Top bond ETFs for 2023
BlackRock’s Salim Ramji: Investors turn to ETFs in volatile times
BlackRock global head of ETFs and index investments Salim Ramji discusses the popularity of ETFs after 2022 became the second best year for the investment vehicle on ‘The Claman Countdown.’
As you’re allocating your investments for 2023, it may be worthwhile to consider bond ETFs.
"Bond ETFs hold bonds within an exchange-traded fund wrapper, which trades like a stock," says Roxanna Islam, associate director of research with VettiFi. "Compared to direct investment in bonds, bond ETFs are more liquid, transparent, and provide more frequent income."
In addition, Islam says many investors are more comfortable with equity investments over fixed-income investments due to simplicity and familiarity.
"So putting bonds in an ETF wrapper allows fixed income investments to be more accessible to investors who are reluctant to buy bonds directly," Islam tells FOX Business.
WHY YOUR 401(K) MIGHT NOT HAVE ETFS
Why are bond ETFs a wise investment choice?
Bryan Armour, Morningstar's director of passive strategies research for North America, says bond funds – regardless of mutual fund or ETF – are a great way to diversify bond exposure to reduce risks inherent to any one issuer (or a set of issuers).
"Investors can lean on professional management of funds, regardless of whether it's active or passive," Armour tells FOX Business. "The alternative would be investors running their own strategy by purchasing bonds and reinvesting each time they came due. This approach carries little benefit for the investor given the extremely low fees of passive, broadly diversified bond funds."
ARE ETFS A HEDGE FOR INFLATION?
Armour with Morningstar provided information regarding bond ETFs
Vanguard Total Bond Market Index Fund – Armour says this ETF's broad scope (it holds over 10,000 investment-grade bonds) and its low fee (0.03%) should help this fund outperform peers over the long run.
|BND||VANGUARD BD INDEX FUND INC TOTAL BOND MARKET||73.72||+0.53||+0.72%|
"Roughly half of its portfolio is allocated to government bonds, with corporate bonds and securitized debt filling out the other half," he says. "This fund puts a lid on credit risk exposure but still gets a yield boost compared to a similar duration Treasury ETF. We give it a Morningstar analyst rating of gold."