A video on Charles Schwab'​s website asks, "Are You Going Too Short-​Term in Your Bond Portfolio?" Schwab'​s Kathy Jones explains, "With the Federal Reserve raising interest rates over the past couple of years, short-​term investments like treasury bills and CDs with maturities of under a year or so have become very popular with investors, and rightly so. In the treasury bill market, a one-​year T-​bill right now will generally yield around 2.​3%. A year ago, you would have had to buy a seven-​year treasury note to get that much yield. So, naturally, investors have gravitated to the part of the market where they can get more yield with less interest-​rate risk over time. But one of the concerns that we have is that investors may be getting too short-​term in their bond portfolios." She adds, "​As the Federal Reserve has been raising short-​term interest rates over the past couple of years, we'​ve suggested investors focus the average duration in their fixed income portfolios in the short-​to-​intermediate-​term area -- that is, two to five years for treasuries and investment-​grade corporate bonds. And the reason is that as the Fed raises short-​term rates, the yield curve tends to flatten, the difference between long- and short-​term rates tends to narrow, and you get more return for less interest rate risk at the shorter end of the yield curve. But we don'​t think investors should abandon intermediate- or longer-​term bonds entirely in their portfolios."

Your Name:
Your Email:
Recipient Email(s):

Use a comma or a semicolon to separate

Please retype symbols from the image:

Optional Message

Daily Link Archive