Which Bond ETF should I invest in?

I manage my own brokerage account online. I am a big fan of two Bond ETFs with similar characteristics (both long term securities). One has a slightly higher SEC Yield than the other, and have marginally different premiums/discounts. Which one would you pick for your portfolio? Why?

Investing, Asset Allocation, ETFs
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August 2017

Thanks for the interesting question on bond ETF's.  It is difficult to answer the question without knowing the specifics of your portfolio and the ETF's.  My suffestion is to look at each ETF and the specific holdings of the entity and examine what are the largest percentages of the fund allocated to.  If they are corporate bond funds, you are owning the debt securities of specific issuers so find out what the largest ones are in the fund.  Look at the yields and prices of the debt and consider whether or not you believe these companies will continuing paying these debt obligations, and whether the specific issuer has a business which might improve.  If they are bond funds with a mix of corporate and government issuers, again, look at the heaviest weighted holdings and determine if this is debt you have a high confidence will be paid, and why.  The yields are a function of the price, and vice versa, and ultimately, how the issuer's business is doing, or municipality or government entity performs financially, so that has to be the prime consideration. For example, you probably don't want to see the state of Illinois general obligation bonds in these funds because of the states financial consideration.  I hope this helps answer your questiona and good luck with this situation.  

Yale Bock, CFA

Y H & C Investments

 

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