Use Bonds to diversify and reduce risk
High volatility in the equities market have led many investors to buy bonds to protect hteir investment and retirement portfolio against a possible recession. A dovish FED means that interest rates are likely to stay low for a while. Buying bonds can act as a portfolio stabilizer.
Bonds have an inverse relationship to interest rates. When interest rates fall, bond prices rise. As bond prices rise, the yield on those bonds falls. The total return on bonds is therefore the interest yield and the changes in price of those bonds.
To get core exposure to bonds, consider iShares Core U.S. Aggregate Bond ETF (NYSEArce: AGG) for your portfolio.
AGG tracks the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index. The index measures the performance of the total U.S. investment –grade bond market. The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.
Profile of AGG:
| AGG investment information | Profile information Oct. 14, 2019 |
|---|---|
| Assets under management | $66 billion |
| Management expense ratio | 0.05% |
| Last dividend date | Oct 1, 2019 |
| Annual dividend yield | 2.72% |
| i-year return | 7.77% |
| 3-year return | 1.22% |
| 5-year return | 2.00% |
Below is a daily price chart of AGG. AGG is rated a buy once price pulls back to support at $112.
