Written by Vicky at Vix Money. I personally hold both XBB and XSB (I told you my portfolio is messy!), and I am curious to see how they stack up against each other. XSB, iShares DEX Short Term Bond Index Fund, seeks to replicate the performance of the DEX Short Term Bond Index. It was introduced on November 20, 2000, and holds bonds that are issued domestically in Canada by all levels of government (federal, provincial and municipal) as well as corporate bonds. The main difference between XSB and XBB is that the focus of XSB is on acquiring bonds with a maturity less than 5 years. What is in this ETF? When you purchase a bond ETF like XSB, it is good to know who the issuers of the bonds are. The top 10 holdings in this ETF make up about 22% of the total holdings, and it is represented mainly by the Canadian federal government. Overall, both the federal and provincial government in Canada represent approximately 64% of total holdings (as of June 11, 2012). Altogether, XSB currently owns ...

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These days, bonds are getting a bad name. Stock markets are off to a tremendous start in 2012, dividend stocks are outperforming, and not surprisingly investors are losing their confidence in government issued bonds. There are three main reasons why investors are spooked with bonds. First and foremost, are the sovereign debt woes in Europe and the antics of the U.S. government to raise the debt ceiling, which sent ripples around world markets last August. Second is the global and record low interest rate environment, with the potential threat of increasing rates. And third of course, is the low yield on government bonds versus the yield on dividend stocks. The Shift to Dividends As a result investors have lost confidence in their governments (bonds) and turned to corporations (stocks) for higher returns through dividends. For the first time in decades, investors were even avoiding German bonds – and Germany is one of the most economically stable countries in the world. Not surprisingly, ...

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In a previous post, The Safety of Short Term Bonds, I pointed out  the merits of holding short-term government bonds in a balanced portfolio. The underlying reason for doing so, is short-term bonds are an ideal hedge against stock market volatility. Short term bonds generally move in the opposite direction of the stock market – in other words they are inversely correlated. As investors, we saw this effect over the last three weeks as markets declined, and bond funds and bond ETFs gained value. We also saw this occur during the Japan Earthquake, and also last spring 2010 as markets also temporarily declined. It’s called flight to quality and safety. And there is no doubt that market declines will occur again. Yield to Maturity My previous post focused on one specific product, Claymore 1-5 Year Govt. Laddered Bond ETF (CLF-TSX), a short-term bond ETF (Claymore CLF). It holds a 1-5 year ladder of primarily Government of Canada and provincial bonds. This is about as safe as you can ...

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Bond funds have been out of favour these days, especially with the threat of rising interest rates. With dividend stocks paying juicy yields, and returning phenomenal capital appreciation, investors have been reluctant to purchase fixed income securities. Investors forget that when times are good, that all of that can change on a dime! This week the TSX and S&P 500 are already showing signs of a correction, with some dividend stocks off 10% from their highs. This should be a reminder to investors of why asset allocation is important. That’s where short term bond holdings come into play! Bonds with a duration of 1-5 years, are in opposite movement with the stock market – in other words they are uncorrelated. When markets fall, short term bond funds do very well. And unlike corporate bonds or long-term bonds, short term bonds are less sensitive to interest rate increases. Claymore 1-5 Year Govt. Laddered Bond ETF (CLF) is a short-term bond ETF, traded on the TSX, and a core ...

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I received an email from a reader this afternoon. Like anyone who invested in mutual funds for years, they discovered  they weren’t making money. Surprise! They wrote how “Fed up with Mutual Funds” they were, but didn’t know how to get started in Dividend Investing. There are so many questions for the new Dividend Investor. If you have been investing in mutual funds, then a lot of this can seem complex and overwhelming. But once you make the start you are well on the road to keeping your own money and getting paid regular dividends, instead of paying mutual fund managers and brokers. I’ve covered most of this in a previous article: The Ninja Lessons STEP 1: Read and Research If you are going to be successful investing for yourself, then that means you are responsible for your own investment decisions. If you are new to the Dividend Investing game, then start reading and learning so you at least have an idea of the playing field. Here are some great resources to get you started: Money ...

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