ETF to Dump No. 4: Vanguard Extended Duration Treasury (EDV)
In bond terminology, "duration" measures a portfolio's sensitivity to interest rates. Vanguard Extended Duration Treasury (EDV) has an extra-large "extended" duration of 27.8, which means it can lose about 27.8% for every 1% in long-term interest rates. This makes EDV the highest-risk Treasury ETF that does not use leverage.
Of course, this also means EDV stands to gain if long-term rates should go down. But with Ben Bernanke keeping the monetary fire hose on full blast, there isn't a lot of room for rates to drop. Hence I think the risk of EDV far outweighs the upside potential.
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