Where can I find all Bond Etfs
Bonds: bond ETFs
Bonds are great: they offer safe, steady, and predictable returns that have a low correlation to stocks, making them an excellent way to offset riskier stocks in a portfolio; however, for the average investor, investing in individual bonds is almost impossible.
The disadvantages of buying bonds
Investing in single bonds is difficult for many investors because of:
The market is difficult to navigate and investors may find that they are getting very different prices for the same bond from different brokers.
High premiums: Broker premiums on bond prices can be substantial, especially for smaller investors; a US government study found that municipal bond premiums can go up to 2.5%; between these premiums, the bid / ask spreads, and the price of the bonds themselves, the cost of investing in individual bonds can quickly increase.
Some bonds trade daily while others only trade weekly or even monthly - and that's when the markets work perfectly - and in times of market distress some bonds can cease trading altogether.
What are Bond ETFs?
A bond ETF tracks an index of bonds and tries to replicate its returns: although these instruments contain bonds and only bonds, they trade on a stock exchange like stocks, giving them some attractive stock-like properties.
The differences between bond and annuity ETFs
Bonds and annuity ETFs can include the same basic investments, but exchange trading changes the behavior of annuity ETFs in several important ways:
However, bond ETFs have a constant maturity that is the weighted average of the maturities of all the bonds in their portfolio. Some of these bonds can expire at any time or leave the age range that a bond ETF is aiming for (e.g. a one to three year Treasury Bond ETF will expire all bonds with a term of less than 12 months).
Bond ETFs are also liquid in illiquid markets, the tradability of individual bonds is very different: some issues trade daily, others only once a month, in times of stress not at all, while bond ETFs are traded on an exchange, i.e. they can be traded at any time during the Market times are bought and sold even if the underlying bonds are not traded even at that time.
This has very real implications: one source found that high yield corporate bonds trade less than half the days of the month on average; while the iShares iBoxx $ High Yield Corporate Bond ETF (HYG | B-64) trade millions of stocks daily.
Bond ETFs pay monthly returns, one of the biggest advantages of bonds is that they typically pay investors interest every six months, but bond ETFs hold many different issues at once, and at one point some bonds may be in the portfolio Pay their coupon so that bond ETFs usually pay monthly rather than semiannual interest; the value of this payment can vary from month to month.
Advantages of bond ETFs
Bond ETFs offer many advantages over single bonds:
Diversification: With an ETF, you can own hundreds, even thousands, of bonds in an index at a purchase price well below what it would be to invest in each individual issue individually: institutional diversification at retail prices.
You can buy and sell bond ETFs from your regular brokerage account without having to wade through the opaque OTC markets to haggle over prices.
liquidity: Bond ETFs can be bought and sold at any time during the trading day, including in overseas or smaller markets where individual issues could be traded much less frequently.
Price transparency: With a bond ETF, there is no longer any uncertainty about what your investment is worth: ETF prices are publicly published on the stock exchange and updated every 15 seconds during the trading day.
Although the value can vary from month to month, monthly payments provide bond ETF investors with a more regular stream of income to use or reinvest.
Disadvantages of bond ETFs
There are two major drawbacks to bond ETFs.
Since bond ETFs never expire, they never offer the same protection for your initial investment as single bonds, meaning you are not guaranteed to get your money back at some point in the future.
Recently, however, some ETF providers have started launching ETFs with specific maturities that hold each bond to expiration and distribute the proceeds once all the bonds are due. Guggenheim offers 16 investment grade and high yield ETFs with different maturities (2017, 2018, etc.) under the BulletShares brand; iShares offers six municipal ETFs with a maturity date.
With single bonds, you mitigate the risk by simply holding a bond until maturity, when you are paid the full face value. Bond ETFs don't mature, however, so there is little you can do to avoid the sting of rising interest rates.
Which are better: bonds or bond ETFs?
For most investors, buying individual bonds is out of the question because even if it weren't, bond ETFs offer variety, liquidity, and price transparency that individual bonds cannot, with the added benefits of intraday tradability and more frequent income payments ; While bond ETFs come with some additional risk, they are overall likely a better and more accessible option for the average investor.
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