Best Investment Grade Corporate Bond Etfs

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How To Buy An Etf

Investing in fixed interest, watch this – BetaShares Australian Investment Grade Corporate Bond ETF

ETFs are tremendously easy for investors to purchase these days, and they trade on the stock market just like a regular stock. You can place buy and sell orders on them exactly as you would for a stock, and theyre available for trading on any day the market is open, making them liquid.

Even better, these days investors can access commission-free trading at virtually every major online brokerage, so it doesnt even cost you any extra money to get into a bond ETF.

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Cumulative Growth Of A $10000 Investment

Bloomberg US 1-5 Year Corporate Bond Index $9,949
Worst Three Months Return -3.91
Best Three Months Return +5.31

This graph represents the growth of a hypothetical investment of $10,000. It assumes reinvestment of dividends and capital gains, and does not reflect sales loads, redemption fees, if applicable, or the effects of taxes on any capital gains and/or distributions. If the inception date of the Index is less than the time period shown above, the Since Inception period is shown. Best and Worst Return cover the timeframe of the chart.

Read Also: Best Investment High Interest Rates

Combining Bond Etfs With Equity Etfs To Build A Portfolio

Bond ETFs usually play a critical role in the asset allocation of a well-built portfolio. Your allocation between stocks and bonds mainly depends on your goals and risk tolerance.

When looking to add bond ETFs to a portfolio, we recommend implementing more vanilla bond categories first. These are typically government bonds and corporate bonds.

Bonds in categories such as high-yield, floating-rate, and short-term are used only for a small portion of the overall portfolio. Their usage depends greatly on your investment circumstances as well as broader market conditions.

The 3 Best Corporate Bond Etfs

Investment Grade Corporate Bond ETF ($LQD): Technical Analysis Research ...

Last Updated: 2 min. read

Corporate bonds tend to pay higher yields than treasury bonds and are more popular for income investors. Here well look at the best corporate bond ETFs.

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Contents

  • Where To Buy Corporate Bond ETFs
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    Our Brokerage Comparison Table Below Allows You To Compare The Below Features For Brokers Offering Etf Brokers

    We compare these features to make it easier for you to make a more informed choice.

    • Minimum deposit to open an account.
    • Available funding methods for the below ETF Brokers.
    • What you are able to trade with each brokerage.
    • Trading Platforms offered by these brokers.
    • Spread type for each brokerage.
    • Customer support levels offered.
    • We show if each brokerage offers Micro, Standard, VIP and Islamic accounts.

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    Emerging Markets: Vaneck Em High Yield Bond Etf

    • 3-year return : 5.52%
    • Expense ratio: 0.40%
    • Assets under management : $1.3 billion
    • Inception date: May 8, 2012

    If you want to invest in international bonds with a focus on emerging markets rather than developed ones, the VanEck EM High Yield Bond ETF is a solid choice. Emerging market bonds tend to be lower-rated than bonds from developed markets, but they also pay higher interest rates. This fund primarily invested in bonds rated BB and B.

    This is one of the smaller funds on our list, with just $1.3 billion in assets. However, that should be enough to ensure liquidity for investors buying and selling shares. Its also one of the more expensive funds but is still relatively cheap overall with an expense ratio of 0.40%. This is equivalent to $4 for every $1,000 invested.

    What Are Fixed Income Etfs

    ‘LQD’ corporate bond ETF looks to be the most overvalued bond asset: Jeffrey Gundlach

    A fixed income ETF is an exchange traded fund that only invests in bonds. While a regular ETF holds a collection of stocks or commodities, a bond ETF only holds a collection of bonds. A bond ETF may hold hundreds or even thousands of different bonds.

    Most bond ETFs will include a specific subset of bonds. Here are some of the most common areas of focus:

    • Government bonds: These bond ETFs contain bonds that are issued by either the federal government or by local governments . U.S. Treasury bonds are often considered the most lucrative type of government bond.

    • Corporate bonds: Some bond ETFs will only contain corporate bonds that have been issued by large companies.

    • International bonds: These bond ETFs will contain bonds that are issued by foreign governments.

    • Maturity: Some bond ETFs contain only short-term bonds, while others include only long-term bonds.

    So whys it called a fixed income ETF anyway?

    Fixed income refers to any security that gives investors a fixed amount of interest or dividends until maturity is reachednamely, bonds.

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    How Expensive Are Bond Etfs

    Like other ETFs, bond ETFs charge an expense ratio to cover the costs of running the fund and generating a profit. The good news for investors is that these fees have been moving in the right direction for investors for some time.

    In 2021, the asset-weighted average expense ratio for an index bond ETF was 0.12 percent, or about $12 per $10,000 invested, according to the Investment Company Institutes 2022 Investment Company Fact Book, a compendium on the industry. Thats down from 0.26 percent in 2010.

    If youre looking for a bond ETF, search for funds with lower expense ratios, so that you put more of your funds yield into your own pocket instead of the fund companys.

    Corporate Bonds Vs Stocks

    Stocks represent direct ownership in a business, while bonds are a loan with a predetermined rate of return. This is why, even for a strong and profitable company, the value of its bonds will hold stable even if the stock price changes substantially. You usually know exactly what you’re getting with a bond.

    A company’s stock price, however, can substantially fluctuate and is often based on projections of what people think it could earn in the future. As a result, stock prices can be volatile, while corporate bonds tend to hold their value. You trade the potential upside of stocks for the predictability of bonds.

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    Bscn Ibdn And Lqdi Are Q2 2022s Best Investment Grade Corporate Bond Etfs

    Exchange-traded funds are not reserved solely for equities. There are also bond ETFs that invest exclusively in fixed-income securities. Investors who want to access relatively low-risk corporate bonds can consider investment grade corporate bond ETFs, which buy the high-quality debt of financially strong and stable companies. Examples of the kinds of companies whose bonds are included in these ETFs include Verizon Communications Inc. , Goldman Sachs Group Inc. , and Wells Fargo & Co. . These companies have high , suggesting a low risk of default. For this reason, these ETFs can provide a strong defensive addition to investment portfolios.

    Ishares Core Canadian Universe Bond Index Etf

    iShares 5

    XBB is a Blackrock iShares Canada ETF that was established in November of 2000 and trades on the Toronto Stock Exchange.

    XBB is a low-cost fixed-income ETF that provides exposure to the Canadian investment-grade bond market.

    It has a low-risk rating, and its largest weighted holdings are mostly Canadian Government bonds.

    Here are some key facts for XBB:

    • Inception Date: November 20, 2000
    • MER: 0.10%

    Qtrade is a Canadian discount brokerage that was founded in Vancouver, BC in 2001.

    It has numerous investing tools like its robo-advising service called VirtualWealth.

    Qtrade offers free ETF trading for some Canadian ETFs and investors can choose from 12 different Canadian bond ETFs on the list. Learn more in this review.

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    Ishares 10+ Year Investment Grade Corporate Bond Etf

    The iShares 10+ Year Investment Grade Corporate Bond ETF generated a 12-month trailing distribution yield of 3.36% and a 30-day SEC yield of the same. Started in December 2009, the ETF tracks the performance of the ICE BofAML 10+ Year U.S. Corporate Index, which is composed of long-duration corporate bonds issued by U.S. companies.

    There were 2,992 holdings in the fund’s portfolio with $2.5 billion in net assets. Compared to its peers, this ETF has a wider sector diversification.

    The top sectors in the fund’s portfolio are consumer noncyclical at an 18.3% allocation, communications at 12.5%, and electric at 10.9%. Almost the entire fund’s portfolio is of investment-grade bonds, with bonds rated BBB having about a 51% allocation. The fund had a yield-to-maturity of 3.37% and an average duration of 14.45 years.

    The fund generated a one-year return of 9.82%. The fund demonstrated average annual returns of 7.35% for the three-year period and 6.52% for the five-year period. Morningstar assigned the fund a two-star overall rating in the corporate bond category. The expense ratio for the fund is 0.06%.

    Should You Invest In A Total Bond Market Index Fund

    Index fund investing benefits from lower fees than buying actively managed mutual funds. Lower costs result in better after-fee returns over the long term. Thats true with fixed income investments as well as equities.

    SP Global tracks the relative performance of actively managed funds compared to their respective benchmark across a number of asset classes. Its latest report shows that actively managed funds were more likely to underperform their respective index over one-, three- and five-year periods. Morningstar has reported similar results.

    There are at least two important considerations beyond performance that investors should keep in mind. First, the duration of the funds in our list hover around six years. Duration helps us understand how much the value of a fund will rise or fall with interest rates. Generally, for each 1% rise or fall in interest rates, a funds value will rise or fall by a percentage equal to its duration.

    Assuming a fund with a six-year duration, an increase in rates of 1% will cause the funds value to decline by about 6%. A decrease of 1% in the prevailing rates will cause the funds value to increase by about 6%. Given the historically low interest rate environment and the recent rise in yields, you need to consider the interest rate risk associated with a total bond index fund.

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    Ishares Iboxx $ Investment Grade Corporate Bond Etf

    • NAV as of Aug 04, 2022$114.1352 WK: 107.44 – 136.18
    • 1 Day NAV Change as of Aug 04, 20220.23
    • NAV Total Return as of Aug 03, 2022YTD: -12.77%
    • Fees as stated in the prospectus Expense Ratio: 0.14%

    1. Exposure to a broad range of U.S. investment grade corporate bonds

    2. Access to 1000+ high quality corporate bonds in a single fund

    3. Use to seek stability and pursue income

    Best Bonds Etfs To Combine With All

    ETFs are bolstering the corporate bond market

    If you are looking to achieve a specific asset allocation through bond ETFs and an all-in-one equity portfolio, we recommend starting off with our best picks from the more core fixed income categories.

    If you are a more aggressive investor, consider using corporate bonds instead of government bonds. If you are a more conservative investor, government bonds may be a safer pick.

    For corporate bonds, we recommend:

    • BMO Mid Corporate Bond Index ETF
    • Horizons Active Corporate Bond ETF
    • iShares Core Canadian Corporate Bond ETF

    For government bonds, we recommend:

    • BMO Government Bond ETF
    • iShares Core Canadian Government Bond ETF
    • Vanguard Canadian Government Bond ETF

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    Best Bond Etfs In Canada 202: Invest In Fixed

    Looking at investing in fixed-income in Canada? Bond ETFs are a simple and effective method to do so.

    At the end of 2021, equity funds accounted for 65% of total funds, and bond funds accounted for 26%.

    Most investors will combine bond ETFs with equity ETFs to build their portfolio, which I go into more detail about below.

    Here are our picks for the best bond ETFs in Canada.

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    Risk & Other Information

    Credit ratings are assigned by Nationally Recognized Statistical Rating Organizations based on assessment of the credit worthiness of the underlying bond issuers. The ratings range from AAA to D and are subject to change. Not rated indicates the debtor was not rated, and should not be interpreted as indicating low quality. Futures and other derivatives are not eligible for assigned credit ratings by any NRSRO and are excluded from quality allocations. For more information on rating methodologies, please visit the following NRSRO websites: standardandpoors.com and select “Understanding Ratings” under Rating Resources and moodys.com and select “Rating Methodologies” under Research and Ratings.Typically, security classifications used in calculating allocation tables are as of the last trading day of the previous month.

    There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. The Funds return may not match the return of the Underlying Index. The Fund is subject to certain other risks. Please see the current prospectus for more information regarding the risk associated with an investment in the Fund.

    Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa.

    The Spdr Portfolio Long Term Corporate Bond Etf

    LQD Institutional Ownership

    The SPLB ETF tracks the Bloomberg Barclays U.S. Long Term Corporate Bond Index. All its underlying bonds performance is screened using this index, which measures the performance of corporate bonds with a maturity period of 10 years and above. Considering this, its no wonder it is ranked 3rd on the list of the best long-term bonds. It boasts $892 million in assets under management, a low expense ratio of 0.07%, and a yearly yield of 4.11%. All correct at the time of writing.

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    Different Bond Strategies You Can Use

    Bonds should be a key building block for an overwhelming majority of investors, as not many people can handle the volatility of an all-equity portfolio. Fixed income does an excellent job of stabilizing a portfolio over time, especially since bonds and stocks are generally inversely correlated.

    The inverse correlation between stocks and bonds means that when one is rising in value, the other is usually falling, and vice versa. Through a typical market cycle, using both asset classes should reduce your portfolios volatility.

    Before rushing to invest in fixed income, you must understand that there are many different types of bonds and bond ETFs. Below is a general summary of the types of bonds and bond strategies that you can encounter.

    Type of Bond
    • YTD Return: -4.24%

    BMOs ZCS comes with excellent features for short-term bond exposure.

    The ETF invests entirely within Canada, across short-term bonds issued by investment-grade companies. The benchmark that it passively tracks is the FTSE Canada Short-Term Corporate Bond Index.

    With over 400 individual bond holdings, the ETF is very well diversified across corporate bonds. BMO offers ZCS at an extremely low MER within the short-term bond category. The ETFs assets exceed $1 billion, making it an extremely large ETF.

    • Stock Price: $26.01
    • YTD Return: -3.28%

    XSB invests entirely within Canada, across both government and corporate bonds. It is a passive strategy that tracks the FTSE Canada Short-Term Overall Bond Index.

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