Now Is The Season To: July 2011
Consider Floating Rate Bond ETFs
Thanks to the shakiness of stock markets around the world, many investors are piling into bond funds as a way to play a strengthening dollar, capture yield, and ride out the storm. While this might be a good short-term strategy, eventually the Fed will have to raise rates in order to combat inflation. When this happens, bond ETFs that are sensitive to interest rate changes, especially those on the long end of the curve, will be negatively impacted by this and will likely see the capital gains that they have made over the past few months disappear. Thanks to this reality, long-term investors need to consider adding bonds that are tied to floating rates as an alternative.
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