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Horizons Seasonal Rotation ETF (HAC)
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Vanguard Intermediate-Term Corporate Bond ETF (VCIT)
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iShares 20+ Year Treasury Bond ETF (TLT)
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BMO Asset Management Inc (ZTL)
Horizons Seasonal Rotation ETF as of May 31, 2023 has 75% in 0-3 month T-bills & 6% in 7-10 years with no exposure beyond that.
Could you help me understand the risk/reward difference between the ultra-short term and ultra-long term T-bills and which I would be better with in todays market and assumption interest rates may have peaked, or should I cover both ends?
Diversification can always be helpful, but if investors believe rates have peaked then long term bonds will offer more upside potential if and when rates decline. With lower rates, the future cash flows of bonds are worth more, and vice versa when rates rise. As explanation, think of an extreme: if rates rose to 20%, say, then a 20-year bond paying 5% today is hardly very attractive when one can sell that bond and re-invest the proceeds at 20%. We would be comfortable with ZTL and TLT today but they will be more volatile in general. VCIT, as a mid-term bond ETF, might be a good complement to one of the others for some better diversification.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in VCIT.