Randament SEC vs Randament pe 12 luni: De ce SEC este mai bun

“Hey Brett. How’s the weather out there in California?”

My usual reply is “warm and sunny.” Simple. Gives the asker what they expect and keeps the pleasantries moving along.

If I was one for small talk, I would be tempted to mix in a confusing and way-too-detailed response. Like this:

“The weather? Well, Sacramento hit a low of 27 degrees in the early morning hours of February 24. And we cooked at an extreme 116 degrees on September 6. It has been quite the 12 months!”

Doisprezece luni? Who cares about 12 months? Well, bond funds do.

Săptămâna trecută, we highlighted the iShares 20 + An Trezorerie Bond ETF (TLT): “It (TLT) boasts a 4.1% yield and has some serious upside potential.”

If you bought it then, nice work—TLT popped 3.9% the very next day. (That’s good for a comical 200%+ annualized return.)

Upside? Check. And even after the pop, TLT is încă paying 4.1%.

Please note that many websites will say that TLT pays just 2.6%. This is the too-detailed-not-too-useful weather report version of this fund’s yield.

Yes, over the trecut 12 months, TLT are paid 2.6%. But second-level thinkers don’t care about what happened. We care about now and what’s ahead.

More recently (last 30 days), TLT has dished dividends at a 4.1% pace. Acest is what we’re buying—a fund likely to pay 4.1% ahead, over the următor 12 months, not the last 12.

How do we find this? “SEC Yield” reflects the interest the fund earned, minus expenses, over the past 30 days. It’s fairer and more accurate calculation of what’s current and ahead than is the trailing twelve-month (TTM) yield.

With the SEC calculation, we’re changing our focus from the back of the car mirror to the road ahead. What’s TLT likely to pay over the următor 12 months? Use SEC yield: 4.1%.

One of the most popular pickup requests from my daughters is to let one of their stuffed animals (“stuffies”) drive us home. Our stuffie guest driver will look at everything around except for the road ahead, while the kids laugh and scream: “Look at the road!”

Rear-view-staring is great for laughs, but not for buying bonds. Don’t be that stuffie.

Now, why do we care about SEC yields versus TTM yields all of a sudden? Because we are buying bonds to take advantage of a bounce in fixed income.

Bonds have had a bad year, to put it lightly. But hope is on the way as yields begin to “top out.”

I’m not sure the reason is cause for cheer. The Federal Reserve is engineering a recession to tame inflation. Recessions are bullish for duration (how long before the bond “ends”—is redeemed by the issuer) because rates fall. Which sends bond prices higher.

Since we are heading into a slowdown, we don’t want to buy just Orice old bond. Credit quality is going to come into focus. Heck, last week we saw a crypto exchange exploda. More stuff is going to bust in the months ahead.

So, we want to own only the safest paper. TLT fits the bill because it owns US Treasuries, backed by the full faith, credit and printing press al Americii.

Again, for you contrarians scoring cum se cuvine, TLT yields 4.1% (SEC). Nu 2.6% (the flawed TTM calculation you see everywhere other than here).

iBoxx $ Investment Grade Corporate Bond ETF (LQD) is another good fund for a bond bounce. The fund holds-duh-investment grade corporate credit. Its bonds are secure.

Generally speaking, we rarely buy bond ETFs (we prefer CEFs). But when we do, we cherry pick Oferte. And LQD is poised to rally as bonds get up off the mat.

Once again, LQD’s yield is better than it looks. The computers say 3.2%, but don’t be fooled. The fund’s Randament SEC is a fantastic 5.7%.

Again, credit risk is not a big concern with LQD. It owns investment-grade bonds, the highest quality paper on the planet.

LQD nu yields this much. Don’t be fooled by the wrong weather report! Other sites say that the fund pays just 3.2%, but this is the TTM yield. According to the SEC calculation, LQD yields a fantastic 5.7%.

Brett Owens este strategul principal pentru investiții Perspective contrare. Pentru mai multe idei de venituri mai bune, obțineți gratuit copia dvs. cel mai recent raport special: Portofoliul dvs. de pensionare anticipată: Dividende uriașe – în fiecare lună – pentru totdeauna.

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