What are Fixed Income ETFs?
Fixed Income ETFs are the same as Bond ETFs. A bond is a debt that a company can sell to raise money without diluting their ownership over the business.
Fixed Income ETFs are the same as Bond ETFs. While equity shares, or common stock, gives you ownership of part of a company, a bond is a debt that a company or government can issue/sell to raise money without diluting their ownership or control over the business. When you invest in a bond, you are effectively loaning money to a company or government with the intent that they will repay you at a determined point in the future with interest.
The traditional method of buying bonds through a bond brokerage desk provides little price transparency to investors. Furthermore, every time a bond is traded, a commission is charged which is subtracted from the bond’s yield.
Bond ETFs provide investors a way to trade a portfolio of bonds all in one transaction, directly through an exchange at a transparent price. With Bond ETFs, building a diversified bond portfolio has become more transparent and accessible to all types of investors. They are a great solution for investors who are looking for asset class diversification.
Examples of Bond ETFs/Fixed Income ETFs:
- Government Bond ETFs: Allow you to invest in the debt issued by governments, with varying qualities and grades available.
- Investment Grade Corporate Bond ETFs: Allow you to invest in the debt of companies with high credit quality.
- High Yield Corporate Bond ETFs: Allow you to invest in the debt of companies with low credit quality.
- Emerging Market Bond ETFs: Allow you to invest in the debt of companies from emerging markets.
This article was written in collaboration with Trackinsight.
