Mohamed El-Erian Issues Dire Warning To Equity And Bond Investors – But Also Offered This Shockproof Asset For Safety

'Get Out Of These Disturbed Markets': Mohamed El-Erian Issues Dire Warning To Equity And Bond Investors – But Also Offered This 1 Shockproof Asset For Safety

‘Get Out Of These Disturbed Markets’: Mohamed El-Erian Issues Dire Warning To Equity And Bond Investors – But Also Offered This 1 Shockproof Asset For Safety

Due to rampant inflation, holding cash may not be a wise move. (Increasingly higher price levels are eroding the purchasing power of savings.)

That’s one of the reasons why many investors hold stocks and bonds instead. But according to Mohamed El-Erian – president of Queens’ College, Cambridge University and chief economic adviser at Allianz SE – it may be time to change course.

“We have to get out of these distorted markets that have done a lot of damage,” the renowned economist tells CNBC.

Both the stock market and the bond market have been tumbling recently, and El-Erian notes that when these market corrections happen simultaneously, investors should turn to “risky” assets.

“What we have learned again since mid-August is that [stocks and bonds] both can go down at the same time,” he says. “In such a world, you should look at short-term fixed income and you should look at cash as an alternative.”

You can hide your money under a mattress or put it in a savings account. Or you can use ETFs to leverage the so-called “short-term fixed-income securities.”

Here’s a look at three of them.

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Vanguard Short Term Bond ETF (BSV)

Vanguard is known for its low-cost ETFs that track major stock market indices. Through these ETFs, investors can gain exposure to large stock portfolios.

The company does the same with bonds.

Check out the Vanguard Short-Term Bond ETF, which aims to track the performance of the Bloomberg US 1–5 Year Government/Credit Float Adjusted Index.

The fund has a strong focus on US government bonds, which represented 67.9% of its holdings as of September 30. At the same time, it also invests in investment grade corporate bonds and international dollar denominated investment grade bonds.

Currently, the 30-day SEC yield on BSV is 4.75%. The fund has a very low expense ratio of only 0.04%.

SPDR Portfolio Short Term Corporate Bond ETF (SPSB)

SPDR Portfolio Short Term Corporate Bond ETF is another low-cost option for investors looking to access short-term bonds.

As the name suggests, the fund focuses on corporate bonds.

Specifically, it tracks the Bloomberg US 1-3 Year Corporate Bond Index. In particular, the corporate issues included in the index must be investment grade and have an outstanding par value of more than $300 million or more.

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SPSB currently has 1,208 holdings with an average coupon of 3.21% and an average maturity of 2.02 years. The fund has exposure to three corporate sectors: finance, industrials and utilities. The rest of the portfolio is in cash.

The 30-day SEC yield on the ETF is 5.38%. And like the Vanguard fund, SPSB also has a low expense ratio of 0.04%.

Western Asset Short Duration Income ETF (WINC)

Western Asset Short Duration Income ETF is an actively managed fund. The maturity, sector and individual securities are selected by management with the aim of reducing interest rate risk while offering an attractive income.

At its core, the fund focuses on investment-grade corporate bonds. But management also looks for opportunistic positions to add diversification and improve returns, for example through high yield bonds, structured securities and emerging market debt.

WINC currently has 245 holding companies with a weighted average maturity of 2.8 years. The 30-day SEC yield is 5.0%.

And because this ETF is actively managed, the expense ratio is higher at 0.29%.

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This article provides information only and should not be taken as advice. It comes without any kind of warranty.

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