Question 1: I'm researching 'stable' corporate and government fixed interest ETFs, such as Vanguard's VAF. Why has such a boring, safe product gained near on 9% this year?
Answer: When bond yields fall, bond prices go up. Because bond yields have fallen (the 10 year Australian Government treasury bond now yields around 1.35%), funds that invest in fixed interest securities (like Vanguard’s VAF) have seen the value of their investments rise and on a “mark-to-market basis”, recorded strong positive returns. When and if bond yields rise, fixed interest funds will lose value. Investing in fixed interest is not without risk. It is less risky than investing in shares, but not riskless. If you want to minimise the capital risk, look for bond funds (or bond ETFs) of short duration. However, they will typically pay a lower return and have a lower running yield.
Question 2: I really enjoy your Saturday Switzer Report. Can you tell me why nobody ever seems to go short in bank stocks? These seem to me to be an obvious target at certain times.