No Need To Pay Up For Safety

July 10, 2012

Real ETF Options

The Pimco Enhanced Short Maturity Strategy Fund (NYSEArca: MINT) has been a popular choice among investors willing to step outside the realm of super-short-term government bonds. It now has $1.72 billion in assets.

A lesser-known but viable alternative worth considering is holding a combination of the Guggenheim BulletShares 2012 Corporate Bond ETF (NYSEArca: BSCC) and the Guggenheim BulletShares 2013 Corporate Bond ETF (NYSEArca: BSCD).

Both BSCC and BSCD are part of the fixed-maturity-date line of investment-grade corporate bond products offered by Guggenheim.

The funds hold bonds expected to mature during 2012 and 2013, respectively. At the end of their respective years, the funds will close, and investors would receive the equivalent of par, minus expenses.

To ease the process, BSCC—the fund “maturing at the end of this year—will invest all funds from maturing bonds in T-bills and commercial paper. This makes the fund progressively more conservative.

It also gives investors an opportunity to tactically allocate between BSCC and BSCD to meet their yield and safety needs.

For those in need of more yield, a greater stake in BSCD would be more appropriate. Those looking for more safety can hold more BSCC.

In both cases, the unique structure of the products and the transition to safety assets in the last six months of operation for BSCC give investors a multitude of options to build the ladder strategy most fitting for them.

Instead of paying someone to hold their money, investors can use these products to intelligently preserve their capital.

My point is this: The ETF industry has served up new and viable ways to preserve capital as the developed world de-leverages and careens from one problem to the next.

 

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