait? ... and what would be the signal for you to deploy the funds? ... and would you recognize the signal when it came?Dubmac said:I plan to cash in a portion of the fixed income and buy a 5th GIC to complete a 5 yr GIC ladder
If and when interest rates go up, will 5 yr GIC rates go up? I guess this is like timing the market to some extent, but what are you thoughts?