I am retired and take educated guesses on all things financial.

January 12, 2007

January 13, 2007: New ETF Bond: stirred, not yet shaken

Barclays iShares ( have introduced eight new iShares featuring bonds.

Here are the Lehman index-replicated iShares ETFs:

Short U.S. Treasury Bond Fund (SHV)
3-7 Year U.S. Treasury Bond (IEI)
10-20 Year U.S. Treasury Bond Fund (TLH)
1-3 Year Credit Bond Fund (CSJ)
Intermediate Credit Bond Fund (CIU)
Credit Bond Fund (CFT)
Intermediate U.S. Government/Credit Bond Fund (GVI)
U.S. Government/Credit Bond Fund (GBF)

Trading began at $100.00/share on Thursday. Expense ratios are low (0.15-0.2%)

iShares has expressed a desire to launch several more Bond ETFs of a more speculative nature, including emerging market debt and junk.

Having ETFs now aggressively entering the fixed income market should put a strain on mutual fund bond assets. All things equal (and they are), ETFs win so long as expenses are lower. I especially look forward towards more sector choice in the bond ETF areas. In today's rarefied stock atmosphere, bonds are not often considered by the individual investor. This is a mistake. I love to speculate as much as you, but I do have a core holding in IBonds and Treasury bills kicked up a notch by Sirius junk and GMAC Smart Notes bought at a wide discount. With iShares, I can now use their funds to paint a broad or narrow brush on fixed income holdings and plan on using iShares bond funds, or other ETF bond aggregates, in my permanent and speculative portfolios.

My goal of a close to 100% ETF investment portfolio world is one step closer to reality. That said, I still would not renounce the individual stock that lurks in sectors that demand individual stock selection. Nor should you.

Off subject: If you have children, grandchildren or future educational plans for that favorite nephew, niece, etc., now is the time to start or throw more money into a 529 Plan.
This is a permanently tax free entity that can hold up to $320,000. in contributions.
Utah, Alaska and Nevada are good. Most states are making their 529's more attractive. Your contribution MAY be deductible to a degree. Not to fully explore the 529 Plan benefit is financial malfeasance.

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