IShares U.S. Treasury Bond ETF (BZX: GOVT)

This ETF invests in what many consider to be the world’s safest investment: U.S. government Treasury bonds. So, if Treasuries are so safe, why has the fund dropped in price? The U.S. Federal Reserve Board has not raised its key rate and continues to maintain a dovish stance. The reason is that despite the Fed’s posture, bond yields, including Treasuries, have been gradually inching higher. And when yields rise, bond prices fall. That’s exactly what we’re seeing here, and there may be more to come. So why own GOVT? For stability. The U.S. government is not going to default on its debt, so the principal of the bonds that underlie this ETF is safe. And if the stock market takes a nosedive, you’ll be glad to have some bonds that will minimize your downside risk. That said, as interest rates move higher, you’ll see a gradual erosion in the market price. If that is not acceptable to you, look for other options. - Gordon Pape