Perhaps my question will fit here.
For discussion purposes , let’s ignore the second pillar because it’s kind of out of control.
If I want to look at my Taxable account + 3a portfolio, and if I want to have asset class diversification, how should I view the role of bonds based on current situation.
Few things I understood so far is -:
- better to hedge the bond exposure for currency
- Expected return from currency hedged govt bond ETF should be similar to local govt bond ETF.
If I look at 5-10 year CH government bond yields at this moment, they seem to be less than 1%. This brings them closer to Zero or Negative real rates category (accounting for inflation). This means even if I buy global govt bond ETF, it would still result in <1% effective yield.
With such low yields which don’t even cover inflation, can a sizeable allocation to bonds be justified if one is NOT near retirement?
I am a bit confused why CH is keeping interest rates below inflation. This makes bonds not very interesting. But then CH bonds market is quite big. So this should also mean something.
What is common view on bonds amongst people on this forum?
- Do you hold any bond ETFs in your portfolio excluding 2a?
- If yes, do you have any return expectations or it’s just a way to protect the capital but not to generate returns
Edit -: sharing an article from Pictet throwing some light into topic of CHF bonds. They suggest that actual total return is a bit higher than Yield to maturity