Cash is king, but savings bank account which earns interest less than 1% is not a hedge against inflation. U.S. government bills, notes and bonds, also known as Treasuries, are considered the safest investments in the world by Americans, and are backed by the US government.
TLT, the iShares 20+ Year Treasury Bond ETF, tracks a basket of U.S. Treasury bonds with remaining maturities greater than twenty years.
TLT is not available in Singapore. It is listed in US. Earns 1.7% annually in dividends after withholding tax.
By conventional theory, when interest rates rise, long dated bonds such as TLT should fall. But looking at the interest rate increases in the following 3 year chart:
Dec 2015
Dec 2016
Mar 2017
June 2017
The TLT has remained resilient even though it is expected to drop with every interest rate increase.
What do you think will happen to TLT when the stock market crash?
Forever portfolio and Permanent portfolio are some of the many portfolios that use long dated bonds as a hedge.
I bought some TLT at 123 and will buy more as it drops.
TLT cannot be supercharged with Maybank Kim Eng.
I'm a remisier with Maybank Securities, and as a bonds and REITs investor myself, I guide my clients to build resilient bonds and REITs portfolios. If you like to be guided, please open a trading account to become my client; It's free!
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