So how am I investing?
First, I continue to hold positions in the 20+ Year Treasury Bonds ETF (TLT) and the Extended Duration Bonds ETF (EDV). They can be volatile and can be up or down 1-2% on some days and that can be unnerving. But, over time, these positions have the opportunity to produce stock-like returns (10% or more) without being exposed to the stock market. In other words, these positions fluctuate based on the movement in the 20-year and 30-year interest rates.
Second, not that the Federal Reserve will likely keep interest rates lower for longer because of a slowing economy, I expect to be increasing the amount allocated to bonds while continuing to generally avoid stocks. Compare that to some large brokerage firms who are still recommending a retiree have a disproportionate amount of their portfolio invested in stocks. For me, I say now’s not the time to be overweight stocks.
So it is likely that I will be adding more bonds to my portfolios, this time focusing on Barclays 7-10 Year Treasury Bond ETF (IEF) and Barclays 3-7 Year Treasury Bond (IEI). These are shorter term bonds that shouldn’t fluctuate as much as TLT and EDV but that should also see gains as interest rates drift down. Keep in mind that these bond funds also pay dividends along the way.
Lastly, even though the markets may be in a general decline (unless the Fed announces QE4), there will still be stock rallies and declines, as well as certain types of stocks that can do well in this environment. I plan to keep a small allocation set aside to take advantage of those opportunities (long and short) as they present themselves.
Thanks for reading and have a great week.
Twitter: @JeffVoudrie
Author has positions in mentioned securities. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
