Here are 7 bonds for a portion of your overall portfolio... or even as a stand-alone, bond-only arrangement. Keep in mind that changing circumstances warrant modifying holdings over time.
Bond Investments For 2009
Annual Yield 1/1-5/30 YTD%
SPDR International Inflation Protected WIP 2.9% 7.4%
iShares Fixed MBS Bond Fund MBB 2.9% 0.4%
PowerShares Insured National Muni PZA 4.8% 6.8%
SPDR Convertible Bond ETF CWB 5.0% N/A
iShares Barclays Intermediate Corp Credit CIU 5.4% 2.8%
PowerShares Emerginig Sovereign Debt PCY 6.5% 16.5%
Templeton Global Income CEF GIM 6.0% 13.0%
The annual income stream for this portfolio is approximately 4.8%, which is tough to replicate from similar bond maturities. It might be easiest to compare the holdings with the 10-year U.S. treasury, which is currently delivering in and around 3.75%. However, the depreciation in the 10-year treasury is close to -7.5%% in 2009 already, hinting at an effective 2009 loss of -5.25% so far%.
In contrast, the capital appreciation component of the above-highlighted bond portfolio is roughly +7%. Add this to the income stream of 2% in the first 5 months, and this bond portfolio is up an enviable 9% through the first 5 months of 2009.
Currencies can also give your portfolio a kick in the right direction. In fact, many currency ETFs are up double-digit percentages in 2009.
In the first 5 months of the year, the 5 currency ETFs with the highest returns seem to share several things in common. First, each represents a country that boasts higher interest rates than the yen or the U.S. dollar.
Top 5 Currency ETFs (January 1-May 30)
Wisdom Tree South African Rand (SZR) 22%
Wisdom Tree Brazilian Real (BZF) 14%
CurrencyShares Australian Dollar (FXA) 13%
WisdomTree New Zealand Dollar (BNZ) 11%
CurrencyShares Canadian Dollar (FXC) 11%
While it's not surprising that currencies around the world are gaining on the greenback, it's not a simple function of hedging against its inevitable fall. Rather, it appears that investors are winding up the carry trades by going short the yen or U.S. dollar while simultaneously going long higher yielding currencies. (That's a sign of risk taking... not risk aversion!)
The second thing that I noticed about this list is the fact that each country is rich in natural resources. Commodity inflation as well as the carry trade, then, seems to be telling us what's important.
Perhaps we shouldn't be surprised by stock market performance in these same countries either. South Africa (EZA), Canada (EWC), Brazil (EWZ) and Australia (EWA) have significantly outpaced the Vanguard FTSE All World exc U.S. (VEU).
With the U.S. dollar at 5-month lows, and U.S intermediate and long-term treasuries at 5-month highs, you may have legitimate concerns about the U.S. dollar’s path. The Gold Trust (GLD) represents the world’s most prominent commodity and hedge against dollar devaluation. It’s also up 9% in the first 5 months.
That said, here are 2 other ETFs that should respond to the possibility of the U.S> dollar deteriorating more:
(1) Silver Trust (SLV). Gold gets all of the attention, as predictions for $2000 an ounce seem prevalent. That's a 100% move form current levels. Yet the very same folks who see gold reaching inflation-adjusted highs believe silver will be $30 an ounce. That too represents a doubling in value. Yet silver has the advantage of having precious metal appeal as well as industrial usage. So with China's huge upswing in demand for all commodities, one might consider SLV for a combo hedge/practical growth story.
(2) Powershares Dollar Bearish Fund (UDN). If you simply believe the dollar is toast, buy some jam. The Dollar Bearish Fund has gained only 3% YTD, but is firmly above its 50-day and 200-day moving average.
If you'd like to learn more about ETF investing... then tune into In the Money With Gary Gordon. You can listen to the show live or via podcast or on your iPod.
Disclosure Statement: ETF Expert is a web log (blog) that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.