We recently opened a small position in TLT. The TLT is an ETF that tracks the 20-Year US Treasury Bond. Here is the fund’s summary:
The fund will invest at least 80% of its assets in the component securities of the underlying index, and it will invest at least 90% of its assets in U.S. Treasury securities that the advisor believes will help the fund track the underlying index. The underlying index measures the performance of public obligations of the U.S. Treasury that have a remaining maturity greater than or equal to twenty years.
Source: finance.yahoo.com
TLT currently has a yield of 3.22% but that’s not the reason we initiated a position. We bought this ETF for the long term. If and when the Fed decides to lower rates, TLT will be poised to rise. Our plan with TLT is to DRIP (dividend re-invest program) the dividends and accumulate more TLT over the next few years with a target hold of 5 to 10 years depending on how quickly it climbs back up.
We may also opt to squeeze more income out of this ETF by selling covered calls but for now we’re just getting started so stay tuned, stay profitable and stay solvent…