I’m looking to mirror the returns profile of individual bonds with rolling bond funds. Essentially, I would like to ensure that I achieve the current YTM of a rolling bond fund (excluding fees) with a 6-year duration over my bond investment horizon of 6 years. Is there a way to achieve this?
Reading through previous posts, my understanding is that I’d need to hold the 6-year duration rolling bond fund for a maximum of 2x duration (i.e. 12 years) to ensure that I achieve the current YTM (in the unlikely scenario of continually rising interest rates). I would like to achieve the current YTM within my 6-year horizon rather than potentially having to hold the investment for longer. Could I perhaps achieve this by reducing the weighted average duration of my bond funds over time (e.g. every year) through selling the 6-year duration fund and buying shorter duration funds? Would this enable me to achieve the current YTM of the 6-year fund within my 6-year horizon even if I'm forced to sell my holdings at a loss when rebalancing the durations?
I am very averse to losing any principal in my bond investments over my 6-year horizon. I’m not keen on buying individual bonds as I would like to mix government and corporate bonds. I would find this difficult to do if investing in individual bonds. I’ve seen in previous posts that fixed maturity bond funds can be a way to guarantee yield to maturity over a certain horizon. However, fixed maturity bond funds are not widely available in my jurisdiction.
Thank you in advance for any views
Reading through previous posts, my understanding is that I’d need to hold the 6-year duration rolling bond fund for a maximum of 2x duration (i.e. 12 years) to ensure that I achieve the current YTM (in the unlikely scenario of continually rising interest rates). I would like to achieve the current YTM within my 6-year horizon rather than potentially having to hold the investment for longer. Could I perhaps achieve this by reducing the weighted average duration of my bond funds over time (e.g. every year) through selling the 6-year duration fund and buying shorter duration funds? Would this enable me to achieve the current YTM of the 6-year fund within my 6-year horizon even if I'm forced to sell my holdings at a loss when rebalancing the durations?
I am very averse to losing any principal in my bond investments over my 6-year horizon. I’m not keen on buying individual bonds as I would like to mix government and corporate bonds. I would find this difficult to do if investing in individual bonds. I’ve seen in previous posts that fixed maturity bond funds can be a way to guarantee yield to maturity over a certain horizon. However, fixed maturity bond funds are not widely available in my jurisdiction.
Thank you in advance for any views
Statistics: Posted by Ocado — Tue May 07, 2024 4:57 pm — Replies 0 — Views 51