I've been using USFR and TFLO as "cash placeholders" in my M1 Finance pie slices. I like them, and SGOV, because of the short duration leading to low volatility.. Not as steady as cash but for a bond ETF, it's pretty steady.
Thank you. Let me clarify my question, what happens to NAV/share price of the floating rate bond ETF’s? Wouldn’t potential buyers pay less because the yield is less/falling such that the NAV/share price of the ETF would then decline?
I'm considering using 50/50 USFR/VTIP instead of BND for the FI portion of my portfolio (2022 anyone?) In good years BND outperforms but I'm looking to the FI portion of my portfolio to be as anti-equity as possible (while maximizing returns as much as possible). Since I'll probably settle on 80/20 I think 50/50 USFR/VTIP would be simple, near liquid, while hedging inflation.
Bond duration should be determined by one's asset allocation and time horizon. Recognize that USFR/VTIP is very different from BND. View the portfolio holistically, not assets in isolation. Not sure why you quoted a single year - 2022 - as if that's an indication that one should deviate from a proper duration-matched fixed income allocation.
So in a nut shell FRN's interest payment will change depending on the market's current interest. So..like...example..Today is 6/27/2023. In 3 months from now and on 9/27/2023 your interest payment might be 2.5% out of...say...$1000. In 12/27/2023 and we say..the interest rate has dropped to..say..2% so now the next payment you get will be 2% out of $1000.
I bought a few floating rate funds a couple years ago, and am sitting on 15-20% losses in them. NOT what I was expecting. Is there any hope that these will rise in value as interest rates go down, or will they get even worse?
The way Floating Rate ETFs function isn't clear to me. (This could be a video also.) If you put in X dollars, can the investment go down below X? or is the only question about how much you get on top of X (if interest rate is 4% you get X plus 4% minus 1.5%fee, but if rate goes down to 2% you get X plus 2%)?
It can go below X. The ETF is still subject to the market. The fluctuating interest rates are separate from the ETF's market price. The way it pays interest doesn't shield the ETF from changes in its market price.
What do you think of floating rate bonds?
I've been using USFR and TFLO as "cash placeholders" in my M1 Finance pie slices. I like them, and SGOV, because of the short duration leading to low volatility.. Not as steady as cash but for a bond ETF, it's pretty steady.
Indeed
The video clarify some concepts for me in-between fixed and floating rates. Thx.
Glad to hear it! Thanks for watching!
thanks for the material
Thanks for watching!
great video, I have FLOT in my portfolio. Brazilian greetings
Thanks for watching!
What happens to the net asset value/price per share of floating rate bonds when interest rates are falling? Thanks, great video!
Would be expected to go up very slightly. As explained, the yield would reflect that new lower rate very quickly.
Thank you. Let me clarify my question, what happens to NAV/share price of the floating rate bond ETF’s? Wouldn’t potential buyers pay less because the yield is less/falling such that the NAV/share price of the ETF would then decline?
Same thing. A floating rate bond ETF is just a basket of floating rate bonds. Price and yield have a necessarily inverse relationship.
I'm considering using 50/50 USFR/VTIP instead of BND for the FI portion of my portfolio (2022 anyone?) In good years BND outperforms but I'm looking to the FI portion of my portfolio to be as anti-equity as possible (while maximizing returns as much as possible). Since I'll probably settle on 80/20 I think 50/50 USFR/VTIP would be simple, near liquid, while hedging inflation.
Bond duration should be determined by one's asset allocation and time horizon. Recognize that USFR/VTIP is very different from BND. View the portfolio holistically, not assets in isolation. Not sure why you quoted a single year - 2022 - as if that's an indication that one should deviate from a proper duration-matched fixed income allocation.
So in a nut shell FRN's interest payment will change depending on the market's current interest. So..like...example..Today is 6/27/2023. In 3 months from now and on 9/27/2023 your interest payment might be 2.5% out of...say...$1000. In 12/27/2023 and we say..the interest rate has dropped to..say..2% so now the next payment you get will be 2% out of $1000.
Adjusts faster. Paid monthly.
@@OptimizedPortfolio Sorry. I was looking at US Treasury FRN. Lol.
So interest made for example from tflo would not be state taxable?
Correct.
I bought a few floating rate funds a couple years ago, and am sitting on 15-20% losses in them. NOT what I was expecting. Is there any hope that these will rise in value as interest rates go down, or will they get even worse?
You didn't even say what fund you're talking about. Always aim to fully understand what you're buying.
The way Floating Rate ETFs function isn't clear to me. (This could be a video also.)
If you put in X dollars, can the investment go down below X? or is the only question about how much you get on top of X (if interest rate is 4% you get X plus 4% minus 1.5%fee, but if rate goes down to 2% you get X plus 2%)?
It can go below X. The ETF is still subject to the market. The fluctuating interest rates are separate from the ETF's market price. The way it pays interest doesn't shield the ETF from changes in its market price.