Q: I know you prefer to purchase US stocks in US currency. Does this apply to US Bond ETFs as well? Further, I'm trying to determine the percentage of corporate and government bonds to purchase (15%). Is the risk/reward associated with each type of bond ETF very different? I'm assuming that corporate bonds are riskier than government. Any insight or resources that could give me guidance would be appreciated. I appreciate any help you can provide.
5i Research Answer:
It may apply moreso to US bond ETFs because of the regular income received. Every payment of a CDN listed fund will result in some currency f/x drag. Yes, there is a difference between corporate and government. There are various degrees of risk, with 'junk' corporates of course being higher than well-rated corporates. For both categories, the other risk is interest rate risk, and this is dictated by the average maturity or duration of the bond fund's portfolio. Longer maturities have more leverage to rates (both up and down leverage). Very short term bond funds have far less rate risk exposure. We would consider this a good primer.