The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments


Subject:  Trading Bond ETFs, Part 2 Date:  1/5/2013  6:49 PM
Author:  globalist2013 Number:  34604 of 35623

The premise of this post is simple. Fundamentals tell you “What?” and “Why?” Technicals tell you “When?” Your risk-management plan tells you “How Much?”

You can make your investment bets on price alone, but that’s asking for trouble. You really should understand what you’re betting on, and that means digging into the fund’s holdings. But I’m going to assume you can do your own fundamentals (by relying on a site like Morningstar to pull the info). So, without justifying my own choices, I’m going to assume you’ll make your own (which might be the same, or not). But of the very similar pair, I strongly prefer PCY over EMB for being its seeming to be the purer play on foreign sovereigns and, hopefully, the better diversifier against domestic sovereigns, even though that isn’t what the 1-year correlations say at site like, where EMB vs. PCY = 0.99 and TLT vs. EMB vs. PCY = 0.41, 0.45. But I’m going to trust that portfolios with significant differences will behave differently and go with PCY. (Besides, its lower share price makes the risk-management task easier.)

If “What?” has been decide, the next task is to decide “When?” On the basis of its chart, PCY has run up and is way past a good entry point. Or again,