A type of ETF (exchange-traded fund) that is designed to provide exposure (both risk and return) to a certain type or types of bonds. It is perceived as a selection or portfolio of bonds that trades on an exchange in the same fashion as a stock.
It is a type of fixed income ETF and has similarities to a bond mutual fund but comparatively at lower costs for a competitive performance. A holder of a bond ETF is an owner of a respective share in a bond portfolio. However, unlike individual bonds, most bond ETFs don’t have a maturity date.
The main advantages of a bond ETF include diversification, tax efficiency, lower costs, transparency (with daily disclosure), and flexibility as to intraday trading possibility. [For more, see: advantages of bond ETFs].
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