A quick update on a a recent purchase in my portfolio.
Over the course of past few months, I’ve been thinking a lot about protecting assets from the ongoing (and increasing) instability in the equity markets. I have a sizable position in defensive positions with a lot of gold equities exposure, but that comes with a lot of volatility. I wanted to provide some more inertia in my portfolio here.
I started a new position in Vanguard Total Bond Market ETF (BND). BND provides a 2.79% yield with intermediate term bond exposure to the US market. With a MER of 0.05% (and zero trading costs in my brokerage account), the cost of exposure is extremely low.
I already own ETFs with exposure to Canadian & Emerging Market bonds, but the US bond market was missing. I was waiting to find the cue where we think we have reached the top of the Fed rate hike cycle. The bond market is pricing in an end to the hikes for this cycle, although there are some arguments to be made for one or two more hikes before the end. Nevertheless, we are closer to the end if not already past — so I decided to start building my position here.
There are a lot of ifs-and-buts on whether to go with on the short end or the long end of the curve. But I was also looking for a more passive approach and this ETF seems to provide the best option for my portfolio. The BND ETF provides a good diversified exposure to the US bond market with 65% in US government debt. Current portfolio snapshot is captured below.
This is just a small iteration of starting to build my portfolio with US bond exposure. I will be adding to this position incrementally over the coming months.
Full Disclosure: Long BND. Our full list of holdings is available here.