With the safety and consistency of bonds becoming increasingly more attractive relative to stocks, here are the latest recommendations for Bond ETFs per U.S. News Invested.
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Treasury bond investors these days may be unnerved with news of the recent downgrade of the U.S. government's creditworthiness by Fitch Ratings, but another ongoing phenomenon warrants close scrutiny as well – the continued steep yield curve inversion.
In normal circumstances, the curve charting interest rates on bonds of varying maturities slopes upward. This is because investors typically demand higher returns for the added risk of holding a bond over a longer period.
However, the yield curve inverts when interest rates on short-term bonds trend higher than those on long-term bonds. Many investors believe that an inverted yield curve heralds an upcoming recession. Should a recession be on the horizon, investors can attempt to reduce risk in their portfolio by holding bond exchange-traded funds, or ETFs.
Here are nine of the best bond ETFs to buy in 2023:
iShares Core U.S. Aggregate Bond ETF (ticker: AGG). One of the simplest ways to passively track a wide swath of the overall U.S. bond market is via an aggregate bond ETF like AGG. By tracking the popular Bloomberg US Aggregate Bond Index benchmark, AGG provides exposure to over 11,000 U.S. dollar-denominated bonds.
Vanguard Short-Term Treasury ETF (VGSH). A popular ETF for short-term Treasury bond exposure is VGSH, which holds Treasurys of one to three years in maturity. Due to the inverted yield curve, VGSH is currently paying a yield to maturity of 4.9%. Like most Vanguard ETFs, VGSH keeps fees low, charging an expense ratio of just 0.04%.
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