Hi all - have a question for those who have bond or bond-like allocations. What vehicles do you use? Are things like AGG, TLT, IEF, JNK, HYG what most people use? For context, I'm just a retail investor looking for things to utilize besides cash when trying to lower volatility profile of my portfolio and diversity vs. equities. (edit: chatgpt suggests traditionally something like AGG or BND w/ their broad mix is usually used in many portfolios.)
Thanks in advance. Appreciate comments.
I'm currently using IEF (7-10 year duration). Previously, I used TLT (20+ years), and there's also EDV (an even more extreme option). Here’s why I find 20+ years to be excessive: the dividend yield recovery after a rate-hike cycle takes too long relative to the unit of volatility. In other words, IEF offers a better Sharpe ratio when it comes to inflation-adjusted returns over the long term. Additionally, consider looking into seasonal commodity longs for a small allocation alongside Treasuries. This can help cushion against rare scenarios similar to 1973
Yoy can always backtest your simulated stock strategy together with bond ETF's as a book.