Etf bond - What is the deal with etf bond funds?

Summary: This article describes what etf bonds are, their advantages and whether you should get a piece of the action or not.

Related Articles: bond mutual funds, Corporate bonds, eurobonds



When people talk about a bond etf, they are talking about a new breed of exchange traded funds, which were introduced in 2002. Although typically bonds are secured for a fixed amount of time, they cannot be bought and sold easily. However, bond ETFs are essentially index mutual funds so they can be traded just like stocks. But there are some crucial differences between stocks and etf bond funds. With a bond ETF, the interest is paid out monthly, by way of a cash dividend. Whereas the dividends from stocks are disbursed annually and re-invested automatically, dividends from bond ETFs are given in cash form and will have to be recycled back in order to be invested.

Corporate bond ETF? Junk bond ETF? Short term bond etf? Treasure etf?

Not a lot of people are aware of the many advantages of a corporate bond ETF of a junk bond etf. For example, a bond ETF carries less expense than an actively managed bond fund, so that investors can realize more profit. In addition, it can be traded on a daily basis. And it is available globally.

One advantage that is not being utilized when it comes to a exchange traded bond is the ability to buy and sell options on it. If this is used correctly, investors can protect their portfolios or even sell in order to produce extra income. However, these bonds are not entirely risk-free because of their similarity to stocks. Instead of being priced just once a day like mutual funds, bond ETFs are priced throughout the day. So investors never know for sure what is going to happen with the ETF from one day to the next. In addition, because these bond funds run like stocks, investors have to pay a brokerage commission every time they purchase one. Over a period of time this cost can become overbearing.

Since their inception, bond ETFs have sprouted up left and right. This has allowed them to become more diversified and more liquid, and as a result more appealing to investors who are in search of a place to build on to their portfolios. Although they are still relatively new in the investing world, their value is increasing exponentially, as investors realize the advantages that these funds have over other kinds of security investments.