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Which Leveraged Bond ETF is Right For You?


While it is certainly acceptable to use certain investments for short term needs, that is generally what your regular salary should be used for. If you have the money, then buy what you need. If you don’t, then wait until you do. Living by this motto will give you the money that you need to survive on well into old age. With this mindset, you can figure out quite quickly that most investments that you engage in need to be focused on your retirement. This is type of wealth building that should begin early on during your life, and continue until you are ready to retire. This is the reason that investing needs to be looked at as a long-term strategy to become rich. If you can keep your eyes focused on that core objective, then you are certainly closer to the finish line than most people in our society. With that in mind, consider the power of exchange traded funds to build the type of wealth that you desire.

Another retirement strategy that has become increasingly popular in recent years is to make use of exchange traded funds to accumulate money with an investment portfolio. Exchange Traded Funds to operate a lot like index funds, but are distinguishable in the fact that they are actually traded as stocks. This is a basket of securities, if you will, that trades on a stock exchange. Various firms will issue Exchange Traded Funds, such as Merrill Lynch, State Street and Barclays.

1. iShares Long-Term Corporate Bond ETF

Here is an ETF that has achieved a one-year performance percentage of 11.5%. The expense ratio is quite low at 0.06%, while the annual dividend yield is 3.32%. This is a good long term investment ETF. There is currently $1.9 billion in this fund that has been active since late 2009. This fund put a great deal of focus into bonds that are priced in U.S. Dollars and that have a maturity in excess of a decade. You will benefit from an ETF that holds significant shares in more than 2,500 different corporate bonds. These bonds are issued by hundreds of different companies, giving investors the type of diversity that they need the most.

It is always helpful to know the top holdings for any leveraged ETF that you consider investing in. For this particular iShares ETF, the top three holdings are the bonds that they hold in Pacific Gas and Electric, GE Capital International Funding Company, and Anheuser-Busch. Pacific Gas and Electric happens to be a utility company that is a leader in the energy sector, while GE Capital International Funding is the international funding division of GE Capital Corporation. Anheuser-Bush needs no introduction.

2. SPDR Portfolio Long Term Corporate Bond ETF

The SPDR Portfolio has a respectable one year performance percentage of 11.2% and an expense ration of 0.07%. Investors will enjoy an annual dividend yield of 3.24%. The assets under management at the current time is a shade under $900 million, so there appears some room to grow here. This is a top leveraged bond ETF that you will want to consider investing in because it focuses on investing in U.S. based corporate bonds that have maturities in excess of ten years. It uses the U.S. Corporate Index published by Bloomberg Barclays to decide which bonds to invest in. Any bond must have a minimum of $300 million when it comes to outstanding par value. It currently has more than 2,100 holdings.

3. Vanguard Long-Term Corporate Bond ETF

This particular Vanguard ETF is a long term leveraged ETF with a one year performance percentage of 11.1% and a low expense ratio of 0.05%. The annual dividend yield is currently 3.09%. What sets this ETF apart from others on this is that it has an impressive $5.1 billion. This is another ETF that takes a long-term approach in terms of the corporate bonds that it chooses to hold. The top holdings for this ETF are currently GlaxoSmithKline Capital, Microsoft Corporation, and Johnson and Johnson. The latter is a pharmaceutical and consumer products company that has a significant following around the world. This is an ETF that investors will want to take a long-term approach with.

Strategies To Employ When Investing in Leveraged Bond ETFs

There are two basic strategies that can be employed when making use of the power of Exchange Traded Funds. These include a buy and hold strategy, and that of a more actively managed strategy. Both are equally as useful in your efforts aimed at building capital appreciation. The first strategy related to buying and holding is considered to be passive in nature. The second strategy employs an active management scenario whereby a financial advisor will work to adjust your exposure to different markets, various indices, and different sectors just as they might adjust stocks in your actual portfolio.

In essence, the strategy of investing in leveraged Exchanged Traded Funds is great in terms of preparing for retirement and, then once you are actually retired, it also become a great strategy to continue in order to invest for your needs for capital appreciation that will generate the type of cash flow that you will need absent a regular work based salary. When making of Exchange Traded Funds, you will want to decide how much money you can allocate to stocks in any give equity market. You will then want to determine how much you want to invest as a core strategy, and this will be what the Exchange Traded Funds represent. Put these funds to use for you and watch your wealth grow over time, and then enjoy your retirement, while continuing your asset appreciation. This is what you should be aiming for in the end.

Allen Lee

Written by Allen Lee

Allen Lee is a Toronto-based freelance writer who studied business in school but has since turned to other pursuits. He spends more time than is perhaps wise with his eyes fixed on a screen either reading history books, keeping up with international news, or playing the latest releases on the Steam platform, which serve as the subject matter for much of his writing output. Currently, Lee is practicing the smidgen of Chinese that he picked up while visiting the Chinese mainland in hopes of someday being able to read certain historical texts in their original language.

Read more posts by Allen Lee

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