Recent Buy – BND

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A quick update on 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.

4 thoughts on “Recent Buy – BND

  1. Do you plan to divest from your gold assets? I sold all of my gold stocks in 2012 when it peaked to non-sense levels. To me, gold is just a shiny yellow metal with no real value. Consumers are brainwashed about gold jewelry thinking it’s gonna make them look cool. The bond purchase is a strong move to further protect your portfolio value. Great job!

    • I may divest a bit here and there depending on my risk tolerance, but I view gold as anything but a shiny metal. For thousands of years, it has been money and it will remain of high value for the next thousand. There’s a reason why central bankers around the world are hoarding gold in their vaults. I will take the shiny metal anyday in exchange for the paper currency from the bankrupt governments.

      R2R

    • I debated a lot about risking $ for a 2.8% yield instead of just holding cash, but I think there’s a lot of value in holding some bonds right now — esp that yields some US$. I can see US$ going either way, with a slight trend lower from here but still a good way to hedge and earn some US$ income while I wait. As my portfolio grows, I want some more stability in the portfolio — and bonds provide that.

      R2R

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