'Buy, hold and re-roll' these short-term bonds as banking sector rattles markets, experts say

Published Wed, Mar 15 20231:44 AM EDT

If the market gyrations and Silicon Valley Bank's failure are rattling your faith in stocks, there are places to look for safety. In fact, investors flocked into Treasurys and gold on Monday after the collapse of Silicon Valley Bank and Signature Bank , and the government's subsequent plan to backstop the banking system. Yet experts caution that if you are invested for the long term, it's important to be mindful of your time horizon and your risk appetite before fleeing into safe-haven assets . "It's really important to step back and assess the situation and understand where the economy sits and … and how long you can hold and how much risk you can take right now," said Callie Cox, U.S. investment analyst at social investment network eToro. For instance, right now stock prices are about 15% to 20% below record highs, she said. "It may suit your emotions best to go into bonds, but it may not suit your portfolio and your goals the best," Cox noted. It's also important to keep your future goals in mind. "You still need the long-term growth of the equity market for your long-term future," said chartered financial analyst Tim Utecht, chief investment officer at Life Planning Partners. "That is why we would not recommend making huge shifts in terms of your asset allocation." Where to find safety If you're looking for some safety, short-term Treasurys , which are still offering attractive rates and are backed by the full faith and credit of the U.S. government, are a good play. Jordan Benold, a certified financial planner at Benold Financial Planning, recommends that younger investors stay the course. But for cash and bond allocations, T-bills – U.S. Treasurys with maturity of one year or less – might be the ticket. "Buy, hold and re-roll them until rates start going down. Just ride this wave. The rates will adjust and correct [at some point], and these short-term rates will go back to normal," he said. "At that point, you can pivot or stay in T-bills. It depends on the investor." US1Y 1Y mountain 12-month performance of one-year Treasury yields. Utecht also recommends T-bills of anywhere from 6 months to one year in duration, as well as certificates of deposit, which have rates over 4% and some near 5% . When buying bank CDs, investors should be mindful of the Federal Deposit Insurance Corp.'s coverage, he said. The Federal Deposit Insurance Corp. insures up to $250,000 per depositor, per bank, per ownership category. "You can scatter them among a dozen different banks and collect 5% on your money in the next six to nine months. That is a great place to be," Utecht said. Hans Olsen, chief investment officer of Fiduciary Trust Company, highlighted short-duration, high-quality bonds are where it's at for safety. "Treasurys had a heck of a run today, but with the proviso to keep the duration short and the credit quality high. It's interesting to note what's running in the Treasury market: It's the shorter end," Olsen said.