Suppose you just want to speculate on rising bond yields and don't care about income. No problem. You can choose from among a dozen "inverse" exchange-traded funds and notes, which rise in value when interest rates go up (and bond prices go down).
The most popular inverse-bond ETF is ProShares UltraShort 20+ Year Treasury (symbol TBT). UltraShort seeks to provide twice the opposite move of a Barclays Capital long-term Treasury bond index. In other words, if the index falls 1% in a given day (meaning that yields have risen and bond prices have fallen), the ETF should climb by 2%. Conversely, if the index rises by 1%, the fund should lose 2% of its value.
The problem with TBT is that single-day focus. Because the fund can only promise to achieve its objective on a daily basis and because of the quirks of compounding, you can guess correctly on rates rising but make dismayingly little money with one of these funds if you hold it for an extended period.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
So how do you use these critters? With extreme care. If you expect, say, an announcement of a sharp rise in employment, you could buy an inverse bond fund the day before. If you're right and the report pushes yields up, your fund will jump and you can make a quick 1% or 2%. But this isn't investing, folks. It's gambling.
-
GOP Eyes Taxes on Municipal Bond Interest: What You Need to KnowTax Reform If the tax status of muni bonds changes, the impact on regular investors and state and local governments could be significant.
-
Aging Well: 10 Things You Should Know for a Healthy RetirementIf you're committed to aging well, these tips can save on healthcare costs and make your later years more fulfilling.
-
The 5 Best Actively Managed Fidelity Funds to Buy Nowmutual funds In a stock picker's market, it's sometimes best to leave the driving to the pros. These Fidelity funds provide investors solid active management at low costs.
-
The 12 Best Bear Market ETFs to Buy NowETFs Investors who are fearful about the more uncertainty in the new year can find plenty of protection among these bear market ETFs.
-
Don't Give Up on the Eurozonemutual funds As Europe’s economy (and stock markets) wobble, Janus Henderson European Focus Fund (HFETX) keeps its footing with a focus on large Europe-based multinationals.
-
Vanguard Global ESG Select Stock Profits from ESG Leadersmutual funds Vanguard Global ESG Select Stock (VEIGX) favors firms with high standards for their businesses.
-
Kip ETF 20: What's In, What's Out and WhyKip ETF 20 The broad market has taken a major hit so far in 2022, sparking some tactical changes to Kiplinger's lineup of the best low-cost ETFs.
-
ETFs Are Now Mainstream. Here's Why They're So Appealing.Investing for Income ETFs offer investors broad diversification to their portfolios and at low costs to boot.
-
Do You Have Gun Stocks in Your Funds?ESG Investors looking to make changes amid gun violence can easily divest from gun stocks ... though it's trickier if they own them through funds.
-
How to Choose a Mutual Fundmutual funds Investors wanting to build a portfolio will have no shortage of mutual funds at their disposal. And that's one of the biggest problems in choosing just one or two.
