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STRIPS are quite a tease...EDV=Vanguard Extended Duration Treasury...up 18.5% YTD

edited August 2011 in Fund Discussions
Sharing a strategy is always here's one of mine. Hoping for some constructive criticism.

Early in the year I wanted to capture profits I had accumulated in my Energy ETF (VDE= Vanguard Energy) and my Emerging Market ETF (VWO= Vanguard Emerging Markets). Rather than reallocate these profits into a money market fund I decided to purchase a Long Term Treasury ETF (EDV).

EDV is a Long term treasury in the form of STRIPS, which turn the interest and principal payments on 30-year treasury bonds into zero-coupon bonds making no payouts until maturity. (STRIPS, by the way, stands for Separate Trading of Registered Interest and Principal Securities.) Think of a stock that never pays a dividend.

Anyway, my thought was to somewhat "barbell" my VWO and VDE ETFs with EDV. This was never setup as a 50/50 relationship but rather a reallocation relationship whereby I reduce my investment in VDE and VWO back to their original dollar amounts and reallocate the profits to EDV. The recent downturn has temporarily hammered my to long term positions in VDE and VWO but, I really wish I had some dry powder to reinvest in them.

It now seems appropriate to consider repurchasing VDE and VWO with some or all of the EDV position.

Your thoughts would be very much appreciated.

Related article on EDV and other similar mutual fund and ETFS:



  • Hi Bee: I took a peek at ZROZ - EDV. Wow 8/10 11 was the sweet spot !! I wonder why all the volume on ZROZ at 709,000.
    Just my 2 cents worth, take 1/2 the profit & buy back into VDE & VWO.
    When, not if, rates go up then ZROZ & EDV will head the other direction.
    Did you look to see how the above preformed during the last market drop?

    Have a good weekend,
  • hi bee... you're doing what we are doing in our clients' porfolios.. we are overweight risk in terms of credit exposure (hy) and emerging markets, but we "hedge" that via being long duration. long term treasurys made the risk taking a bit less bloody.
  • fundalarm, it sounds like your adding to risk not hedging it. If you are a hedge fund, perhaps it ok.
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