What is a Bond ETF?

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  • Written By: A. Leverkuhn
  • Edited By: Andrew Jones
  • Last Modified Date: 25 November 2019
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A bond ETF is a specific kind of Exchange Traded Fund (ETF) that presents investors with a relatively new means of investing in multiple securities or equities. There are many different kinds of ETFs available for trading. Many brokerage firms offer their individual clients the option of investing in ETFs. Some of them even offer commission-free incentives for this kind of trading.

An exchange traded fund or ETF is like a bundle of different individual investments. Investors can buy into an ETF that represents a basket of stocks, commodities, currencies or other investments. One of the most popular kinds of ETFs are market ETFs that actually track indexes like the S&P 500 or the Dow Jones industrial average. Another popular kind of ETF is a bond ETF, where the Exchange Traded Fund represents a collection of different bonds.

Bonds, which are a relatively safe kind of investment in municipal or treasury notes, become popular when there is a lot of risk in the stock market. During these times, the value of bond ETFs can rise along with those of individual bonds. Unlike some kinds of financial products, many bond ETFs can be traded on an intra-day basis, or during a trading day when the market is open.


In addition to bond ETFs based on the treasuries of governments, corporations also offer a range of bonds that can be traded in ETF form. Many of these corporate bond ETF options represent short bond ETF investments, or ETFs that can satisfy an investor’s demands in the short term. Investors often keep short-term and long-term investments in different categories, looking for different kinds of returns from each. Other options include high yield bond ETFs that have a greater chance of generating a higher return over a given period of time.

In general, buying ETFs provides a greater flexibility for a specific kind of investing that traders and individual investors do when they want to stay on the sidelines. In times of economic distress, many informed investors pull their money from the stock market, and put into bonds and other more stable equities. With bond ETF’s, investors get the short-term trading ability along with the long-term support that bond investment options have traditionally offered. However, as more and more of America’s local governments experience financial problems, it’s important to look at the party that’s behind a specific bond or portion of a bond ETF in order to make good predictions about whether the bond issuers will be able to pay their holders at any given date in the future.



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