Help choosing Bond ETFs!!

Just working on getting the couch potato portfolio set up and the only area I am having issues with is choosing bond ETF (s).

Looking at several, XSB, XCB, XRB, XBB, CBO, etc but would like any advice on what would be a good long term hold.

I am mixing some GIC’s into my "low risk" potato set up, primarily as we already have some decent yielding GICs in our accounts. The bond ETF will probably make up 20% of total holdings and i think I might want to split that into two separate ETFs. Also thinking about putting 5% into Claymore’s Preferred Share ETF (CPD) and would appreciate any thoughts on that move.

Help appreciated!!

I think the general consensus is that this is a volatile time to own bonds. Risk is likely minimized by choosing XSB , which shouldn’t get hammered too hard when interest rates rise.

If you don’t need the money for awhile, I like GICs and High interest savings accounts, at least it’s safe. The low yields on Bonds right now are probably not worth the risk of a decreased principal.

CPD is a mixed bag, and I can’t say I’m a fan of preferred shares. Others may agree or disagree, but I wouldn’t count it as part of your fixed income. Look back at 2008, the CPD share value dropped about 40% during the crash, as much as some equity index funds. I’d say it’s a poor play if you’re hoping to stabilize your portfolio.

I’ve got my bond allocation in high interest savings for now, I take a peak at real return bonds now and then (but haven’t bitten yet)…

Thanks Mike. The whole issue with rising rates and how this will affect bonds is one of the reasons I am having trouble with this. I don’t mind GICs but with current 5 year rates of 2.8% they are not very attractive either.

I appreciate your comments on CPD and think I might pass on it.

Originally Posted by Ihatetaxes

Thanks Mike. The whole issue with rising rates and how this will affect bonds is one of the reasons I am having trouble with this. I don’t mind GICs but with current 5 year rates of 2.8% they are not very attractive either.

2.8% is better than the 2.10% that XSB is yielding.

If this is supposed to be the safe part of your portfolio, go with GICs.
There is absolutely nothing wrong with GICs during such uncertain interest rate environment.
You could shorter the term and go with a 3 yr. instead of a 5 yr.
That should get you around 2.4%

If you are comfortable with Manitoba credit unions instead of federal CDIC banks, Hubert (Sunova) has bumped their HISA account to 2.5% (and their 3-year term is 3.05%). I’ve got chunks of XBB and XRB, but I held off on the larger allocations for awhile.

If you have kids you can open account in their name in ING and have HISA with 2%, currently CIBC also paying 2% on HISA…., I hold also a liitle bit of CBO, but HISA looks better to me… to add some risk take a look at CHB, at least they pay 7% dividends

Originally Posted by Ihatetaxes

Thanks Mike. The whole issue with rising rates and how this will affect bonds is one of the reasons I am having trouble with this. I don’t mind GICs but with current 5 year rates of 2.8% they are not very attractive either.

I appreciate your comments on CPD and think I might pass on it.

Yes, when interest rates rise bond prices fall. But the interest coming off the bond is also increased. If you have a bond fund and drip the income payments, would it not offset the falling price of the bond fund at least a bit? Also, when rates rise all you have to do is add more money – DCA so you spread out interest rate risk. Does that make sense? I am still learning too