Bonds: Better Than Cash on a Down Day for Stocks

• By the tickerspy.com Staff
• On 12:40 pm EDT, Thursday October 1, 2009

If your portfolio was painted red on Thursday, you might want to check out bond ETFs.

When the equity markets take a dive, there are few better places to preserve capital than in bonds. Nowadays, the proliferation of exchange-traded funds (ETFs) has made it easier than ever for equity investors to take on some exposure to debt. Bond ETFs cover all types of debt, from corporate to municipalities to treasuries, and they trade like stocks.

The Bond ETFs Index has 49 components, the majority of which are trading higher while the Dow tumbles by triple-digits.

Unlike cash, bond ETFs are a safe-haven play that pays. The Vanguard Extended Duration ETF (NYSE: EDF - News), SPDR Barclays Capital California Municipal Bond ETF (NYSE: CXA - News), and PowerShares Insured California Municipal Bond Portfolio (NYSE: PWZ - News) are all up by 5% or more over the last month - that's better than the S&P 500 in September.

Meanwhile, only ProShares UltraShort 20+ Year Treasury (NYSE: TBT - News), ProShares UltraShort 7-10 Year Treasury (NYSE: PST - News), and iShares Barclays 1-3 Year Credit Bond Fund (NYSE: CSJ - News) have turned negative for the period. Considering the former two are short funds, which bet against the performance of their respective bond categories, the iShares Barclays 1-3 Year Credit Bond Fund's fractional loss over the last month represents the sector's entire downside for the period.

Today, when popular commodity-tied ETFs like the SPDR Gold Trust (NYSE: SPDR - News) and Market Vectors Gold Miners ETF (NYSE: GDX - News) sell off, the Bond ETFs Index is a top performer.

The Bond ETFs Index is one of the 25 highest yielding tickerspy Indexes, paying an average 3.7% of share value in dividends.

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