Tag Archive | Bond ETFs

Position Sizing: Key to Maximizing Returns

In a time when market volatility and equity preservation is of utmost importance, determining the correct number of shares to buy, or “position sizing”, is key to maximizing returns and minimizing risk.

The common investor generally doesn’t spend much time thinking about how many shares to buy or how significant of a position to take.  Instead, most investors use a common methodology of trading the same number of shares each time, which usually translates to a specific dollar amount.  Other, more sophisticated investors, opt to allocate a certain percentage of their portfolio value to a specific position. Following this train of thought, a new position in a portfolio of $100,000 would transcribe either a $10,000, or 10%, investment or a usual position of 50 shares.

Although these methods may work for some, using the volatility of a specific portfolio is likely to be the most effective decision tool.  Measuring a portfolio’s overall volatility enables an investor to decide on what percentage of that portfolio he is willing to risk losing on the new position.  This methodology is better explained through the following example. Read More…

Three ETFs To Play Emerging Market Debt

As developing nations continue to draw investor attention, opportunities in developing market debt may present a viable opportunity.

To not much surprise, many have been turning to developing nations mainly due to their aggregate, or combined, size and expected exponential growth compared to the United States in the near future.   In fact, a recent study indicates that 97% of the world’s population, 75% of its economic production and nearly 67% of stock market capitalization is outside of the United States. Read More…

An ETF To Play Soaring Treasury Yields

Over the past few days, Treasury yields have been soaring heading back to seven month highs.  On Wednesday, 10-year yields briefly touched 3.56%, their highest level since May and are up nearly 118 basis points since August.  Furthermore, yields on 30-year bonds have shot up nearly 1 percent and five year bonds are up more than 100 basis points since August. 

This recent surge in Treasury yields could possibly be attributable to increased investor risk appetite which could further indicate that interest rates have bottomed out.  Past trends indicate that when an economy moves out of a recession and into recovery mode, one of the first things to happen is a rise in interest rates as investors tend to move their money into riskier investments and shun safer investments like US Treasuries.   Additionally, when an economy is in recovery mode, history indicates that inflation begins to rise as the economy grows which pushes bond prices down and yields up, hence pushing interest rates higher.  Read More…

WisdomTree Files For Actively Managed Emerging Market Bond ETFs

In an attempt to broaden its horizons, ETF provider WisdomTree Investments, recently filed paperwork with the Securities and Exchange Commission to provide actively managed emerging market bond ETFs.

According to the filing, the first ETF of the proposed three, would be the WisdomTree Asia Bond Fund,  which seeks to offer broad exposure to Asian government and corporate bonds.  Furthermore, the fund intends to invest in fixed income securities denominated in the local currency of countries in Asia.  Particularly, the fund is expected to focus its investments in China, Hong Kong, India, Indonesia, South Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand.  Read More…

3 ETFs To Play Brazilian Bonds

As talks of a bubble forming in the US bond market continue to prevail, many investors have turned to the Brazilian bond market and for good reason.

According to investment data firm, EPFR Global, international bond fund managers have infiltrated the Brazilian bond markets to the tune of $5.2 billion of assets as of September 22, 2010, more than double that seen in 2009.  Furthermore inflows into Brazilian bonds account for more than 10% of all inflows into emerging market bonds.  Lastly, local Brazilian government

Currently, local Brazilian government bonds are yielding more than 11 percent on one-year bonds and are expected to continue to do so as demand is expected to remain strong, especially from countries with low interest rates, suggests Kenneth Rapoza of Barrons.  Read More…

PIMCO Introduces Build America Bond ETF

Pimco, one of the world’s largest bond firms, just launched its latest municipal exchange traded fund (ETF), the Pimco Build America Bond Strategy Fund (BABZ).

BABZ will carry an expense ratio of 0.45% and aims to achieve its investment objective in focusing its asset base on taxable municipal debt securities which are publicly issued under the President Obama’s Build America Bond program.  Furthermore, the fund generally invests in U.S. dollar denominated fixed income instruments that are investment grade but may allocate a percentage of assets to higher yield junk bonds which have a higher likelihood of default.  Read More…

10 ETFs To Play Deflation

As deflationary concerns continue to make headlines among investors, dividend paying investments, interest-bearing investments and cash become more appealing.

Weak economic figures, a decline in money supply and fiscal tightening around the world are a few reasons why falling prices could be in the near future. Other factors that could lead to a drop in prices include tight credit markets, declines in consumer spending and high unemployment – all of which lead to a reduction in the demand for goods. Declines in the demand for goods eventually result in excess supply, which further leads to a decline in prices to bring supply and demand in equilibrium.

A fall in prices can be detrimental to an economic recovery if businesses and consumers become reluctant to spend and decide to hold on to any disposable cash. This decrease in money supply is most devastating to economies that are highly dependent on consumer spending, such as the United States. Other results of deflation include erosion of consumer confidence and amplification of the burden of both household and public-sector debt. Read More…

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