Bond ETFs

Bond ETFs

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Bond ETFs

Bond ETFs are similar to other Exchange Traded Funds, bond ETFs seek to emulate a correlation index or sub-investment product. In the case of the bond ETF, however, it is not as simple as other funds such as Oil ETFs or Energy ETFs.

Bond ETFs are available on a global basis. The Bond ETFs are exclusive in the world of fixed income because, as they are traded on stock exchanges, the present and past prices of Bond ETFs are available to all investors. Historically, this kind of price transparency for bonds has been available only to institutional investors.

Bond ETFs pay a monthly interest of dividends, although capital gains are paid on an annual basis. And while bond funds do the same tax advantages as traditional ETFs, it does not play a large role in the bond yield, because ETFs are not as heavily influenced by capital gains as stocks.

Note that bond funds differ from bonds in that they have no par value. As such a bond fund can lose value and never recapture it.

There are two reasons to think investing in a bond ETFs. The first is to provide a steady stream of income. If you are older, you will appreciate the stability that comes from income generating investments. The other reason is to reduce the overall volatility of the portfolio, since bonds and stocks often do not move in concert with others. However, be careful not to overload your Bond ETFs investment if you are young because you run the risk of reducing the portfolio yield.

There are many bond ETFs to explore for your ETF investment portfolio. International Bond ETFs, Corporate, Government, Short, Medium, and Long-term, and even junk bond ETFs.

The disadvantage of bond ETFs is that they charge an ongoing management fee. Although lower spreads on the ETF trading of bonds to help offset this somewhat, the issue will still prevail with a buy-and-hold strategy over the longer term. The first trading spread advantage of the bond ETFs is eroded over time by the annual management fee.

Here are few Bond ETFs that can be explored for ETF Investment.

Emerging Markets Sovereign Debt Portfolio ETF (PCY) : The PowerShares Emerging Markets Sovereign Debt Portfolio is based on the Deutsche Bank Emerging Market U.S. Dollar Balanced Liquid Index, an innovative index that provides intelligent access to the sovereign debt of approximately 17 emerging market countries.

High Yield Corporate Bond Portfolio ETF (PHB) : The PowerShares High Yield Corporate Bond Portfolio seeks to replicate the Wachovia High Yield Bond Index, that measures potential returns of a theoretical portfolio of high-yield corporate bonds that are rated below investment grade by Moody's, S&P or Fitch

Insured National Municipal Bond Portfolio ETF (PZA) : The PowerShares Insured National Municipal Bond Portfolio is based on the Merrill Lynch National Insured Long-Term Core Municipal Securities Index, designed to track the performance of AAA-rated, insured, taxexempt, long-term debt publicly issued by U.S. states or their political subdivisions.

Insured NY Municipal Bond Portfolio ETF (PZT) : The PowerShares Insured New York Municipal Bond Portfolio is based on the Merrill Lynch New York Insured Long-Term Core Municipal Securities Index, designed to track the performance of AAA-rated, insured, tax-exempt, long-term debt publicly issued by New York or its political subdivisions.

iShares iBoxx $ High Yield Corporate Bond Fund (HYG) : The iShares iBoxx $ High Yield Corporate Bond Fund seeks investment results corresponding to the price and yield performance of the iBoxx $ Liquid High Yield Index, a corporate bond market index.

iShares JPMorgan USD Emerging Markets Bond Fund (EMB) : The iShares JPMorgan USD Emerging Markets Bond Fund seeks investment results corresponding to the price and yield performance of the JPMorgan EMBI Global Core Index.

iShares Lehman 1-3 Year Treasury Bond Fund (SHY) : The iShares Lehman 1-3 Year Treasury Bond Fund seeks to approximate the total rate of return generally equivalent to the short-term sector of the United States Treasury market as defined by the Lehman Brothers 1-3 Year US Treasury Index.

iShares Lehman Aggregate Bond Fund (AGG) : The iShares Lehman Aggregate Bond Fund seeks to provide investment results generally equivalent to the total United States investment grade bond market as defined by the Lehman Brothers U.S. Aggregate Index.

iShares Lehman TIPS Bond Fund (TIP) : The iShares Lehman U.S. Treasury Inflation Protected Securities Bond Fund seeks results generally equivalent to the inflation-protected sector of the United States Treasury market as defined by the Lehman Brothers U.S. Treasury TIPS Index.

ProShares UltraShort Lehman 7-10 Year Treasury Bond ETF (PST) : The ProShares UltraShort Lehman 7-10 Year Treasury Bond ETF seeks daily investment results that generally correspond to twice (200%) the inverse (opposite) of the performance of the Lehman Brothers 7-10 Year U.S. Treasury Index.

Short-Term Bond ETF (BSV) : The Vanguard Short-Term Bond ETF employs a "passive management" - or indexing - strategy designed to track the performance of the Lehman 1-5 Year U.S. Government/Credit Index. This index includes all medium and larger issues of U.S. government, investment-grade corporate, and investment-grade international dollar-denominated bonds that have maturities of between 1 and 5 years and are publicly issued.

SPDR Barclays Capital TIPS ETF (IPE) : The objective of the SPDR Barclays Capital TIPS ETF is to provide investment results generally corresponding to the price and yield performance of the Barclays U.S. Government Inflation-linked Bond Index.

SPDR Lehman Long Term Treasury ETF (TLO) : The objective of the SPDR Lehman Long Term Treasury ETF is to provide investment results generally corresponding to the price and yield performance of the Lehman Brothers Long U.S. Treasury Index.

Total Bond Market ETF (BND) : The Vanguard Total Bond Market ETF employs a "passive management" - or indexing - investment approach designed to track the performance of the Lehman U.S. Aggregate Bond Index. This index measures a wide spectrum of public, investment-grade, taxable, fixed income securities in the United States - including government, corporate, and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities, all with maturities of more than 1 year.

VRDO Tax-Free Weekly Portfolio ETF (PVI) : The PowerShares VRDO Tax-Free Weekly Portfolio is based on the Thomson Municipal Market Data VRDO Index, designed to track the performance of a pool of short-term, tax-exempt Variable Rate Demand Obligations (VRDOs) issued by municipalities in the United States.

Active Low Duration Fund (PLK) : The PowerShares Active Low Duration Fund invests at least 80% of its assets in a portfolio of U.S. government, corporate and agency debt securities. The Fund is limited to 25% of its total assets in non-investment grade securities. Under normal market conditions, the Fund's effective duration will be in the range of zero to three years.