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Investing in US treasuries through liquid ETFs
IThe iShares 20+ Year Treasury Bond ETF (TLT) is an exchange-traded fund that invests in a diversified portfolio of US government bonds with maturities of 20 years or more. TLT is a popular investment for investors looking for a safe-haven asset to protect their portfolios against market volatility, inflation, and interest rate risk. In this article, we will explore the reasons why TLT can be a good investment for investors.
Diversification: TLT provides investors with exposure to a diversified portfolio of US government bonds, including those issued by the Treasury, Federal Home Loan Banks, and Government National Mortgage Association. This diversification helps reduce the risk associated with investing in a single bond issue.
Safe-haven asset: TLT is often considered a safe-haven asset because US government bonds are backed by the full faith and credit of the US government. This makes TLT an attractive investment for investors who are seeking a stable and predictable source of income during times of market turbulence.
Protection against inflation: TLT can provide protection against inflation because as the inflation rate increases, the yield on TLT bonds also increases. This means that investors can earn higher yields on their investment, which can help offset the impact of inflation on their portfolio.
Yield: TLT offers a relatively high yield compared to other safe-haven assets such as cash or short-term bonds. The current yield on TLT is around 1.5%, which is higher than the current inflation rate of around 1.2%.
Interest rate risk: TLT is less sensitive to changes in interest rates compared to shorter-term bonds. This means that TLT can be a good investment for investors who are concerned about rising interest rates because the value of TLT bonds may not decrease as much as shorter-term bonds in a rising interest rate environment.
In conclusion, TLT can be a good investment for investors who are looking for a safe-haven asset that provides diversification, protection against inflation, and yield. Additionally, TLT can provide protection against rising interest rates, which makes it a good investment for investors who are concerned about interest rate risk. However, it is important to note that TLT is not risk-free, and investors should always consider their own risk tolerance and investment objectives before investing in any asset.
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