The Low Rate Conundrum: Why Shorter-Term Bonds Make Sense Right Now

by  on  in Eric Gerster, Markets

Summary

  • The Fed is poised to raise rates for the first time since the financial crisis, placing fixed income investors in a difficult position. Shorter-term bonds/bond ETFs make more sense now.
  • The low level of rates across the yield curve means investors choosing longer duration bonds/ETFs could have less money in 5 years than they do today.
  • Choosing shorter-duration bonds/ETFs allows investors greater protection of principal while increasing investment flexibility in a Fed tightening scenario.

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Disclosure: I am/we are long SUB, MUB. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.