(12-17-2019, 08:51 AM)crimsonghost747 Wrote:A hedge is in fact what I truly desire for some part of my port. TLT has served that purpose well historically. US long bonds just ran 20% and offer a low yield so this doesn't appear to be one of those times. I get 2% (barely) from my cash/extremely short term bond fund combo currently. The yield is fading fast though. It was 2.5%+ from the same funds not so long ago.(12-17-2019, 07:53 AM)fenders53 Wrote: I'm not willing to take a 40% port hit anymore.
I need a hedge for the short to mid-term. I can't find anything other than cash, and hence this thread as cash is less desirable with current rates. For now the answer may be what I am already doing. A huge basket of extremely short duration bond funds.
Well, that changes things a little. Because at first I was under the impression that you wanted bonds as a true hedge, meaning they will move upwards when the market is going downwards. So I thought the main point is to gain price appreciation should the shit hit the fan. And I don't like to be that speculative, especially with bonds and even more so with the current low yields.
But if you are just looking for a place to park some cash with some sort of a yield, then bonds may very well be the answer. But I'd definitely go with individual bonds, not a bond fund. I don't know what you can get for cash in a CD or similar, but the current US government yield is 1.54% for a one year bond. It's not much but it's a safe bet in that you know that you'll get your money back on the specific date. And you don't really run any risk of losses if you hold until maturity. (the only real risk is the US government defaulting.. somehow I doubt it when they can always print more) Some corporate bonds will yield more but honestly I don't think they are worth the time and the risk at the moment.
Preferred shares could be another option. They can certainly fall with the general market too but they should keep their value much better than regular shares and they tend to have pretty juicy yields.
I'm not educated enough on purchasing individual bonds. Sounds like it is time to learn. First a more advanced book, then I can dip my toe in the market with a quality corporate bond and watch it move around. Nothing accelerates the learning curve like some skin in the game.