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Funds that invest in United States debt focused on corporate bonds and U.S. treasuries.
Bold listings are recommended for this category. Fund ComparisoniShares added eight more funds recently. They currently provide the only bond ETFs, although, Vanguard has registered with the SEC to offer competing funds. To select a broad based fund, we look for low expenses with broad diversification and a good yield. The iShares Lehman Aggregate Bond Fund (AGG) fund offers a good combination of corporate and U.S. Treasuries with a medium duration. This fund carries a wide variety of bond holdings with some high safety bonds in the U.S. government and slightly riskier corporate bonds. However, it is also susceptible to interest rate increases or inflation risk. We also recommend buying the TIP fund invests in Treasury Inflation Protection Securities which protect the investor from inflation. It invests in U.S. Government debt, so it has no credit risk. TIP bonds pay semiannual interest just like other treasury bonds at a lower interest rate than the 10 year treasury. However, the advantage is that the principal or face value adjusts every six months depending upon the Consumer Price Index (CPI). If this inflation measure goes up, then your bond face value will increase accordingly. It currently pays a low interest rate, but it does protect the owner from CPI increases. We do suggest that you carry the TIP account in a tax deferred account, since taxes will be owed on the inflation principal adjustments. Seven of the funds (SHY, TLH, TLT, IEI, IEF, SHV, and TIP) invest exclusively in U.S. Treasuries. These funds have no credit risk, but still have interest rate risk. We would avoid the longer duration funds like iShares Lehman 20+ Year Treasury Bond Fund (TLT) and iShares Lehman 7 to 10 year Treasury Bond Fund (IEF). The longer duration funds will fall more than shorter duration funds if interest rates rise. With the current flat yield curve, the short duration funds pay almost the same as the longer funds. Consequently, we recommend the iShares Lehman 1 to 3 year Treasury Bond Fund (SHY) fund. Its now pays an interest rate nearly as high as the longer duration funds, but it will not change as much if interest rates move. This protects the investor if rates move higher. Fund ChartsMixed Debt: LQD versus CSJ, GVI, CFT, and GBF for the last year. Mixed Debt: AGG versus TLH, IEI, IEF and CIU for the last year. Government Debt: TIP versus SHV, SHY, TLT, and IEF for the last year. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Eustis Investing Strategies (EIS) does not guarantee the accuracy or completeness of this information, nor do we assume any liability for any loss that may result from its use. EIS personnel may own shares in the funds recommended on this website. Send mail to
master@eustis-invest.com with questions or comments about this web site.
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