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Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: Hello. My portfolio is currently composed of all equities and approximately 10% cash. I would like to move some money 15-20% out of equities into fixed income. What would you suggest is a simple, yet effective way to achieve this? Invest directly into bonds? Buy a bond ETF? Bond mutual fund? Short or long-term bonds? Corporate or government? Can you suggest some bond ETFs or mutual funds?
Thank-you.
Asked by Antonio on September 11, 2023
5i Research Answer:

We feel that bond ETFs provide investors with good exposure to the asset class at a low-cost approach. We tend to prefer aggregate bond ETFs such as VAB or AGG for diversification and bond exposure. These are bond ETFs which have diversified exposure to differing maturities, bond types (government, corporate, etc.), and credit quality. Aggregate bond ETFs are also great for protecting capital when rates are rising rapidly (as the short-term bonds will have less price sensitivity) and will also see more capital appreciation when rates drop rapidly (long-term bonds increase more when rates decline). 

VAB has an AUM of $4.2B, a yield of ~3%, an MER of 0.09%, and holds 1,161 bonds. AGG has an AUM of $92.3B, a yield of 4.4%, an MER of 0.03%, and holds 11,169 bonds.