This weekend, the theme will be interest rates and we'll get started tonight with a look at the most promising bond ETFs per this week's edition of U.S. News Invested since, as rates continue to be "higher for longer," bonds are now becoming as attractive (or even moreso) than stocks. Enjoy the weekend.
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Investors often gravitate toward stocks for the promise of higher returns, while bonds might be considered mere stabilizers or income generators in a portfolio.
However, by sheer market value, the fixed-income market, valued at $130 trillion, actually eclipses the global equity market, which has a market cap of around $106 trillion. This disparity highlights an underappreciation of the bond market's scale.
The relative neglect of bonds by retail investors can partly be attributed to the lower returns they typically offer compared to equities, in addition to other factors.
For instance, liquidity in the bond market is impacted by its over-the-counter trading system. This means bonds are traded between parties without the centralized visibility that stock exchanges provide, which can make entering or exiting positions more cumbersome.
Additionally, bonds face a transparency challenge. Without a centralized market, bond pricing becomes complex and less accessible, posing difficulties for retail investors in determining risk and return, leading to information asymmetry.
In light of these challenges, bond exchange-traded funds, or ETFs, have emerged as practical tools to navigate these issues, permitting investors to buy and sell portfolios of bonds with the ease of stock trading in a brokerage account.
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Here are nine of the best bond ETFs to buy now:
BOND ETF | EXPENSE RATIO | YIELD TO MATURITY | Vanguard Total Bond Market ETF (ticker: BND) | 0.03% | 5.3% | iShares Core U.S. Aggregate Bond ETF (AGG) | 0.03% | 5.4% | Global X 1-3 Month T-Bill ETF (CLIP) | 0.07% | 5.5% | iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) | 0.14% | 6.1% | Vanguard Short-Term Bond ETF (BSV) | 0.04% | 5.2% | Vanguard Intermediate-Term Bond ETF (BIV) | 0.04% | 5.2% | Vanguard Long-Term Bond ETF (BLV) | 0.04% | 5.5% | SPDR Bloomberg High Yield Bond ETF (JNK) | 0.04% | 9.1% | SPDR Nuveen Bloomberg Municipal Bond ETF (TFI) | 0.23% | 4.1% |
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