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BY Rom Badilla, CFA

Earlier we talked about the short comings of funds and why investing in individual bonds makes better sense. A fund’s “one-size fits-all” approach can be convenient but may not be suitable for an individual who is looking for a tailored solution toward reaching their investment goals.

Below is Bondsquawk’s Investment Grade Model Portfolio which consists of a variety of both corporate and government bonds. The portfolio is benchmarked against the Barclays U.S. Government/Corporate Index which serves as a proxy of the Investment Grade universe. The model is used to illustrate an active bond portfolio and will generally maintain a similar interest rate and credit risk profile as the benchmark. The model may deviate from the index based on outlook and strategy. That said, the model has a total return focus where both income and price changes are considered in determining the allocation.

Investment Grade Model Portfolio – December 2012

Par Amt (000) Percent CUSIP Ticker Coupon (%) Maturity Price ($) Yield (%) S&P Reason
2 0.2% Cash Cash 0.250 12/01/12 100.00 0.25 AAA N/A
125 12.5% 912828TZ3 UST 0.250 11/15/14 99.98 0.26 AA+ N/A
25 2.6% 78012DAC7 RBS 4.250 02/15/15 103.96 2.40 A- Analysis
25 2.6% 78442FAQ1 SLM 5.000 04/15/15 105.63 2.53 BBB- Analysis
25 2.7% 61747YCE3 MS 6.000 04/28/15 108.77 2.23 A- Analysis
25 2.8% 52107QAC9 LAZ 7.125 05/15/15 111.09 2.43 BBB Analysis
25 2.7% 7591EPAG5 RF 5.750 06/15/15 107.63 2.62 BBB- Analysis
25 2.5% 98970ECD9 ZION 3.500 09/15/15 100.58 2.73 BBB- Analysis
25 2.6% 37247DAF3 GNW 4.950 10/01/15 104.26 3.36 BBB- Analysis
130 13.0% 912828TX8 UST 0.375 11/15/15 100.12 0.34 AA+ N/A
25 2.7% 5901884M7 BAC 6.050 05/15/16 109.55 3.11 BBB+ Analysis
25 2.4% 428236BW2 HPQ 2.600 09/15/17 95.22 3.70 BBB- Analysis
25 2.9% 49306CAF8 KEY 5.700 11/01/17 114.46 2.55 BBB+ Analysis
75 7.5% 912828UA6 UST 0.625 11/15/17 99.93 0.64 AA+ N/A
12 1.5% 008117AM5 AET 6.500 09/15/18 125.08 1.90 A- Analysis
12 1.5% 26875PAC5 EOG 6.875 10/01/18 128.42 1.72 A- Analysis
12 1.4% 893830AK5 RIG 7.375 11/15/18 119.79 3.32 BBB- Analysis
12 1.6% 149123BQ3 CAT 7.900 12/15/18 136.87 1.49 A Analysis
12 1.6% 125509BL2 CI 8.500 05/01/19 132.25 2.94 BBB- Analysis
70 7.1% 912828TV2 UST 1.250 10/15/19 101.42 1.04 AA+ N/A
12 1.3% 00206RAZ5 T 3.875 08/15/21 112.21 2.32 A- Analysis
12 1.3% 88732JBA5 TWC 4.000 09/01/21 108.86 2.82 BBB Analysis
12 1.2% 02209SAN3 MO 2.850 08/09/22 99.00 2.97 BBB Analysis
75 7.5% 912828TY6 UST 1.625 11/15/22 99.94 1.63 AA+ Analysis
15 1.9% 652482BL3 NWSA 4.960 12/15/35 124.87 4.63 BBB+ Analysis
15 1.7% 501044CN9 KR 5.400 07/15/40 113.30 4.54 BBB Analysis
15 1.7% 60871RAD2 TAP 5.000 05/01/42 111.73 4.29 BBB- Analysis
15 1.5% 02209SAM5 MO 4.250 08/09/42 99.64 4.27 BBB Analysis
75 7.4% 912810QY UST 2.750 11/15/42 98.84 2.81 AA+ N/A
Bondsquawk Model Portfolio 2.95 7.9 Yrs 105.08 1.83
Barclays U.S. Government/Credit Index 3.23 8.1 Yrs 110.32 1.52
Difference -0.27 -0.2 (5.24) +0.32

Information and market quotes on the bond investments are provided by Trade Monster’s Bond Trading Center.

Guidelines

  • $1000 (m) Market Value starting point
  • Investment Grade Ratings (AAA through BBB- by Standard & Poor’s Ratings Services at time of inclusion)
  • 1 to 30 Years Maturity
  • Taxable Bonds
  • Fixed Rate Coupon
  • U.S. Dollar Denominated Only
  • Maximum issuer exposure is 3% except for bonds issued by the U.S. Treasury

Summary Statistics

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Disclaimer: The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

Source: Bondsquawk's Model Portfolio