The Best Performing Bond ETFs

As U.S. Federal Reserve announced serial rate hikes next year, many investors began looking at fixed-income investments to become parts of their portfolio strategies. Indeed, bonds’ recurrent payouts and low correlation to stocks are vital to a well-balanced investment portfolio. So, what’s the best way to invest in bonds? As the majority of private investors don’t usually research the issuers’ risk profiles and don’t plot yield/maturity charts, there aren’t many ways to tap into the fixed income universe. By investing in bond ETFs, we can gain exposure to the asset class, and the benefits it provides, with the least amount of hassle. Investors have taken notice, as they’ve poured cash into Bond ETFs over the past few weeks.

One option for exposure to relatively lower-interest rate risk Treasuries is the Vanguard Short-Term Bond ETF (BSV), which typically boasts an effective duration under 3, and allocates over 70% of its holdings into government bonds.

But when it comes to income, high yield bond ETFs offer the most. The appropriately tickered SPDR® Bloomberg Barclays High Yield Bond ETF (JNK) is quite attractive in this rate environment. But there’s no such thing as a free lunch; high yield (or “junk”) bonds are debt with a “below-investment grade” rating (anything BBB- or below), meaning the chance of the issuer defaulting is relatively high. Investing in junk bonds is high risk, but they can provide a valuable income stream for your clients in a well-balanced portfolio.

Below is the lists of the best-performing bond ETFs in the key category of Intermediate Core & Intermediate Core-Plus Bonds:

If we care about long term bond ETFs where additional yield premiums exist, then we should consider the following names: SPDR® Portfolio Long Term Corp Bond ETF, iShares Core 10+ Year USD Bond ETF, iShares 10+ Year Invmt Grd Corp Bond ETF, Invesco Taxable Municipal Bond ETF, Vanguard Long-Term Corporate Bd ETF, Vanguard Long-Term Bond ETF, Dimensional Core Fixed Income ETF, and some other names.