Skip to main content
The Globe and Mail
Support Quality Journalism
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); }

Bonds are insurance against disaster in either the economy or the stock market, and bond ETFs are a good way to get bonds into your portfolio.

But in the eyes of one investing veteran, there's a particular bond ETF that stands out for providing disaster insurance. It's the iShares 20+ Year Treasury Bond ETF, traded on NASDAQ under the ticker symbol TLT.

"The U.S.-dollar long bond is the ultimate store of value when things go awry," Bernard Lahey, former chief investment officer for the Hydro Quebec pension fund and currency manager at the Caisse de dépôt, said in an e-mail.

Story continues below advertisement

Mr. Leahy offered his views on TLT after reading an instalment of the Globe and Mail ETF Buyer's Guide that covers bond ETFs.

Investors have been in a confident mood lately, and so TLT has suffered. For the year to Feb. 28, the total return of interest plus share price changes is a loss of 4.7 per cent. If the U.S. economy picks up and interest rates rise, this ETF could get hammered. The effective duration of the portfolio is just over 17 years, which means a rise of 1 percentage point in interest rates would result in a loss of 17 per cent (and vice versa if rates fall).

Mr. Lahey's case for considering some exposure to TLT is that it's an efficient way to diversify a portfolio to provide resilience in tough times. Unconvinced the current environment calls for this kind of portfolio insurance? Mr. Leahy says it's important to have assets that behave differently in your portfolio. You want investments that benefit from rising markets, and you want things that hold up in a down market. "Unless you have perfect foresight, it's not a good idea to bet all you have on a single outcome."

Canadians holding TLT would benefit in a market shock because money typically flows into the U.S. dollar in these situations. The value of TLT converted to Canadian dollars would rise in this case. And just as long bonds are most risky in good times for the economy, they benefit most in hard times.

Mr. Leahy believes investors on average don't hold enough bonds. Adding some TLT to other bond ETFs in your portfolio could address this, while providing some insurance against disaster. Just don't expect TLT to perform well in buoyant markets.

Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

Comments that violate our community guidelines will be removed.

Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies